On taxes, public spending and protectionism the two candidates for the White House are diametrically opposed: Hillary Clinton represents continuity, while Donald Trump seduces or frightens with radical proposals.
However, while many economists are alarmed by the threat Trump poses to US prosperity, there is no shortage of small business owners and investors who believe the Republican candidate’s plans would benefit the economy.
With polls showing the candidates are neck and neck just days before Tuesday’s election, the race could be summed up as “Wall Street is pro-Clinton, Main Street is pro-Trump,” said Steve Odland, of the Committee for Economic Development, a nonpartisan, business-led economic policy group.
But Wall Street is somewhat ambivalent. A survey conducted by the CNBC network last week with 50 economists and Wall Street participants showed 82% think Clinton will win but 46% feel Trump would be better for the economy, compared with 39% favouring Clinton.
Another survey conducted in October by the Pepperdine-Graziadio Business School in Los Angeles with 1,353 small businesses across the country, shows a majority prefer Trump due to his positions on health insurance (55% to 45% for Clinton), as well as on taxes (66% to 34%) and trade (55% to 45%).
Trump aims to revive economic activity through deregulation. He promises to achieve 3.5%-4% growth compared with the rate of 1.8% projected for 2016. He would achieve growth by cutting the corporate tax rate to 15% from 35% and lowering the income tax rate for wealthy taxpayers; the highest bracket would drop to 33% from 39.6%. The impact would be a sharp increase in the budget deficit.
Trump also has promised to renegotiate US trade agreements, repeal the Obamacare health insurance programme, and erect a wall on the
border with Mexico to prevent illegal immigration.
In contrast, Clinton would mostly stick to President Barack Obama’s economic path. The Democrat’s plan includes raising taxes on the richest taxpayers, increasing the federal minimum wage, providing free local universities for the less affluent and reforming Obamacare. Her plan also would widen the deficit but to a lesser extent.
Trump worries the academic world: no less than 370 economists, including several Nobel Prize winners, signed an open letter in the Wall Street Journal appealing to voters to “choose another candidate”, saying Trump spreads disinformation and “promotes magical thinking”. “Donald Trump is a dangerous, destructive choice for the country. He misinforms the electorate, degrades trust in public institutions with conspiracy theories and promotes willful delusion over engagement with reality,” the letter said.
Even the IMF is alarmed by the spectre of growing protectionism, from Trump to Britain’s vote to pull out of the EU, which it says is a threat to global growth.
Odland said Trump’s style attracted some in the business world because he spoke to voters in the familiar blunt patter of a property developer negotiating a deal. “We in the retail industry have to negotiate all the time with commercial real estate developers. They are bombastic, they are emotional, they come at things in a way that frankly sounds crazy,” he said.
“He’s approaching geopolitics in the same way. Is it right? Well, it’s unconventional. His supporters say, ‘Well, maybe it will end up to be a better deal for us,’ and that’s why they are willing to make the bet.”
Analysts at Capital Economics said that Trump’s pitch might be exaggerated. “A Trump victory might not result in the radical changes that many fear. He would probably soften his rhetoric on trade policy once in the Oval Office and would struggle to push his plans for fiscal policy through Congress.”
But in the immediate aftermath of the election, a Trump victory or a disputed vote, will send Wall Street lower. Analysts estimate a Trump win would send the broad S&P 500 index below the 2,000 level, about 5% lower than the week before the vote. That is what the index did on June 27, the day markets were shocked by the Brexit vote. But it was not long before the index rebounded.