Policies on the economy, education, and health care have real consequences for your annual budget, but every candidate has different ideas.
The 2020 presidential election is still months away, but Americans are bracing themselves for the financial impact—whether from a new administration or a second term for President Donald Trump.
Nearly three-quarters of Americans believe whoever is elected to the White House will have a direct impact on their personal finances, according to a survey released by FinanceBuzz in January, and about one in three is putting off a big financial decision until after Election Day.
Trump frequently champions the success of the U.S. economy under his administration. At the World Economic Forum in Davos, Switzerland, he said the country is “in the midst of an economic boom, the likes of which the world has never seen before.”
In 2019 hourly wages increased 2.9%, and unemployment continued to sit at 3.5%—a nearly 50-year low—with 145,000 jobs added in December, according to the Bureau of Labor Statistics. But this number doesn’t account for those who would like to work but have given up looking for jobs.
The labor participation rate, which includes those who are employed or are actively seeking work, remained unchanged at 63.2%, meaning more than 35% of the population is not working. Labor participation peaked at 67.3% in 2000, but has seen little variance since hitting a more than 30-year low of 62.4% in 2015.
But even for the employed, an overwhelming majority have yet to reach financial security, Christian Weller, senior fellow for economic policy at the Center for American Progress, tells Fortune.
“Costs for health care, housing, and education have outpaced people’s incomes, and families are playing catch-up,” he says.
Here’s a look at how the policies of another Trump administration, a moderate Democratic administration, and a liberal Democratic administration could affect your personal finances.
In terms of international trade, Trump’s administration has made deals beneficial to some U.S. industries. According to a federal agency’s analysis, the newly signed United States-Mexico-Canada Agreement (USMCA) will create at least 76,000 jobs in the U.S. automotive sector over five years.
It could be promising for the agricultural sector as well, Weller says, since the agreement allows more U.S. milk, eggs, and turkey to be sold in Canada.
Under Education Secretary Betsy DeVos, the Trump administration has promoted private and charter schools. The proposed fiscal year 2020 federal budget, for example, suggested a $5 billion plan to support private school scholarships.
Trump’s efforts are good news for those who want their children to go to private school, but public education may increasingly see cuts.
Trump’s budget proposal doesn’t bode well for those planning to pursue higher education, either. The proposed fiscal year 2020 federal budget included eliminating subsidized student loans (meaning student loans would accrue interest before graduation) and limiting repayment plan options. He proposed speeding up loan forgiveness by five years, but only for undergraduate loans.
At the time of the budget proposal publication in March, James Kvaal, president of the Institute for College Access & Success, warned the policies would “raise costs and increase student debt,” making students pay $207 billion more on their loans.
If Trump pursues similar changes in a second term, student borrowers could be seeing more debt in their books and higher bills each month.
Despite long promising to protect Medicare, Trump has proposed cutting and privatizing the program for the sake of “fiscal sustainability.”
The Executive Order on Protecting and Improving Medicare for Our Nation’s Seniors, signed last October, paved the way for the privatization of Medicare, says Emily Gee, health economist at the Center for American Progress.
“One proposal in it was to allow doctors to engage in private contracting, which could raise the prices seniors pay for care and subject them to surprise bills,” says Gee. “He has also signaled future changes to network adequacy standards for Medicare Advantage, and as a result, beneficiaries might have a harder time finding in-network providers.”
When it comes to lowering the high costs of prescription drugs, however, Trump has shown initiative. The President is in favor of allowing Americans to purchase lower-cost prescription drugs from Canada, which could force U.S. pharmaceutical companies to lower their own prices.
Trump also backs a bipartisan bill that would place a limit on what Medicare and Medicaid beneficiaries pay out of pocket for medications. The bill would also force drug companies to pay rebates to Medicare if they hike prices beyond the inflation rate, but it does not give the government negotiating power to lower prices.
Whether moderate or left-leaning, nearly every single Democratic presidential candidate supports guaranteeing at least 12 weeks of paid family leave and raising the federal minimum wage from $7.25 to $15 per hour.
According to a July report by the Congressional Budget Office (CBO), a $15 minimum wage could lift 1.3 million people out of poverty. It could also trigger 1.3 million job losses, but the CBO notes there’s “considerable uncertainty” about the effect of raised wages on employment. Prices would rise to cover businesses’ higher labor expenses, said the CBO, but higher-income families who spend more would absorb most of those costs.
Most Democratic candidates also aim to target wealth inequality by adjusting taxes on capital gains. Former Vice President Joe Biden, for example, has suggested nearly doubling the capital gains tax to nearly 40%.
Such taxes “would only impact those families that have relatively high taxable realized capital gains,” Weller says. “This is not the case for typical middle-class families,” as the law provides exemptions for certain situations including retirement accounts and real estate.
Raising the corporate income tax—as almost any Democratic President would—won’t impact the average American family, either. Trump’s cuts to this tax in 2017 “did not result in faster growth and higher wages,” says Weller. “There is no reason that reversing those tax cuts would do anything other than slowing income and wealth growth at the top.”
While these taxes might not affect the finances of the middle class much, the additional revenues help the government support public programs from which the middle class benefits.
According to a 2015 report by Child Care Aware of America, the cost of childcare ranges between $1,500 and $13,000 per year for a school-age child, depending on location. All Democratic candidates are behind reducing these costs, but some—former South Bend, Ind., Mayor Pete Buttigieg; Minnesota Sen. Amy Klobuchar; and Massachusetts Sen. Elizabeth Warren—would make pre-K free only for low-income families.
