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Presidential Issues: Economic Growth

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On the Good and Bad Economics From the Democratic Presidential Debate in Iowa

November 16, 2015

By James Pethokoukis

Let’s start with the few positives.

On the issue of raising the national minimum hourly wage to $15, Hillary Clinton said she took “seriously” former Obama White House economist Alan Krueger’s warning on the riskiness of such a steep increase. Clinton also didn’t seem much interested in the super high income tax rates  — 70%? 90%? — mentioned by Bernie Sanders and Martin O’Malley. And she reiterated her opposition to free, universal four-year college.

As for the negatives, perhaps the biggest was that there was little talk about how to accelerate economic growth. And what talk there was mostly centered around what the left calls “middle out economics.” It’s the idea — more about political marketing than economics, really — that the way economies grow is through consumer spending from a higher minimum wage and income redistribution. Stronger productivity and innovation? Not so much, since that might mean business tax cuts and deregulation among other things progressives don’t like. It’s all about boosting near-term demand rather than structural supply-side reform to raise economic potential.

Here is Sanders: “You have no disposable income when you’re making ten, twelve bucks an hour. When we put money into the hands of working people they’re gonna go out for our goods. They’re gonna go out for our services. And they are gonna create jobs in doing that. And O’Malley: “And if our middle class makes more money, they spend more money. And our whole economy grows.”

Read the full article at the American Enterprise Institute: On the good and bad economics from the Democratic presidential debate in Iowa