Clinton in Cincinnati today
Hillary Clinton and Elizabeth Warren are in Cincinnati today. Follow us on Facebook on our Ohio Politics page and on Twitter at @Ohio_Politics for the latest news.
Likely Democratic presidential nominee Hillary Clinton has outlined a wide-ranging economic agenda that would raise taxes by more than $1 trillion during the next decade to finance an expansion of education, science and retirement programs as well as a wave of new roads and bridges.
Although wealthy individuals and corporations would pay the overwhelming majority of the new taxes, Clinton is backing more than dozen new tax changes that would limit many deductions for upper income Americans, boost estate taxes, and increase taxes on capital gains if the asset, such as stock or real estate, is held for less than two years.
Even as her aides insist she will simplify the tax code by scrapping exemptions for multi-national corporations, a report released in March by the non-partisan Tax Policy Center concluded Clinton’s plan “would make the tax system more complex” for many individuals and companies.
Combined with her new opposition to a Pacific trade pact she once the “gold standard” for international trade agreements, she is moving in a starkly different economic direction than the policies backed in the 1990s by her husband, President Bill Clinton, during a decade in which more than 20 million jobs were created, and wages and productivity rose.
“It’s absolutely a good economic plan,” said Andy Green, managing director of economic policy at the Democratic-leaning Center for American Progress in Washington.
“We are facing a major challenge of wages that have not risen and costs in particular big-ticket costs like higher education, health care and retirement have continued to rise in the face of economic inequality and other changes in the economy,” Green said. “And the middle class has been feeling squeezed.”
Yet conservative critics charge that her economic plans would hamper economic growth as wealthy people and hedge funds scale back new investments. They contend her plan was designed to defeat an aggressive primary challenge by Sen. Bernie Sanders, an independent from Vermont and self-described Democratic socialist.
“I’m going to say this as gently as I can: I don’t think anyone believes that she believes what she is saying,” said Douglas Holtz-Eakin, former director of the Congressional Budget Office and an economic adviser in 2008 to Republican presidential nominee John McCain.
Sen. Rob Portman, R-Ohio, asked “why not go in and just reform the whole tax code? Take away some of the preferences wealthy people get. Isn’t that a better way to do that? And actually give the economy a shot in the arm.”
In speeches last week in Columbus and North Carolina, Clinton sketched out some details, suggesting she would focus more on creating an economy in which income inequality between the upper class and middle class would be reduced.
“The measure of our success will be how much incomes rise for hardworking families,” Clinton said in North Carolina.
Clinton’s economic plan has been overlooked because of the focus on Republican presidential nominee Donald Trump’s plan, which the Tax Policy Center concludes would cost the federal treasury $9.5 trillion during the next decade through major tax cuts, a plan which Holtz-Eakin said “doesn’t add up at all.”
As part of her plan, she would ask Congress to approve a 4 percent surcharge on households earning more than $5 million a year, require those families earning an adjusted gross income of $1 million annually to pay a minimum 30 percent tax rate, and limit the value of deductions for people currently in tax brackets of 33 percent and more.
Unlike her husband who in 1997 signed a reduction in the capital gains tax, she would veer in the opposite direction by taxing capital gains at 43.4 percent if the asset is held between one or two years instead of the current 23.8 percent. Only if the asset is held for at least six years would the investor pay the 23.8 percent rate.
“Her plan for capital gains taxation is just a Rube Goldberg contraption that in my opinion makes no economic sense whatsoever,” said Lee Ohanian, a professor of economics at UCLA and a senior fellow at the conservative leaning Hoover Institution at Stanford University.
The money raised would be plowed back into roads, bridges, scientific research, clean energy and education, such as $350 billion to allow Americans to refinance their student loan debt while also permitting students to attend public universities in their home states without borrowing money for tuition.
The Tax Policy Center calculates Clinton’s plan during the next decade would reduce by $1.2 trillion the federal government’s publicly held debt, which is debt held by foreign and domestic investors of U.S. treasury bonds and securities.
But that barely makes a dent in the $9.3 trillion in fresh debt the government is expected to pile up from 2017 through 2027, according to the non-partisan Congressional Budget Office.
The massive deficits during the next decade are largely caused by the explosive growth in the entitlement programs of Social Medicare, which pays for health care for the elderly, and Medicaid, which provides health care for low-income people.
“The fundamental problem that the next president will inherit from Barack Obama is a federal budget which is on unsustainable trajectory,” Holtz-Eakin said. “She does nothing — precisely zero— to address that problem and that’s unforgivable in my view.”
Green of the Center for American Progress countered that the “obsession” with the debt by some economists “is so out of touch with the needs of the American people, the fundamental realities of the economy and where it is going.”
Staff writer Jessica Wehrman contributed to this report.
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