Hillary Clinton's chances of a victory on 8 November seem to be increasing. While her economic programme is not without ambition, it would meet with the opposition of a probably fragmented Congress.
This programme includes substantial new public spending measures, mostly paid for by a rise in the taxation of high income and wealthy households and by measures intended to increase the efficiency of corporate taxation. They include:
In theory, a substantial positive economic effect could be expected from the implementation of this entire programme, even in the short-term. In July, Moody’s estimated the potential gain, in terms of GDP, to be 1.7% in 2020 (when the presidential mandate ends), as spending targeted toward infrastructures and lower-income households, together with increased immigration, would generate more activity than tax hikes and a higher minimum wage would destroy.
In reality, the short term economic impact of Hillary Clinton’s victory would be limited, because while her party can retake the Senate, it will have to deal with a House of Representatives that will in all likelihood remain Republican. Bipartisan compromises can probably be reached on infrastructure spending. On the other components such as social spending and tax increases, they will be much more difficult, in a situation where the Republican Party, after the Trump episode, is likely to experience an identity crisis and fierce internal power struggles.
Therefore, if Hillary Clinton does win, we will probably not change our economic scenario for the US in 2017, which posits a continuation of the recovery at a pace between 1.5% and 2% per year (close to the economy’s long-term potential), yet with the possibility of additional budgetary support should there be an unexpected slowdown.
This does not detract at all from the fact that this election will, very likely, have substantial long-term consequences for the “political offer” in terms of economic policies in the US. Indeed, the campaigns of Bernie Sanders and Donald Trump have showcased the expectations of a good many Democrat and Republican voters for the development of new policies – in opposite directions, but generally less free market-oriented than in the past – to respond to the middle classes' growing distrust with globalization.
Didier BOROWSKI, Eric BRARD, Kasper ELMGREEN, Tristan PERRIER
Tristan PERRIER, Laurent CROSNIER, Kasper ELMGREEN