Editor's note: This story was originally published in January. With Election Day almost here, it's worth taking another look at what the U.S. economy may look like under a President Clinton. Also, check out our Hillary Clinton Stock Portfolio, which we'll be tracking until November 8. The introduction and sections below on Wall Street regulation, taxes and corporations have been updated.
When it comes to matters of Wall Street regulation, taxes, trade and boosting wages, what would Hillary Clinton do?
Would she mirror her husband Bill, who embraced former Goldman Sachs executive Robert Rubin's vision to repeal the Glass-Steagall Act, deregulate the telecom industry and sign the Commodity Futures Modernization Act, which exempted credit-default swaps from government oversight?
Or would she follow in the footsteps of President Barack Obama, who signed the Affordable Care Act, the Dodd-Frank Wall Street Reform Act and created the Consumer Financial Protection Bureau on the way to raising taxes on the country's highest earners for the first time since the late-1990s?
Clinton's detractors warn that she'll cave in to the same bankers who hosted her lucrative speeches before their members. The former secretary of state's unwillingness to make those speeches public bolstered Vermont Sen. Bernie Sanders' presidential campaign during primary season, giving ample fodder to a movement that has won sizable support for efforts to reshape the country's banking system.
The former New York senator has sought to deflect warnings that she is loathe to upset Wall Street by touting her support for Dodd-Frank and measures such as strengthening the Volcker Rule, which imposes a "risk fee" on banks that make speculative bets with funds from their own accounts. She's also said she would seek to pass the "Buffett Rule," which would close tax loopholes by establishing a higher minimum rate for those in the highest income bracket.
Clinton appears to want to appeal to middle-class voters with retirement savings accounts as well as consumer advocates who warn that the Democratic Party has a history of Wall Street appeasement that rivals that of the Republicans.
"If she is thinking about a policy issue, she's going to want to hear from the business side, the consumer side, the labor side, and in that regard, her positions may not be starkly black-and-white," said Tracy Sefl, a Democratic strategist and former Clinton campaign staffer. "She likes to bring together multiple voices."
Here's how Clinton plans to deal with the overarching issues affecting the country's economy -- and what effects her actions will have (assuming she's able to push her agenda through Congress):
Wall Street Regulation
During the primaries, Sanders was relentless in calling for the breakup of the country's largest banks. Clinton, on the other hand, has taken a more nuanced approach. While Sanders has said he'd reinstate Glass-Steagall within his first year in office, Clinton has countered that more must be done to regulate hedge funds and other entities within the so-called "shadow banking" system.
Since clinching her party's nomination, Clinton's focus has turned away from the Democratic primary and is now on Donald Trump and the Republicans. It's a change of course that will allow Clinton to emphasize that while she wants to expand Dodd-Frank, Trump and the rest of the Republican field wants to repeal it.
Coming just seven years after unemployment spiked to 17% in the wake of the 2008 financial crisis, Clinton clearly wants to run on a platform of tougher Wall Street enforcement. And for good reason. Some 67% of the U.S. populace wants a president who favors stricter regulation of financial institutions, according to a Washington Post-ABC News poll conducted in October 2015. Even Republicans to the tune of 58% said they want a candidate willing to toughen Wall Street oversight.
"It's no surprise that people who were hurt by the crisis want to be protected from Wall Street," Dennis Kelleher, president of Better Markets, a non-profit organization that lobbies for strict enforcement of Dodd-Frank, said in a phone interview from Washington. "Given the hostility of the American people toward financial institutions, no one can get elected, saying they're going to side with Wall Street."
And that puts Clinton in a tight position. Her opponents have on numerous occasions called for Clinton to make public the transcripts of her paid speeches to many of the country's largest financial institutions. The New York Times editorial board in February wrote Clinton should "show voters those transcripts," and GOP operatives are reportedly searching high and low for indications of what she might have said. Clinton has said she will release the transcripts if and when everyone else in the race follows suit on all of their speeches, but suspicions are high that Clinton doesn't want those speeches made public for fear they would reveal a politician eager to please bankers.
