Moodys estimates of GDP and employment

Here's a look at projected employment under Hillary Clinton's and Donald Trump's economic policies plans.

(Moody's Analytics)

CLEVELAND, Ohio -- One of the most important issues in any presidential election is the economy. It's perhaps even more critical this year, when we're still only a few years removed from the greatest financial collapse that most of us will ever see and an economic rebound that has underwhelmed many of us.

Republican presidential candidate Donald Trump speaks at a campaign rally in Virginia.

So what are the key issues that will drive the economy during the next presidency? Taxes. Job creation. Trade. Immigration. The minimum wage. And regulation.

Democratic presidential candidate Hillary Clinton speaks at a campaign event in Scranton, Pa.,

The Plain Dealer, with the help of three local experts, is taking a look at where the two major party candidates, democrat Hillary Clinton and republican Donald Trump, come down on these important issues. Their positions could influence whom voters choose.



Evaluating their positions is easier said than done, in some cases.



Trump has said the federal minimum wage should increase to at least $10 an hour. But then he also said states should set their own minimum wage, because the cost of living is different depending on the state. So which is it?



Clinton over the years has been in favor of the Trans-Pacific Partnership trade deal, which involves 12 Pacific Rim nations, including the United States but not China. She spoke in favor of TPP until two years ago, and then got squishy. Last fall, she said she opposed TPP, while her new running mate, U.S. Sen. Tim Kaine, had favored it until last month. Kaine said previously there was "much to like" about TPP and had voted for the Senate to have "fast-tracking authority," which would speed TPP and other trade deals through Congress.

Then there's immigration, one of the pillars of Trump's candidacy. Trump for 14 months has maintained that the nation's estimated 11 million illegal immigrants should be deported, at a huge cost to taxpayers and a huge hit to the economy. (Some positive and some negative.) But in a stunning reversal this week, Trump backed off his plan to deport all illegal immigrants. In the past few days, Trump made conflicting comments on whether he still favored deporting all illegal immigrants, or only those who've committed crimes since they've been in this country.

These issues are moving targets. To help sort through them, The Plain Dealer turned to three well-respected local economists with different specialties:

Ken Mayland

Ken Mayland

Mark Sniderman

George Zeller,

Mayland said many of the positions claimed by Clinton and Trump are similar to the rhetoric spewed by other political candidates for decades.



"I think a good portion of this stuff is fantasy," he said. "There is a considerable amount of pandering to particular constituencies. Is pandering effective as an election tool? Yes."



Mayland said voters should look at the big picture -- the direction of a candidate's positions. "There are distinctly different courses here. Don't take the details too literally," he said. Voters can look at their positions qualitatively, not necessarily quantitatively.

As a starting point, we must remember the United States is expected to have a budget deficit of $534 billion in this fiscal year, according to the Congressional Budget Office. Over 10 years, the total is expected to be $9.3 trillion. That would increase the debt-to-total-economy to 86 percent, up from 75 percent.

Sniderman notes that the deficit-to-GDP ratio is expected to "rise notably" during the next decade and soar even more in the decade after that, unless taxes or spending change significantly. "There is no 'magic threshold' that pushes us into the danger zone," he said, but "continued increases in this ratio reduce financial flexibility and bring risks.



"It is crucial to recognize that the debt burden, per se, is not what matters most," he said. "What matters most is what the borrowed funds are used for."

So the U.S. government can borrow money for 10 years at about 1.5 percent and for 30 years at about 2.25 percent. That's incredibly inexpensive. If this money borrowed is used to strengthen growth in U.S. productivity -- by education, research, infrastructure, etc., he said, "then it would be money well spent."

Looking at the issue from another view, "taxing the wealthy to subsidize the less wealthy might promote some people's ideas of 'fairness,' but would not necessarily do anything for economic growth or job creation," Sniderman said.

Keeping all of these factors in mind, here's a look at Clinton's and Trump's positions on the selected issues of taxes, job creation, immigration, minimum wage, trade and immigration -- and what the local experts had to say about each area.

TAXES



CLINTON:

Increase taxes on the wealthy. Keep the same for lower and middle class.

Have a top rate of 43.6 percent. Launch "fair share surcharge" on multi-millionaires and billionaires; take steps to make sure the wealthiest folks don't pay a lower tax rate than middle-class families.

