What President Hillary Clinton Might Mean for Taxes, Trade, and Business


She tops most Democratic primary polls, she has outraised every other presidential candidate, and she's even the top choice in the online betting markets to be our next commander in chief. So if you're a political junkie, you can't help but wonder, "What would a Hillary Clinton presidency look like?"

Indeed, Greg Valliere, top political analyst at the Stanford Group, a Washington, D.C.-based institutional research firm for Wall Street's big-money crowd, has pondered just that question. And here is a bit of what the supersavvy Valliere and his team have come up with–a year and a half before Election Day 2008:

Taxes. "The individual rate structure enacted under President George W. Bush, with a 35 percent cap, would be under great jeopardy." Valliere thinks the top rate will be raised to just under 40 percent. The 15 percent top rate on capital gains and dividends might get bumped up a bit, but he thinks that a President Edwards or Obama would push them higher. Interestingly, he speculates that the budget deficit could be close to zero in the fiscal year that starts on Oct. 1, 2007.

Healthcare. "Once she's elected, reforms would come slowly and modestly."

Trade. "Another area where Clinton is more moderate than most of her Democratic challengers ... . Clinton is pro-trade in the tradition of the Democratic Leadership Council, where the ideas of former Clinton administration advisers Rahm Emanuel and Gene Sperling have flourished." This approach focuses on "market-opening initiatives focused on big countries or regions, along with tough enforcement of trade laws, and a more generous safety net for dislocated workers."

Corporate mergers. Valliere thinks a Clinton victory would mark an end to the prevailing assumption that companies can get approval of almost any deal imaginable. "Indeed, the mere prospect of her victory could quicken the pace of deals ahead of the 2008 election."

Energy and the environment. "Hardly ... on the left-most fringe of the environmental movement ... Clinton would go along with a balanced energy/environmental plan, emphasizing incentives for alternatives over more punitive regulation."

Already, she has put forward the idea of a corporate tax assessment that could be avoided by spending and investment in research and development. "She would require 'big oil' companies to install [ethanol capable] pumps at their own stations and wants to provide a 50 percent tax credit for installing such pumps at other retail gas outlets."

Telecom and media. "A President Hillary Clinton would likely appoint people to the FCC who support network neutrality."

My take: To a great degree, this entire analysis assumes that a thoroughly Rubinized (as in Robert Rubin) Hillary Clinton would follow a WWBD–What Would Bill Do–approach to governing. Indeed, she has already hinted to Wall Street that she would go easy on capital gains and dividend taxes. Recall that President Bill Clinton signed a cap-gains cut back in 1997.

But there are two big differences between today–and perhaps 2009–and 1993, when her hubby took office: 1) Concerns in her own party–and even the GOP–about trade and globalization seem to be going parabolic. She seems likely to move on a massive new social insurance plan before pushing new trade openings; 2) Hillary might well enter office with a budget surplus, not the budget deficit that existed in 1993. This might lessen her ability to raise taxes. Big tax hikes usually accompany big deficit fears, though she could point to massive entitlement liabilities as just cause.

In the past, I have differentiated–using an idea stolen from economist Jason Furman at the Hamilton Project–between "pretax Democrats," who want to alter the trade environment such as reopening NAFTA, and "after-tax Democrats," who want to mostly deal with any negative trade effects after they happen, such as through an expanded social insurance program that might include wage insurance for displaced workers. Economist Dean Baker of the left-of-center Center for Economic and Policy Research–and my occasional friendly jousting partner on CNBC's Kudlow & Co.–E-mailed me this recently:

"I like this "before-tax" and "after-tax" distinction. I had not heard it before, but it definitely captures the difference. It actually picks up one of the amazingly sloppy features of the pro-Clinton/Bush trade agenda crowd. They feel a need to eliminate trade barriers because these barriers lead to inefficiencies and slow growth (somehow, this doesn't apply to patents). But any serious measures to help out the losers from trade will require money for the trade adjustment assistance, wage insurance, or whatever else is on the table. To get this money, you need taxes, which also create distortions."