For her part, Clinton has steadfastly insisted that being paid hundreds of thousands of dollars to speak to financial firms doesn't preclude her from supporting Dodd-Frank or the Consumer Protection Act, the cornerstone of Obama's financial reforms. In a Feb. 11 debate with Sanders, Clinton said she would seek to re-insert regulations that Republicans took out of the bill in exchange for passage.
First and foremost was a bank tax to help pay to implement the law. Second was the so-called Volcker Rule, aimed at discouraging banks from making risky investments.
"This would be a sensible, moderate way to address banks taking risks," Jeffrey Frankel, macro-economics professor at Harvard's Kennedy School of Government, said in a phone interview from Cambridge, Mass. "Republicans have consistently tried to limit funding on the enforcement agencies, both the Consumer Protection Bureau and existing ones. These are steps to raise a little money for enforcement and tax the riskier activities of the big banks."
Clinton has also proposed levying a "graduated risk fee every year on the liabilities of banks with more than $50 billion in assets, and other financial institutions that are designed by regulators for enhanced oversight." Those fees, Clinton says, would be scaled "higher for firms with greater amounts of debt and riskier, short-term forms of debt." Clinton likens it to a deterrent, a rainy day fund.
She would also seek legislation to hold executives accountable by extending the statute of limitations for major financial crimes to 10 years from 5 years, and requiring that executives lose bonus pay when a bank pays a fine related to their bad decisions. Additionally, Clinton has also called for addressing executive compensation schemes that Kelleher says "induce and incentivize recklessness."
Unlike Sanders, though, Clinton doesn't support restoring Glass-Steagall, which was passed in 1936 in the throes of the Depression to separate commercial banking from investment banking. She insists that even if Glass-Steagall hadn't been repealed, Lehman Brothers, AIG and Bear Stearns, among others, wouldn't have been prevented from making risky bets.
Rather than focusing on Glass-Steagall, Clinton counters that a different kind of regulatory framework is needed to monitor hedge funds and other non-bank institutions, adding that Dodd-Frank could be used to break up banks, if that's what was required.
Nonetheless, a group of 170 economists who support Bernie Sanders' more aggressive plans to regulate Wall Street signed a letter arguing that Clinton's plan doesn't sufficiently reduce risk in the financial system, leaving the government vulnerable to institutions deemed too big to fail.
"Sanders overstates the banking part of finance, and Clinton overstates the shadow banking part of finance," Kelleher said. "Clinton has to continue to talk about importance of regulating the shadow banking system but she needs to also address the too big to fail banks on Wall Street. They're both right but they both have more work to do."
Remaking the U.S. Tax Code
This is a biggie, and strikes at the heart of the conflicting world views of the two major parties.
To highlight her differences with the Republican candidates, Clinton has been emphasizing in campaign speeches that as president she would seek to close the so-called "carried interest loophole." In effect, the provision allows money managers and hedge fund operators to treat fees on their clients' investments as capital gains, which are taxed at a maximum rate of 23.8% rather than the 39.6% rate applied to ordinary income.
Closing the loophole, and raising taxes on short-term capital gains, are being pitched as concrete steps aimed addressing income inequality, an issue resonating with both Democrats and Republicans.
The carried interest loophole allows "individuals making more than $450 million a year on average are taxed at a lower rate than teachers making around $50,000 on average," wrote Morris Pearl, former managing director of Black Rock, the asset management firm. "There is no more striking example of the cost of corruption than tax loopholes that benefit the 1%."
Congress considered doing away with the carried interest loophole back in 2012 when Rep. Dave Camp, a Republican who chaired the Ways & Means Committee, proposed a sweeping tax reform plan that included treating carried interest as regular income. Yet even as the House approved such a measure, it died in the Senate.
Along these same lines, Clinton in January announced a plan to levy a 4% "surcharge" on people earning more than $5 million, generating about $150 billion over 10 years. That's not going to retire the national debt, but it does send a message at a time when her Democratic rival Sanders is gathering strength from progressives insisting that government take substantive actions to address income inequality.