Simplify and cut taxes for small businesses so they can hire and grow. Provide tax relief for Americans facing excessive out-of-pocket health care costs and those caring for an ill or elderly family member.

On the estate tax, lower the levels of exemptions to $3.5 million for individuals and $7 million for a couple. On affected estates, increase the tax rate to 45 percent.

Tax plan would increase federal revenue by $1.1 trillion over the next 10 years. Clinton has proposed using that money to cover other plans and proposals, which would mean her plans would be deficit neutral.

TRUMP:

Adopt tax cuts for all.

Simplify tax brackets from 7 to 3.

Have a top rate 33 percent.

Exclude childcare expenses from taxation.

Limit tax of business income to 15 percent.

End the estate tax.

Cut all corporate taxes to 15 percent. New pass-through income rate of 15 percent.

Tax plan would reduce federal revenue by $9.5 trillion over the next 10 years. If there weren't corresponding cuts in spending or major economic growth, the budget deficits in the next 10 years would double in size.

Mayland:

"It's not a pleasant conversation. Either you cut spending or increase taxes . . . I'm not entirely clear on how Trump's positions net out. Some think he'll produce more growth. That would mean more government revenue. But it's questionable."

Mayland also believes that a simpler tax system with fewer loopholes and lower tax rates would benefit the economy.

Sniderman:

Trump's position of "tax cuts for all" cannot be true unless spending is reduced as well, he said. "After all, the spending has to be paid for somehow." So tax cuts today push the burden onto future taxpayers.

"So, excluding childcare expenses from taxation would benefit the highest earners the most and would do nothing--at the other extreme -- for those who pay no or little income tax," he said. If the goal is more affordable child care, that could be achieved in other ways, he said.

"Cutting taxes sharply would make more sense to me if the tax cuts were targeted on factors designed to promote growth," Sniderman said, such as by expanding credits for spending on new equipment; and research and development; and building up the skills in the labor force.

Zeller:

He said the basic difference between the Trump and Clinton proposals are clear: "Trump proposes to cut taxes with most of the cuts going to the affluent. Clinton proposes to raise taxes only on the affluent as a means to finance some of her other proposals. The direct impact of both proposals on future employment growth is negligible."

Both proposals are aimed at wealth and income inequality. "Trump's proposal does nothing to deal with the inequality issue, while Clinton's proposal is directly targeted at the inequality issue."



Clinton wants to make her tax policy revenue neutral, but that would require Congress to pass legislation, Zeller said. "Whether Congress would pass such legislation is doubtful, given the prior record of the Congress during the past several years."

Meanwhile, he said, "Trump's proposals to cut taxes and massively expand the federal deficit are clearly counterproductive and dangerous."

Overall, Zeller said, "Tax cuts as a means to speed up employment growth have utterly failed."

JOB CREATION:

CLINTON:

Wants to strengthen American manufacturing with a $10 billion "Make it in America" plan. Will close tax loopholes that benefit companies that shift profits and jobs overseas.

Will charge an "exit tax" for companies leaving the U.S. to settle up on their untaxed foreign earnings. Reward businesses that invest in good-paying jobs here in the United States.

TRUMP:

Says that reducing taxes on workers and businesses means that U.S. workers and companies can sell their products more cheaply here and around the world - meaning more factories, more hiring and higher wages.

Says: "I will be the greatest jobs-producing president that God ever created. I love the subject. I love doing it. And I love helping people. And there's nothing like helping people than getting them and their family great jobs."

Mayland:

He noted that neither candidate has provided a lot of specifics on job creation that doesn't mention taxes or trade. Clinton's "Make it in America" plan hasn't offered many details. As for Trump, "I view Trump as bravado."

Sniderman:

It's not really about more jobs, Sniderman said. It's about better-paying jobs. The United States is nearly at full employment now, so job creation isn't the priority. "What people really want is more jobs that pay better, and that will happen only if the labor force is more skilled," he said.

Employment in manufacturing has been falling for decades because of increasing productivity, he said. Manufactured goods have been less expensive and people have chosen to spend a larger share of their incomes on services rather than on manufactured products.

"So I would focus more on overall economic growth and let the location of the jobs within different sectors evolve on their own, without declaring that one sector is more important than another," Sniderman said.