For secondary education, the vast majority of Democratic candidates support expanding Pell Grants and other such aid. Free two-year public college is also popular among both moderates and liberals.
Klobuchar, Warren, Biden, Hawaii Congresswoman Tulsi Gabbard, Vermont Sen. Bernie Sanders, and billionaire philanthropist Tom Steyer all support making two-year public colleges universally tuition-free, a move that would open up the job market to Americans who previously couldn’t afford higher education.
Buttigieg has a slightly different plan and would make public college free only for those whose family earns less than $100,000 per year (a demographic that, he says, includes 80% of public college students). Those earning between $100,000 and $150,000 would get reduced tuition on a sliding scale.
Health care policy provides the most clear differences between the moderate and liberal Democratic candidates. While Sanders and Warren both support Medicare for All, many of the others don’t think it’s realistic.
Most would create a public option for health care, meaning Americans could choose to pay for insurance like Medicare or Medicaid through the government, but private insurance would still be an option. Under a public option, the general structure of insurance stays the same, but the government would be able to negotiate prices with hospitals and other health care providers. The system could also create competition among private insurers, potentially bringing down prices across the sector.
A public option is the preferred policy of Biden, Buttigieg, Klobuchar, Steyer, and former New York City Mayor Michael Bloomberg. All of these candidates support keeping private insurance as an option, at least for the moment.
Gabbard’s website says she supports “a single-payer system that will allow individuals to access private insurance if they choose.”
Nearly all of the Democratic candidates would expand Affordable Care Act tax credits, so that no family has to spend more than 8.5% of their income on health insurance. Like Trump, all candidates support addressing high prescription drug prices in part by allowing the importation of lower-cost drugs from other countries.
Nearly all Democratic candidates support higher taxes on the wealthy. In addition to hiking up existing structures like the corporate and estate taxes, more left-leaning candidates like Sanders and Warren are joined by Buttigieg and Steyer in backing a wealth tax.
Sanders would put a 1% tax on households worth at least $32 million, and a 8% tax on wealth above $10 billion. Warren favors a 2% tax on households worth more than $50 million, and 3% on those above $1 billion. Steyer, himself a billionaire, supports a 1% tax on wealth exceeding $32 million. Buttigieg has not published an explicit wealth tax plan, but has voiced support for the idea.
These taxes would not directly affect the finances of middle-class families, but would benefit them through programs like student loan forgiveness, Social Security expansion, and affordable health care, according to Weller.
“Wealth taxes can generate a lot of revenue and thus finance programs that benefit middle-class families,” he says. “On net, middle-class families would benefit from wealth taxes and their proposed uses.”
Instead of guaranteeing an income, Sanders prefers a federal job guarantee. With this program, the government either provides public service jobs or subsidizes private sector jobs for the unemployed. Sanders proposed creating jobs through the infrastructure demands of the Green New Deal, early childhood education, and senior citizen care. Warren has said she is open to a similar program.
Biden and Steyer, usually more moderate, join Sanders in support of a national, universally free pre-K program. This would ease childcare costs for all families, regardless of income.
For secondary education, the most liberal candidates promise the least amount of debt.
While most Democratic candidates would provide free two-year public college, Sanders and Warren would provide free four-year public college. Buttigieg and Gabbard support this as well, but only for low-income families.
“Without debt burdens, college graduates may be more likely to work in public service fields that typically have lower pay,” says Antoinette Flores, director for postsecondary education policy at the Center for American Progress.
While moderates aim to alleviate this burden with new loan refinancing and payback options, Sanders wants to wipe the slate clean. His administration would cancel or pay off all of the federal and private student loans held by nearly 45 million Americans.
“Education must be an economic right for all, not a privilege for the few,” Sanders wrote in Fortune. Under his plan, the average student loan borrower would save $3,000 per year.
Warren and Bloomberg also support canceling student debt, but their plans are dependent on the borrower’s income. Warren, for example, would cancel up to $50,000 in student loan debt for every person with household income under $100,000. Those with an income between $100,000 and $250,000 will have varying amounts of debt canceled, while those earning about $250,000 (the top 5%) will have to pay their own way.
Canceling this debt may stimulate the economy and encourage homeownership, says Flores.
“It could also decrease the racial wealth gap,” she adds, “since research has shown that black borrowers are more likely to take on greater student debt burdens and have a more difficult time repaying, in part because of structural inequalities.”
The signature health care plan of the left is Medicare for All, Sanders’ plan for a single-payer system in which all Americans get all their health coverage from the federal government, eliminating private insurance. Both Sanders and Warren advocate for this program.
Medicare for All would prompt a complete overhaul of U.S. health care, but once implemented, there would be no more networks, premiums, deductibles, co-pays, or surprise bills. The government would be able to negotiate prices with pharmaceutical companies, and no one would have to pay more than $200 a year for medication.
According to data company Clever, the average American household currently spends $5,000 a year on health care. Even if taxes were to increase slightly to cover Medicare for All, supporters of the program say the savings from lower health care bills would outweigh the costs.
A few candidates—including Sanders, Warren, and Gabbard, according to the Washington Post—support having the government produce and sell generic drugs itself to lower prices in the pharmaceutical industry.
Government production of generics—plus the importation of drugs from abroad—could help increase competition and lower drug prices.
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