The Price Point

As Stuyvesant students prepare to enter the outside world, understanding the economy becomes an essential skill. In today’s society, knowledge of economics provides us a foundation for navigating financial issues, understanding the effects of public policy on the market, and making informed decisions about our own personal finances. With the election right around the corner, each candidate stands for different changes to the American economy, each of which would greatly affect our standard of living in the next four years.

America Remains Economically Strong

               Despite somewhat high inflation for a couple of years and the economic aftershock of the COVID-19 pandemic, America still remains one of the fastest growing developed economies and the engine of global economic growth. The International Monetary Fund (IMF) has also ascertained that the U.S. inflation rate will return to a fairly normal rate without accidentally tipping the global or U.S. economy into a full-blown recession. The rate cuts that will likely come as a result of this announcement and other pieces of data will allow the American economy to grow at a faster rate, unencumbered by its war against inflation.

Harris

No College Degree Requirements For Certain Federal Jobs

               Harris announced during a recent appearance on Spanish media channel Telemundo that she wants to remove the college degree requirement from certain federal jobs and encourage private employers to do the same. Harris also wants to double the number of registered apprenticeships. The goal of these two policies is to allow practical experience to play a stronger role in job selection rather than expensive college degrees.

The Lesser Deficit Spike

                 Both Harris’s and Trump’s economic plans are likely to spike the national debt. However, Harris’s plans are projected to increase it by $3.5 trillion through 2035, which is less than half the $7.5 trillion of Trump's plan. This is because Harris intends to increase government spending, and while her tax proposals do bring in new revenue, it’s not by a large enough amount to completely cover her proposals. On the other hand Trump intends to increase government spending while overall decreasing tax revenue, thus increasing the deficit significantly. A higher deficit means the government has to borrow more money to operate, resulting in a greater risk of the government defaulting on debts. 

Trump

Trump Tax Cuts

Donald Trump’s tax reform policies are a huge pillar of his economic platform. He announced his plans to exempt about 93 million Americans by eliminating income tax on tips, Social Security benefits, and overtime pay. He also announced that he wants to implement tax breaks for first responders such as firefighters and police officers, as well as active military personnel and veterans. Trump envisions that his increasing tariffs will cover the decreasing government revenue gained from income tax. These tax exemptions will apply to more than a quarter of the country–a monumental portion of eligible voters in America.

The Deficit Spike

Although appealing, experts say that Donald Trump’s proposed tax cuts will increase US budget deficits by about 7.5 trillion dollars. Along with these tax cuts, his plans for tariffs on foreign goods, military expansion, and mass deportation will do more to widen the budget deficit and increase government spending. These plans that aim to reduce income taxes for American voters could possibly endanger the US and put it in greater national debt than before.

Economics Concepts Of The Issue

GDP

             Gross Domestic Product (GDP) is the sum of the value of all goods and services produced within a nation's borders. Real GDP is essentially the same, but adjusted for inflation, which makes it a useful indicator of a nation's overall economic health. In order to make this comparison between nations, GDP converts both nations’ output in their national currency into a stable common currency (usually the U.S. dollar). This can lead to issues since some nations produce cheaper goods which can therefore underinflate the overall productivity of their economies. As such, some economists have argued that Purchasing Power Parity (PPP) is a better model for economic comparison. This model attempts to account for local prices of goods and services across nations in order to better compare which one actually produces more. It has been argued though that generalizing a price estimate to particularly large nations is extraordinarily difficult and can lead to overinflated numbers for some countries using this model. 

Inflation

             Inflation is when the amount of a country's national currency in circulation increases, usually due to printing more money. This devalues the currency over time which spikes the price of goods and services. Some level of inflation is expected in every national economy in order to sustain consumer spending growth—a critical driver in the growth of total economic size. However, inflation that is too high can raise the prices of essential goods out of reach of many while extremely severe inflation can render a nation's currency essentially worthless. As the world's reserve currency and most commonly used trade currency, the dollar needs to inflate somewhat or it starts damaging nations with debts measured in dollars and hurts their ability to buy dollars to service their debt.