Further, he said he's "skeptical" that charging an exit tax would create many more jobs in this country, even though it may seem like a good idea. "The U.S. tax system is very complex and rewards people and firms that organize themselves in such a way that they can escape tax burden--this is a deadweight loss to society." It would be better to make the tax system less complicated and lower the tax rates "so people and companies have less incentive to avoid taxes by creating lots of subsidiaries and engaging in transactions that are just designed to legally avoid taxes."

Zeller:

He said that both candidates' proposals to boost manufacturing "fall somewhat short" because they don't address the biggest challenge facing manufacturing: the rising value of the U.S. dollar. Congress has failed to help the economy through fiscal policy.

"Thus, the issues that caused the Great Recession remain largely unresolved. This leaves us with only monetary policy at the Federal Reserve, with no fiscal policy, as our tools to solve this issue," he said. "As a result, we have European-style austerity, such as already been a proven disaster in places like Greece, Italy, and Spain ..."

Zeller noted that both Clinton and Trump have shifted their stances on jobs, so it's difficult to predict their effect on job growth. "Both are long on rhetoric and short on substance," he said.



TRADE



CLINTON:

Now opposes the Trans-Pacific Partnership trade deal. She hasn't shown as much enthusiasm for supporting other trade agreements either. Globalization has been mounting for seven decades. If TPP doesn't become law, that could mean a slowdown in globalization.

Wants to pursue smarter, fairer, tougher trade policies that put U.S. job creation first and get tough on nations like China that seek to prosper at the expense of our workers. This includes opposing trade deals like the Trans-Pacific Partnership that do not meet a high bar of creating good-paying jobs and raising pay.

TRUMP:

Appoint trade negotiators whose goal will be to narrow our trade deficit, increase domestic production and get a fair deal for our workers.

Renegotiate NAFTA.

Opposes TPP. Says that notably, TPP will hurt the auto industry because it does not resolve non-tariff barriers to U.S. cars being sold in Japan and other countries -- including currency manipulation, excess supply and closed dealerships.

Bring trade relief cases to the world trade organization.Label China a currency manipulator.

Apply tariffs and duties to countries that cheat.

Direct the Commerce Department to use all legal tools to respond to trade violations

Says the U.S. trade deficit in goods is nearly $800 billion on an annual basis, which hurts economic growth and jobs, especially in manufacturing

Mayland:

TPP in its current form will not pass Congress, he said. "Am I for free trade? Yes, free trade is good for everyone . . . What Trump is saying is he favors trade as well, but it's not free."

The United States represents the biggest market in the world. "Donald Trump says that's fine except you're not going to get free and open access to this market, and we're going to extract some benefit from that." Mayland added that it seems Trump is more in favor of bi-lateral trade deals: "I give you access to my market and you give me access to yours."

The opportunity for economic growth in this country actually lies in looking at our trade deficit, Mayland said. "That's the golden nest egg. If we can reduce the trade deficit, we buy something we could produce ourselves. That is how you get more growth out of this economy. How do you do it? We could out-compete everybody."

Sniderman:

Everyone wants "fair trade," he said, which just means enforcing existing rules. "I don't think trade deals are the most important factor determining the level of employment in this country," he said.

Trade deals, however, matter more in some industries than others because some industries lose jobs from various provisions of trade agreements.



"Historically, the U.S. economy has been dynamic enough to generate new jobs quickly enough to re-employ many people who lose jobs as a result of trade deals, just as it generates jobs for the people who benefit from the trade deals," he said.

That has changed in recent years, however, and it's now more difficult for people to get good jobs as quickly.



"From a policy perspective, the United States has not adjusted quickly enough to the difficulties people face from trade displacement." But he added the same thinking applies to workers who lose their jobs for any number of reasons -- their plant closes, their company sheds jobs, their skills aren't needed any more, their company moves out of state. "In other words, as a nation we should look for better ways to prevent workers from experiencing long-term unemployment."



Sniderman stresses that it's important to remember that trade imbalances depend greatly on a nation's savings rate (public and private) compared with spending. "If nation spends more than it produces (as the United States has been doing for decades), it will necessarily be a net importer . . . It will have a trade deficit.



