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Andrew Puzder: Economic Growth would REDUCE Income Inequality.

Andy_PuzderExcerpt from

After seven years of anemic economic growth, working class Americans are facing limited job opportunities, stagnant wages, a diminishing middle class and, as a consequence, increasing income inequality. The obvious way to reverse this trend would be to encourage the private sector growth necessary to create good paying jobs.

But, Hillary Clinton wants to use government compulsion to artificially create the benefits of robust economic growth (including reduced income inequality) without any actual economic growth. Clinton’s website contains a section titled “Five important steps Hillary Clinton will take to reduce inequality and grow our economy.” Even the title puts the (income inequality) cart before the (economic growth) horse. But her policies would actually focus on reducing inequality at the expense of growth and, in the process, fail to achieve either goal.

Her more problematic proposals are to increase taxes, punish companies that attempt to reduce their tax burdens and compel companies to share profits with employees, all the while mandatorily increasing wages and workplace benefits. These proposals would discourage capital investment, stifle business expansion and increase the cost of employing people. That’s not how you grow the economy. It’s how you shrink it.

Taxes under a Hillary White House

Clinton’s tax plan is perhaps the best example of her misguided approach. She proposes increasing taxes on the wealthy through a minimum income tax rate, a cap on itemized deductions, increased capital gains tax rates for high earners and a surcharge on high incomes. According to the non-partisan Tax Foundation, Clinton’s tax plan would “reduce GDP by 1% over the long-term” result in “0.8% lower wages” and “311,000 fewer full-time equivalent jobs.”

With increased marginal tax rates on both labor and capital, there is no reason to expect that this ‘tax the rich plan’ would result in economic growth. But, that’s not even the intent. The intent is income redistribution. On the low end, Clinton proposes increasing the cost of employing people by, for example, raising the federal minimum wage from $7.25 to $12. She has conceded that she would sign a bill raising it to $15.

But, wages haven’t stagnated because the minimum wage is too low. They have stagnated because there are so few good paying jobs. When employees are competing with each other for low wage jobs, as is currently the case, wages for those jobs remain low. In a growing economy with robust job creation, employers compete for employees, causing wages to rise.

Continuing Obama’s economic legacy

These attempts to address income inequality through tax and regulatory policy should sound familiar. Clinton has acknowledged that she intends to “defend and build on” President Obama’s economic “legacy.” Let’s look at that legacy. In 2010, the White House projected that GDP growth would “accelerate in 2011 to 3.8%” and “exceed 4% per year in 2012-2014.” In reality, GDP growth has languished at a disappointing 2.1% since the recession ended. For the last three quarters, as business investment has declined, the economy has grown an average of just under 1%, dangerously close to recessionary levels. It’s exactly the kind of meager growth you get when government overtaxes and overregulates.



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