Essentially, if you're super-rich or make most of your money investing, your taxes will probably go up under a President Clinton.
Raising taxes on the wealthy doesn't necessarily hurt the economy, said Michael Lind, a senior fellow at New America, a Washington-based think tank. Tax rates on the highest wage earners was higher before the 1980s when the economy was growing faster, he said.
"The real question is the 'dead-weight loss' of tax avoidance, tax evasion because rich people have the resources as well as the incentives to avoid paying taxes," Lind said in a phone interview. "That's a loss to the economy, and has a very real impact on raising the deficit."
To lower the federal deficit, it will likely be necessary for the next president to widen the tax burden for those earning less than $250,000 through increases in sales or consumption taxes, he added. This is not part of Clinton's plan.
Critics of Clinton's tax plan say that higher investing taxes -- that are already too high -- will hurt economic growth by disincentivizing investment. Legendary investor Warren Buffett, a Clinton supporter, has said, however, that higher taxes on investing won't stop the rich from doing so.
According to the Tax Foundation's analysis, Clinton's plan would raise tax revenue by $498 billion over the next decade on a static basis. However, when taking into account what it says would be a dip in economic output incurred by the plan, it would end up collecting $191 billion.
U.S. Corporations, Trade and Foreign Policy
While U.S. corporations may differ with Clinton on taxes, she proved her worth as secretary of state in negotiating free trade agreements with Colombia, Panama and South Korea.
Yet it was in Mexico where Clinton may have forged her most significant achievement when she helped to negotiate an agreement with Mexico and its state-run oil and natural gas company Petroleos Mexicanos (Pemex) to open drilling rights in the Gulf of Mexico. The agreement, made on behalf of U.S. energy companies, was hashed out in December 2013 with the signing of the U.S.-Mexico Transboundary Agreement, which established a framework to allow U.S. companies to work with Pemex to develop oil reserves that straddle the underwater boundary between the two countries.
The agreement was approved by Congress, signed by Obama and hailed as a landmark achievement by the American Petroleum Institute.
Working for the Obama administration, Clinton also helped to lay the groundwork for the Trans-Pacific Partnership even as she has changed her position on the trade treaty as a presidential candidate. The sweeping agreement, negotiated in closed meetings with 11 Pacific Rim nations, lays out myriad rules to lower import tariffs.
Yet trade treaties have proven to be political liabilities as many Americans believe they send jobs overseas, and Clinton was quick to distance herself from the TPP, which Congressional leaders have said isn't likely to be considered until after the November elections, despite President Obama's emphatic support of the agreement.
In an interview with PBS, Clinton said that she was "worried about currency manipulation not being part of the agreement. We've lost American jobs to the manipulations that countries, particularly in Asia, have engaged in." Her flip-flop on TPP, however, has opened her to criticism from both Sanders and Republican candidates.
The same can be said of her support for authoritarian regimes such as Hosni Mubarak's Egypt and military coup that ousted Honduras's democratically elected president Manual Zelaya. Both cases reflect the historic economic underpinning of U.S. foreign policy: to open markets for U.S. corporations.
While supportive of U.S. corporations doing business abroad, Clinton has been critical of efforts by some companies to skirt U.S. taxes by executing mergers with non-U.S. entities. Paradoxically, that's a position she shares with GOP frontrunner Trump, who has condemned the use of so-called tax inversion deals.
In November, Trump sided with Clinton when she slammed New York-based Pfizer Inc. for attempting to execute a $150 billion merger with Ireland's Allergan PLC in order to change its headquarters, thereby leaving "U.S. taxpayers holding the bag." The sides scrapped the deal in light of new rules from the Treasury Department aimed at squashing it. (The Obama administration has been especially aggressive in its handling of inversions and deal-making.)
But despite the current rhetoric, Clinton is likely to continue to support free trade, which is widely considered to be good for the economy.
