In the post-WW II era, the industrial revolution led the western world to a period of high economic growth and prosperity. But then came the period of complacency in which the governments encouraged shorter work weeks, longer paid vacations, liberal benefits, and increased freebies from the governments in the form of subsidized food, education, health care, housing, and child care that made the population increasingly dependent on the government and less self-reliant. The wave of socialism, coupled with higher taxes and higher government expenditures, has contributed to the decline of capitalist system which is making it harder for free-market economies to grow. The slow or negative growth has led to higher budget deficits and record national debts. These trends have been more prevalent and more pronounced in Europe where many countries are now in dire financial situation. In the United States, it has been estimated that during the presidency of Barrack Obama, the welfare programs have increased government expenditures by $1 trillion that could not possibly be sustained in the future. Obama’s legacy is doubling up the national debt to almost $20 trillion.
The global financial crisis of 2008 and subsequent bailouts of banks around the world have created another destabilizing situation in the form of income inequality. The top 10% of the people around the world handsomely benefited from bank bailouts and they became even more rich, while the rest of the people lost ground. Even today, almost a decade later, a majority of people are still struggling. In the United States, stagnant incomes of the middle-class has become an explosive issue in the current election cycle. Globalization of trade has also contributed to stagnant incomes of common people because high-paying manufacturing jobs are being outsourced to emerging economies where the labor cost is much lower than in the western world. In many industrialized cities such as Cleveland, Detroit, and Buffalo, we now see a frighteningly ghostly sight of deserted plants with broken windows and falling roofs, and deteriorating homes and streets.
During the current presidential election, Democratic Party nominee, former Secretary of State Hillary Clinton, has sharply moved to the left to attract the supporters of her primary opponent Senator Bernie Sanders (D-VT), a self-proclaimed socialist. She now promises a minimum wage of $15 an hour, free college education, free health care for all children, and no more trade deals (such as TPP) that have the potential to move high paying jobs from the U.S. to other emerging countries. To pay for all new programs, she proposes to increase the taxes on the rich and corporations that are comparatively already too high. If Clinton wins in the general election, we will see a third Obama term with continuing budget deficits and crushing national debt. The Republican nominee, Donald J. Trump, on the other hand, proposes to increase infrastructure spending and reduce taxes for the middle class and corporations to give economy a big boost. Trump’s overriding focus is on growing economy faster to create more high-paying jobs (Trump also disfavors unfair trade deals such as NAFTA and TPP) and only that will move the recipients of government freebies from welfare rolls to employment rolls. High growth rates will also reduce chronically high unemployment rates among the minorities in the inner cities. The polls consistently show that almost two-third of the electorate thinks that presently the country is moving in the wrong direction which seems to favor Trump’s approach.
If Clinton wins in November, she might keep most of Obama’s policies in place with an emphasis on “tax and spend” philosophy. If Trump wins, his focus would be to cut taxes and spend on infrastructure to stimulate economy, reduce regulations to make it easier for small businesses to thrive, and modify trade deals to discourage migration of high-paying manufacturing jobs to other countries. Only the election will tell where the electorate stands in terms of Republican capitalist approach with reduced government regulations vs Democratic socialist approach to solve the twin problems of stagnated wages and income inequality.