All of the trade agreements, tariffs and so on influence which commodities, goods, and services get imported and exported -- and from which countries they come from. But they don't change the reality that that country will have a trade deficit.



"Countries with high savings rate that consume less than they produce, like China and Germany, are net exporters," he said. So if the United States would increase its national savings rate by lowering the federal deficit and greater household savings, then we would have a lower trade deficit.



MINIMUM WAGE



CLINTON:

Her proposal is based on recent legislation, which would increase the federal minimum wage from $7.25 an hour to $12 an hour by the end of her presidential term, and indexed to increase with consumer price inflation after that.

Eliminate the lower tipped minimum wage that currently stands at $2.13 an hour.

TRUMP:

Says: "The minimum wage has to go up . . . (to) at least $10, but it has to go up." Suggests that states should set their own minimum wage but also, somewhat contradictory, said of the federal minimum wage, "I would like to raise it to at least $10."

Mayland:

He said that one way of interpreting concepts like a higher minimum wage and paid family leave is that they're a tax that's paid for entirely by the private sector. "It's easy for the government to mandate a benefit they don't have to pay for," he said.

Sniderman:

"Most economists would say that if the minimum wage gets 'too high,' it will adversely affect those who have the weakest labor market skills, in that employers will find them too expensive to hire," Sniderman said. "I'm not sure what level is 'too high.'"

The United States would be in better shape if we had a better education and training system and more people had better skills, he said.

Sniderman noted that people who advocate a higher minimum wage want to make sure working people receive a certain "basic income." But the same thing could be accomplished by expanding the Earned Income Tax Credit program.

"This would shift the responsibility for funding the 'basic income' from employers to taxpayers," he said. "In this way, employers would not have the same incentive to reduce the number of employees or employee hours when their labor costs go up as a result of the minimum wage hike; the taxpayers would subsidize these low-wage workers."

Zeller:

"It has been the policy of the United States for many years to cut the minimum wage by leaving it the same and letting inflation cut the value of the minimum wage," Zeller said, adding that the minimum wage has already been lowered repeatedly for years.

"This did not produce robust employment growth," he said. "We instead saw tepid growth and/or continued employment losses, depending upon the jurisdiction and the time period covered."

While both Clinton and Trump favor an increase in the minimum wage, only Clinton wants to index future minimum wage values to the consumer price index. "Trump appears to lack a CPI indexing in his minimum wage proposal," he said. "If that is true, then Trump advocates for cutting the minimum wage in several years by the lack of indexing it to the CPI."



IMMIGRATION

CLINTON:

Has proposed significant reform to immigration law. Legal immigration to the United States could increase by 1 million a year. Within 10 years, the U.S. population would increase by 3 percent. Immigrants likely would be a mix of high-skilled workers and lower-skilled workers. This immigration would be expected to increase GDP by 3.3 percent in the next 10 years. The increase in population would mean more demand for goods and services, which would lead to a demand for labor.

TRUMP:

Build a wall and make Mexico pay for it.

Support nationwide e-verify to protect jobs for unemployed Americans.

Require mandatory deportation of all illegal immigrants.

Triple the number of U.S. Immigration and Customs Enforcement officers.

Mayland:

For more than a year, Trump has passionately said he would deport the nation's estimated 11 million illegal immigrants.

"That's fantasy too," Mayland said. "There's no way under the sun that anybody would deport 11 million undocumented workers out of the United States. You go from what's entirely impossible to what you can do." Maybe that's going on this week with Trump's position on immigration. He said he's open to "softening" his plans and he may embrace "working with" people who entered this country illegally years ago. Yet his campaign on Thursday insisted his position hasn't changed.

It may be realistic, Mayland said, to start with illegal immigrants who've committed crimes, and kick them out. "Deporting 11 million people is not going to happen."

Mayland added that immigration laws should be changed to allow some people who come here from other countries to attend college to stay.

Sniderman:

Sniderman declined to comment on immigration specifically, but said simply if the U.S. population grows by 3 percent over 10 years and GDP increases by 3.3 percent in 10 years, then the increase in per capita GDP is relatively small.

Zeller:

Immigration has always had a positive impact on many economic indicators, Zeller said, including growth in population, employment and GDP.

"Trump is extremely vulnerable to his foolish 'build a wall' policy," Zeller said. "This is clearly a negative proposal in terms of employment growth, while Clinton's immigration reform proposal is more positive in terms of employment growth."



