Clinton/Trump Debate
Hillary Clinton and Donald Trump faced off on Monday night in the first of the 2016 Presidential Debates. Though the candidates discussed a variety of important topics, the candidates spent more time answering questions about The Economy than any other topic [1]. Even though the fields of entrepreneurship and innovation have been cited as one of the best sources of hope for revitalizing the economy [2], virtually no air time was devoted to the candidates' policies on these topics. In fact, of the 28 minutes and 12 seconds spent discussing the U.S. Economy [3], the candidates almost exclusively focused on trade and manufacturing sectors. Interestingly, only 9% of the labor market is comprised of jobs in manufacturing; most jobs involve a service of some kind (i.e. healthcare or teaching) [4]. How can we account for the overrepresentation of time devoted to fixing the economy through manufacturing sectors? This division of air time certainly doesn't stem from ignorance of other solutions; Clinton has demonstrated her commitment to entrepreneurship and innovation through her support of various policy proposals [5] and Trump's record as businessman [6] each seem to lend themselves to a more substantive discussion, at a minimum, on their experiences in these fields. Given the profound impact entrepreneurship and innovation will have on the U.S. economy over the next four years, what do the candidates' performances in the debate say about the role of entrepreneurship and innovation in their vision for the United States' economic future?
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To understand the solutions the offered, we must first understand the candidates' perceptions of the economy. Clinton and Trump offered drastically different stories about the current state of the United States economy on Monday night. Clinton optimistically said of the economy, "We have come back from that abyss [referring to the housing bubble burst and financial crisis], and it has not been easy,” she said. “So we’re now on the precipice of having a potentially much better economy.” [7] Trump, on the other hand, claimed that "we’ve become a third-world country” and are a "serious debtor nation". [8] [9] He said Clinton's claims of economic improvement are nothing more than smoke and mirrors, saying “the only thing that looks good is the stock market, but if you raise interest rates even a little bit, that’s going to come crashing down. We are in a big, fat, ugly bubble.” [10]
Trump said the first step towards a solution is "to stop jobs from leaving the United States. The first thing you do is don't let the jobs leave." [11] Part of Trump's reasoning seems to stem from his belief that there are too many taxes and regulations on small businesses. However, Trump has a general lack of focus or specificity regarding tech and innovation policy. To the extent there is a sector focus, it is on traditional manufacturing, which he demonstrated on Monday night. [12] To learn more about Trump's plan in detail, please see McNair's blog post Trump|Pence and Entrepreneurship. During the debate, Clinton characterized Trump's plan as "trumped-up trickle down economics". [13]. Planet Money describes trickle-down economics as a pejorative term for supply-side economics, and as the tax approach famously associated with Ronald Reagan. [14] The idea is that cutting taxes for the wealthy will help the whole economy, because the money that wealthy people are not paying in taxes will be spent in other ways. Rich people will buy things, or hire people, and that money will then trickle down to the rest of the economy. Trickle-down economics' effectiveness is contentious among economists and an issue that divides the candidates in this election.
Offering a sharp contrast to Trump, Clinton characterized approach to revitalizing the economy as being very specific. In fact, she said of her multi-faceted plan at the debate, “I’ve tried to be very specific about what we can and should do." [15] "Generally, Clinton wishes to engage the government as a private industry partner in implementing innovation policies. [16] She wishes to grow federal Research and Development pages [17], and would increase access to capital for small businesses. To learn more about Clinton's plan in detail, please see McNair's blog post Clinton|Kaine and Entrepreneurship. During the debate, Trump attacked President Bill Clinton's support of NAFTA in the 1990's. Clinton responded by saying, “I think my husband did a pretty good job in the 1990s,” she said. “Incomes went up for everybody.” [18]
One place both Clinton and Trump reached consensus was over carried interest. Carried interest goes back to the early days of shipping. The owner of the cargo would pay a ship captain with a percentage of the final sale of the cargo they carried on their ship. That gave the captain an incentive to sell for a high price at the other end of the journey. This same principle applies today to certain investment firms. The managers of the firms take people's money to invest, and just like the old sea captains, they get a cut of the profits. It's essentially their paycheck, but the fund managers don't pay regular income taxes on it. It's taxed at an investment rate. Both candidates want to get rid of the carried interest provision. [19]
Though a few shots were fired back and forth throughout the debate, the candidates said very little in the way of substantive economic policy actions they would take in the fields of entrepreneurship and innovation. This is important because there is substantial evidence which has found that investment and development in these fields is key to the country's twenty-first century economic growth. [20] [21]
