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In the interview given by the presidential candidate Hillary Clinton to the Washington Post, the nominee for president and the magazine’s journalist Jim Tankersley discussed possible and planned economic policies and changes that Hillary Clinton would implement if she had become the president of the USA. In the interview, precise attention was given to the labor market, the taxation of the wealthiest, international trade, globalization, as well as education and skills’ connection to an economic boost. This paper aims to address some of the statements made by Hillary Clinton to critically evaluate the accuracy of her thoughts and suggestions from an economic point of view.
Taxation of the Wealthiest
Discussing the taxation of the wealthiest and how the gap between the wealthiest Americans and the Americans from the working class has increased, Hillary Clinton suggests that the former need to pay their “fair share” and stresses the importance of the Buffet Rule. The Buffet Rule was proposed as a solution to the unfairness of the tax distribution: while workers with median income consistently pay their taxes, the wealthiest Americans have more advantages to avoid the taxes or even pay less than an average worker (The National Economic Council 5). Therefore, Clinton assumes that a 30% tax on the wealthiest Americans could help the minimum, low, and median-wage workers and provide the budget with more revenues that could be spent on the infrastructure change that Clinton suggests. According to Mankiw, taxing the richest citizens might indeed help to narrow the gap because the living conditions of the poor would be improved, while the wealthiest citizens would live in a society with a lower level of poverty (230).
When the interviewer and the presidential candidate discussed the international trade and its possible impacts on the USA, Clinton approached the problem from the opposing sides. On the one hand, she points out, trade deals would be possible if they are capable of raising wages and enhancing the national security of the country (Tankersley par. 20). On the other hand, shutting borders for other countries is unreasonable because the USA needs to understand how to sell its products to the world, how to compete and win, and not choose isolationism (Tankersley par. 21). The issue of international trade and its impact on the country is complicated. It can increase the variety of goods, realize economies of scale (low-cost products produced in large quantities), avoid monopoly, and meet new ideas provided from foreign markets (Mankiw 188).
However, as Clinton points out, the government’s responsibility is to support employment that might be influenced by international trade and ensure that national security would not come to harm as well. The domestic industries should not be too dependent on foreign trade as in case of any major conflict or other complexities, the country will not be able to produce all the needed products by its own means (Mankiw 190). Nevertheless, such an approach might be advantageous to corporations as they can “exaggerate their role in national defense to obtain protection from foreign competition” (Mankiw 190). Therefore, international trade can be both profitable and dangerous to domestic manufacturers.
Another argument that Clinton uses is the unfair competition argument. She states that China’s unfair game and cheating has had an adverse impact on the USA, but does not provide a detailed explanation. As China is “the largest economy in the world”, it is possible to assume that the low-costing goods exported by China are providing benefits for American consumers by reducing the products’ price but harms producers that cannot compete with the set prices (Observatory of Economic Complexity). Nevertheless, point out Mankiw, the gains of the consumers would exceed the losses of the manufacturers (191). Therefore, such a policy can potentially benefit the country that could purchase goods at a subsidized price (Mankiw 191).
Globalization and CAFTA
In the interview, Clinton admits that globalization, as well as business and government leaders, have had an impact on the unemployment rates and the disappearing jobs. Globalization, according to Clinton, has “replaced or undermined the future for many jobs”; that is why people experience anxiety and even anger as technologies advance, and more workers fear to lose their jobs (Tankersley par. 30). Clinton also reminds that she had strongly opposed CAFTA (Central American Free Trade Agreement) (Tankersley par. 22). Therefore, Clinton’s approach to free trade is quite complicated and depends on the context. Free trade, however, can be profitable both to the high-wage and to the low-wage countries (e.g. the USA compared to Costa Rica, El Salvador, etc.) as it increases the wages in the third-world countries but brings benefits to the first-world countries in the form of cheaper products and services. However, such trades also influence American employees, as some of them might experience wage cuts or even lose their jobs (Mankiw 192).
This rhetoric, as Clinton points out, was often used by another presidential candidate, Donald Trump, who stressed that the immigrants were the reason why many Americans lost their jobs (Tankersley par. 41). Such statements can be both perceived as exaggeration and partial truth as free trade with third-world countries is indeed capable of reducing the wages of most Americans (Mankiw 192). The free trade is nevertheless able to benefit some Americans, i.e. highly educated and skilled. Citizens with “less formal education either see their jobs shipped overseas or find their wages driven down by the ripple effect” (Mankiw 193). That is why Clinton points out that the government needs to focus on education and development of skills; according to her, this approach can improve the productivity of the American economy (Tankersley par. 42). Thus, globalization per se is not necessarily harmful, but it still can bring challenges to the labor market resulting in unemployment of the workers who had been replaced with those working for a lower wage.
Education, Renewable Energy Jobs, and Supply and Demand
Clinton stresses the importance of higher education and presumes that the government should encourage it in order to create more jobs, provide new inventions, and even manufacture these inventions in the future (Tankersley par. 41). This is generally true, as higher education can lead to more educated population and create informed voters who will possibly choose a better government; a society with a bigger percentage of educated members tends to have lower crime rates; the development of technology is also boosted by citizens with higher education (Mankiw 207).
Understanding of the climate change and its impact is also more common among citizens with higher education. To overcome the threats of the climate change, renewable energy jobs are proposed by Clinton as a solution (Tankersley par. 35). However, the labor market is governed by supply and demand; it is reasonable to “[hire] workers up to the point where the value of the marginal product of labor equals the wage” (Mankiw 396). While the renewable energy market is actively developed in Europe, it remains unclear whether this labor market is profitable in the USA (Lehr, Lutz, and Edler 2370). Renewable energy policies also suffer from conflicting pressures of policymakers (Stokes 491). Therefore, policies that concern renewable energy, as well as positions and jobs linked to it, need to be evaluated to understand their potential profitability.
Lehr, Ulrike, Christian Lutz, and Dietmar Edler. “Green Jobs? Economic Impacts of Renewable Energy in Germany.” Energy Policy, vol. 47, no. 2, 2012, pp. 2370-2377.
Mankiw, N. G. Principles of Microeconomics. Cengage Learning, 2015.
Observatory of Economic Complexity. China, 2014, Web.
Stokes, Leah C. “The Politics of Renewable Energy Policies: The Case of Feed-In Tariffs in Ontario, Canada.” Energy Policy, vol. 56, no. 3, 2013, pp. 490-500.
Tankersley, Jim. “A Transcript of Hillary Clinton’s Interview with the Washington Post on Economic Policy.” The Washington Post, 2016, Web.
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The National Economic Council. “The Buffett Rule: A Basic Principle of Tax Fairness.” The White House, Web.