The US elections are stirring up the entire world and it is hard for anyone or any aspect of the world not to be affected by it. The US economy policy is due a major change and therefore, the global economy too will invariably follow.


While Hillary Clinton leads the Democratic field, Donald Trump is not too far behind in the Republican field just in front of Senator Ted Cruz of Texas and Senator Marco Rubio. Further behind are neurosurgeon Ben Carson and Ohio Governor John Kasich.

Although it is highly doubtful whether this predicted trend will hold. In fact as of now, nothing seems certain.

Clinton and Trump are in the limelight as of now. Although Hillary Clinton is not trusted by the young voters, may face legal action for managing highly classified information via a private email server when she was Secretary of State, there is an unhealthy conflict among the Republicans which may give her an advantage in the upcoming elections in November. It is of the belief of most Republicans that the nomination of Trump would cost them the White House as well as the Senate.

In addition to being concerned about national security, the other factor which most concerns the American citizens is economic issues. Each candidate offers their own ideologies for this space. Trump presents dangerous ideas on trade which could potentially harm the bipartisan American leadership in trade liberalization which allows considerable foreign import tariffs from countries such as China and Mexico. Sanders from the Democratic Party inveighs against free trade. Clinton has a vacillating view of the issue and now opposes Canada’s Keystone XL pipeline and the Trans-Pacific Partnership. This she has widely promoted when she was Secretary of State.

Clinton somewhat reflects the anti-bank position and his ideas of Sanders on financial-system reform. The interest of the Democrats lie in low interest rates, loose monetary policy and a depreciated dollar while Republicans worry about exceedingly loose monetary policies, bailouts and  excessive discretion for the US Federal Reserve outside real emergencies.

The impact will be great by these changes. The appointment of a new Fed Chair, the new president will have a somewhat indirect effect on exchange rates, interest rates as well as global financial markets. If in case the inflationary pressures rise, the economic stability will depend largely on the Fed’s response.

Each candidate also has their own ideas about the taxes and spending plans affecting their deficit and debt proposals. The proposal of Sanders includes free tuition at public colleges,  a single-payer health-care system and a infrastructure investment which will account for about $18 trillion of additional spending over the next decade. This would be complemented by tax hikes of $6.5 trillion which is meant to be imposed upon the “wealthy”. However, their definition of “wealthy” translates to an annual household income above $250,000 which is basically the starting salary of the first job of an urban couple. Clinton too has similar ideas but without the drastic increases.

Republicans are rooting for broadening the tax base and personal income tax reliefs. They believe that the lowering of America’s corporate-tax rate would be beneficial while some are of the belief that the current income taxes both personal and corporate must be replaced with a flat tax on consumption. This would entail slowing the growth of spending in numerous areas while increasing the spending on defense. Trump is opting for an outsize $10 trillion in tax cuts while Cruz goes up to about $9 trillion. Meanwhile Rubio and Kasich have come up with more arithmetically and economically plausible fiscal plans.

It is evident that tax cuts are instrumental in spurring growth than increase of spending and also that effective consolidation of budgets is more likely achieved by lower spending than imposing tax hikes. However, it must also be noted that constraining the growth of spending is not going to be easy.(image courtesy: ytimg, washingtoneexaminer.)