"She is positioning herself as Obama's heir on issues such as trade," said Kyle Kondik, managing editor of politics website Sabato's Crystal Ball at the University of Virginia's Center for Politics, in an interview from Charlottesville, Va. "Yes, she did flip on the Trans-Pacific partnership but that's likely to be settled before she would enter office."
Clinton has taken a harder line on drug pricing, which could have a major impact on the pharmaceutical industry. Clinton rolled out a plan to lower prescription drug costs in September 2015 and announced additional initiatives in September of this year, including the establishment of a dedicated consumer oversight panel to protect consumers from aggressive price hikes. Her plan may very well lower prices, but it could also rock pharmaceutical companies.
Wages and Jobs
On the campaign trail, Clinton has increasingly described herself as "progressive," an indication that she wants to position herself to the left of where she might have been in the past.
That past included serving on the board of directors at Walmart for six years (1986-92) at a time when the company's worker relations were infamous, and helping to build strategy for an Arkansas governor who rode the centrist Democratic Leadership Council's push for free trade, tough-on-crime policies and welfare reform straight to the White House.
The DLC, of course, closed its doors back in 2011, a clear sign that the party has moved left.
And now Clinton wants to show that she has moved left as well, especially on issues of union organizing, immigration and raising the minimum wage, Kondik added.
"We can expect a high level of continuity with Obama's policies if she's elected," Kondik said. "While she has tried to move to left a little bit to satisfy the more populist wing of the part, I don't think she is naturally more liberal on economic issues than Obama is, she might actually be less but she's moved to where the party is, which has become more liberal over time."
At the top of that list is wage stagnation, a direct product of income inequality, which is arguably a product of a tax code with elements that Democrats have called regressive. As James Surowiecki wrote recently in the New York Review of Books "the top 1% of earners take home more than 20% of the income, and their share has more than doubled in the last 35 years. Over that same period, wages and household incomes have risen only slightly."
Forcing employers to raise salaries probably begins with raising the federal minimum wage. Since 2009, that's been $7.25 an hour. Clinton has proposed a $12 minimum wage target nationally but has also been supportive of the labor-led fight for $15, saying that the $15 target should be implemented where allowed regionally. When pushed by Sanders at an April debate, she said she would sign a bill setting the federal minimum wage at $15 and later clarified her stance that such a bill would have to have certain stipulations in it.
Whether or not raising the minimum wage would hurt the economy is a source of much debate -- and policy papers -- from competing think tanks, industry lobbyists and labor unions. Yet accepting that some change and displacement would occur, raising the minimum wage may actually be a net longer-term positive for the economy, argues New America's Lind.
"Obviously, businesses that would be unable to pay a higher minimum, whatever it is, would suffer," Lind said. "But having a minimum wage that drives low-wage businesses out of existence arguably is a good thing, as it can force businesses to invest in technology rather than labor, which is a good thing from the point of view of overall national productivity."
Reality With Republicans Controlling Congress
To get any of these proposals enacted, Clinton would likely have to barter with a House of Representatives that likely will remain in Republican hands (although Trump at the top of the GOP ticket might change that). Assuming that Clinton is elected president and the Democrats fair poorly in mid-term elections, which is customary, Clinton runs the risk of being the first Democratic president to serve without ever having her party control the House.
As a result, raising the minimum wage or increasing taxes on higher earners would probably require a grand bargain with Republicans that might have to include lowering the corporate tax rate.
"Because the political situation will probably be much like it is now, her ability to pass landmark legislation would be blocked," Kondick said. "If you thought Obama's relationship with the House was bad, I don't see why Clinton's would be better. We could be looking at more stalemate.
Whether such an impasse could be broken would depend on one party gaining significant momentum coming out the election in November. Ultimately, though, Clinton's ability to move her economic agenda will rest on how she decides to govern. Will it be through the centrist positions of her husband's administration, the liberal doctrines of Barack Obama or the populism of Bernie Sanders?
Only Hillary knows.