REGULATION:



CLINTON:

Give regulators more authority to force banks, hedge funds and other non-bank financial institutions to reorganize, downsize, or break up.

Close a "loophole" in the Volcker Rule, which prohibits banks from making risky trades with money guaranteed by the federal government through deposit insurance.

Require big banks and financial companies to pay a fee based on size and their risk of helping fuel another financial collapse.

Recommend that senior bank managers lose bonuses if their bank suffers "major losses with sweeping consequences."

TRUMP:

Says excessive regulation is costing the nation $2 trillion a year. Says regulations may have cost the nation 600,000 small businesses since the start of the recent recession--largely because of new regulations on financing--and some 6 million fewer jobs.

Institute a temporary halt on new regulations.

Review all previous regulations to see which need to be scrapped.

Require each federal agency to prepare a list of all regulations it imposes on American business, and rank them from most critical to health and safety to least critical. Least critical regulations will receive priority consideration for repeal.

Review regulations that hurt job growth, including the Environmental Protection Agency's Clean Power Plan, which forces investment in renewable energy at the expense of coal and natural gas, raising electricity rates; and the Department of Interior's moratorium on coal mining permits, which put tens of thousands of coal miners out of work.

Mayland:

He believes this is one of the biggest areas of difference between Clinton and Trump.

"I don't think the differences (between two candidates) have ever been so stark," he said. "Secretary Clinton calls for more regulations. Trump is calling for regulatory freeze and rollback."

A key will be what happens with the Environmental Protection Agency and what happens with oil, gas and coal.



"I take Hillary at her word when she said we're going to be putting a lot of coalminers out of business," Mayland said.

He noted there are studies that show that new regulations over the years has cost tens of billions of dollars. To be fair, he said, some of those were passed under President George W. Bush, some under President Obama.

The bottom line: One of the reasons this economic recovery is so bad, Mayland said, is regulatory overreach. "Yes, I want clean air. I want clean water," he said. But to further improve air and water by 1/100th of a percent is "super-more costly."

Sniderman:

He believes it's possible that the new financial regulations have increased the cost of financing. "But in some sense, that was the point, since many people believed that cheap and easy-to-obtain credit fueled the financial crisis," he said.

The goal in financial regulation should be to allow financial firms to fail without posing risks to the broader economy, he said, and there's been progress toward this.

Still, "there may well be too many regulations, and too many especially for the smaller and less complex financial companies," he said. "I'd like to see the regulators look for ways to selectively ease off of the excessive regulations. I think they are doing that."

He noted that the Federal Reserve and FDIC have the authority to force institutions deemed important to the system to reorganize or break apart, but they haven't yet used that authority. "Until they do, we don't know how it will play out," he said.

On candidate specifics, "I don't know what to make of the Trump claims," he said. "Of course regulations have costs, but the point is that they are supposed to have benefits as well, and ideally benefit that exceed their costs."

Sniderman said he believes we have have "many unnecessary regulations," but reviews of regulations need to be comprehensive.

"Suppose burning coal greatly harms human health and destabilizes the environment through greenhouse gases," he said. "At some point these costs could well outweigh the loss of mining jobs. In this case, going back, to my comment on job creation, the challenge is to reduce the burning of coal AND to meaningfully compensate those who lose their jobs as a result."

Zeller:

Regulation is "heavily seeped in ideology," he said. "Some regulations are completely necessary and mandatory, such as regulations that keep food supplies, drug quality, and various related issues from killing consumers."

Meanwhile, he said, many analysts believe the repeal of the Glass-Steagall Act in 1999 was the cause of the Great Recession. Glass-Steagall prohibited banks with FDIC-insured deposits from investing in anything besides government bonds another low-risk products. After that law was repealed, "investment banks ran amok and nearly ruined the worldwide economy," Zeller said.

Zeller said some regulations may be unnecessary but conservatives often believe that "all regulations are undesirable and should be eliminated."

That's wrong, he said. Instead, we should divide regulations into two groups -- necessary ones and harmful ones. "Trump's proposal fails to do that given his blanket proposal to eliminate new regulations, while Clinton's proposals are properly targeted toward financial regulation, which is dangerously deficient at the moment."