The No-Growth Campaign

aeiWSJ, Editorial Board

Clinton and Trump are offering nothing to improve the economy.

BN-KC660_edp090_M_20150901183831Stocks took another tumble on Tuesday on a weak manufacturing report out of China, and investor shivers about Japan, the oil patch and the U.S. are increasing. The shaky markets and underlying economy seem relevant to the presidential debate—yet the front-runners of both parties have next to no pro-growth ideas to contribute.

Hillary Clinton favors higher taxation, heavier regulation, more political shackling of business, and centralizing more economic control inside the White House. So does Donald Trump—at least as far as we can tell.

Mrs. Clinton is promising Obamanomics Plus: continue the agenda of the last eight years, with bonus corrections toward the left as necessary. She’s proposed to nearly double the top tax rate on some capital gains to 43.4% from 23.8%, for example, up from 15% as recently as 2012.

On energy, one of the few U.S. growth areas of the Obama era, she is even further to the left. The green elites used to tolerate support for the U.S. oil and natural gas boom if gas could be levered as a transition fuel toward a post-carbon future. Now they favor massive subsidies for wind and solar today and no fossil-fuel drilling, and Mrs. Clinton is moving their way.

About the only growth component of Mrs. Clinton’s agenda is immigration, and there she beats Mr. Trump in a romp. A larger workforce adds to GDP, and economists of all political persuasions agree that increasing human capital drives prosperity and offsets an otherwise aging population.

Mr. Trump’s candidacy is more attitude than substance, and his quicksilver positions change day to day, even minute to minute in the same interview. But he has been consistent about rounding up illegal immigrants and deporting them to their home countries—if they have one, in the case of kids born on U.S. soil. He supports “a pause” in legal immigration too.

The real-estate tycoon is also running as the most antitrade candidate since Herbert Hoover. He has assailed the trade agreement with Canada and Mexico and the pending Pacific Rim pact as “disasters” that are “killing us.” Mr. Trump promises to reopen these agreements and do better, though without saying how, apart from his alpha-male negotiating skills. He’s proposing tariffs as high as 30% on imports, and he has already promised to punish Ford and Nabisco for expanding production south of the border.

On taxes, Mr. Trump promises to release a “comprehensive” reform plan soon. So far, though, his only specifics have been some kind of tax relief for the middle class coupled with class warfare. He said in a recent interview that “I would take carried interest out, and I would let people making hundreds of millions of dollars a year pay some tax, because right now they are paying very little tax and I think it’s outrageous.”

Carried interest is the accounting term for a share of profits from investments in general partnerships—private equity, hedge funds, (ahem) real-estate outfits. Congress taxes this at-risk capital at a lower rate than ordinary wages because it only pays out if a fund invests wisely, but this treatment should be reconsidered as part a larger tax reform.

LIfe 2x 3Mr. Trump doesn’t engage these facts, much less anything else that might help the real economy. Carried interest is a sideshow. Much like Mrs. Clinton and President Obama, he’s trying to stoke resentment of the rich, or the merely affluent, or foreigners, people dumber than he is, whoever.

This makes it all the passing stranger that some conservatives are embracing Mr. Trump as a truth-teller speaking to the anxieties of middle-American voters. On this view, he’s a hero for challenging the GOP policy consensus of low marginal tax rates, free trade, less regulation and entitlement reform.

Thus instead of modernizing the tax code for the 21st century, offer tax relief that does nothing to reduce complexity and distortion or to improve the incentives to work and invest. Rather than fixing a broken immigration system to attract the hard-working and ambitious, distract low-wage American workers by scapegoating illegal workers. Instead of making the U.S. economy more competitive, attack foreigners and adopt a divisive platform and rhetorical style designed to polarize a justifiably frustrated electorate.

But following Mr. Trump down these cul de sacs—a Canadian border wall?—is a formula to lose and deserve to. After seven years of slow growth and stagnant incomes, the GOP is well positioned to make the case against liberal economic policies while stumping for an optimistic agenda that offers disaffected voters the opportunities that faster growth and tight labor markets create.

But in the anti-reality of the current campaign, the GOP field is attacking each other and giving Hillary a pass. The candidates who break out will invoke something more inspiring than the no-growth future that the front-runners are offering.

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