Do elections really matter to financial markets? Pt 2


To continue. So Hillary Clinton will arrive at the White House with her two shipping containers of baggage. She will (unless this election outcome is the best possible and that is with Democrat majorities in both halls of Congress) have to fight hard to implement her platform.

However, Obama’s sweeping overtime rules reform is a powerful force for economic growth as I asserted above. This will help her right out of the box. Then there is her minimum wage increase initiative. That initiative, if implemented sooner rather than later will bring with it profound economic growth. Economists agree that demand side economics is an undeniable force for growth. The minimum wage increase brings with it a change in the distribution of value added in services and manufacturing. Instead of an inordinate proportion of income, both personal and corporate flowing to a tiny minority, less will flow to them and more will remain with employees who will spend it quickly, so great is pent up consumer demand.

Workers with their new disposable income will empty stores enthusiastically causing a supply shortfall that will drive manufacturing expansion. They will dine out more often filling tables at local restaurants; take vacations and travel more often; etc., etc. as a more dynamic economy takes hold.

That brings to mind another important Clinton economic expansion proposal: the ambitious 10 year $500B infrastructure renewal and jobs program. The beauty of this and many other Clinton economic initiatives is that it is largely funded by the richest 1% of Americans through increases income tax rates and even a 30% surcharge tax on incomes in excess of $5M. This is where fallow capital is to be found. It sits, mostly in US Treasury bonds; largely unproductive. This capital is to be given new velocity as it is appropriated through taxation and put to work building new bridges, laying high speed railroad track, installing high speed internet cable among other projects. This new and improved infrastructure will lower production and transportation costs increasing productivity that has been stagnant of late.

Another Clinton program is the promise of free college education for all Americans at community colleges and state universities. This is for students from households with income of $125,000 or less. This will create a post-secondary education boom growing jobs for educators, administrators and support staff. New student capacity will be needed causing growth in commercial construction.  The “value added” of a vastly improved educated workforce will be tremendous in the decade to follow this initiative as these colleges and universities graduate these new students. Instead of our society bringing on young college educated people with college loans averaging $27,000, these students will graduate debt free. Instead of these payments flowing to capital-bloated Wall St. banks, these new graduates will have much more disposable incomes with which to buy homes, furniture, cars, clothing and other tangible goods. The supply side will be greatly enriched with sales.

It must be obvious to the reader at this point that I am extremely optimistic about the new Clinton administration and the fiscal policy she brings. If she can implement a good deal of her platform, we will see an economic boom perhaps the likes none of us has ever seen since the 1950’s. This boom will be reflected in the financial markets as investors bet that great companies, both existing and to come will be ubiquitous and their stock offerings will find many excited investors.