Is dumping Donald Trump for Democrats worth a recession?

Despite relentless political attacks and of course impeachment drama, President Trump has an approval rating held up by consistently upbeat economic news, including the new unemployment numbers. Why would voters cash in their gains this year for a return to bad economic times?

The unemployment rate remains at a near historic low of 3.6 percent, and black and Latino unemployment rates are now at record lows. The stock market has been rising due to regulatory and tax reform. The S&P 500 is growing at more than double the annual rate under Trump than previous presidents. Record highs are more than numbers. They have contributed to millions of new jobs and the fastest wage growth in over a decade.

Sending a Democrat in the White House would jeopardize this goldilocks era. Soon, especially as more moderate candidates like Joe Biden and Amy Klobuchar are knocked out of the primary process, the alternatives will be increasingly frightening to the market. This is especially starting to be the case as Bernie Sanders moves into the lead in New Hampshire.

What would fear of Sanders in the White House mean for the economy, even before the election? If he enters office with a Democratic Congress, he could accelerate the national transition from a relatively free market to a planned economy, with direct and indirect state control of the means of production. His Marxist views have altered little in the last five decades.

Both Main Street and Wall Street would price in these potentials, and if Sanders runs away with the Democratic nomination and leads in general election polls against Trump, the economic results would be frightening. Money would flee to greener pastures in offshore accounts, commodities, or even under mattresses. Growth is the well from which both economic opportunity for the middle class and tax dollars spring. The specter of a socialist victory would seriously damage the current economic boom.

For all the talk of billionaires being harmed by socialist policy, the rich have financial flexibility to take their assets out of danger. Middle class workers, however, would be much more exposed to the repercussions of capital flight. A very steep decline before the election would mean stock market disaster, leading to layoffs similar to the months prior to the 2008 election of Barack Obama. Millions of jobs would be on the hook, hours slashed, and exposure to the stock market for average Americans would be seriously diminished. In a sense, the risk intended toward “millionaires and billionaires” would, shall we say, trickle down to hurt the rest of us.

Sanders said he would force publicly traded and many privately owned companies to fork over 20 percent of their equity to a workers council. The plan is shockingly similar to the platform of erstwhile Labour Party leader Jeremy Corbyn. Combine the uncertainty behind the principle of private property with a near doubling of the federal budget, and all those impacts would be catastrophic for our future. Middle class families would see their average tax burden balloon by more than 25 percent. Increased chances of layoffs, loss of private insurance, and shattered retirement plans are all the risks we run in ousting Trump from the White House.

The markets, to borrow from Frederick Hayek, will act as a diffused set of interests that act in our national interest. So every dollar pulled out of the market in anticipation of new taxes, regulation, and government seizures of private property will not just come after the election. It will start in the moment that Sanders or Elizabeth Warren appear to be a viable candidate, and that may help them at the polls. The economy under Trump has made gains every month. Any deviation from low unemployment, strong wage growth, and gross domestic product growth would assist his opponent.

Democrats would reap the whirlwind, potentially causing mayhem before taking office, then using a 2021 recession to seek broad new fiscal powers. This is similar to the 2008 election and the failed regulation and stimulus plans under Obama during 2009, which gave the country eight years of recession and poor economic realities. Fear of the economy under a left wing administration would wreak havoc on our good fortune. Investors certainly realize the ideas proposed by the Democratic candidates would not push us toward Denmark or Sweden, but instead toward Venezuela.

If polls suggest a Democratic victory in the general election as November nears, markets may react first, but your personal stake in the economy will be affected just the same. Finally, when the pink slip comes for you or a regulation doubles your cost of operating a small business, you will need to ask yourself, since we knew in early 2020, why did we not act sooner?

Kristin Tate is a libertarian writer and an analyst for Young Americans for Liberty. She is an author whose latest book is “How Do I Tax Thee? A Field Guide to the Great American Rip-Off.” Follow her on Twitter @KristinBTate.

Tags Bernie Sanders Democrats Donald Trump Economics Election Finance Policy

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