On Monday, following Hillary Clinton’s pneumonia diagnosis, the bookies dramatically cut the odds that Donald Trump will be the next president of the US. Years ago, Bill Clinton said it was all about “the economy stupid”. But is it this time? If so, let’s have a look at Trump’s economics.
Trump’s economics make absolutely no sense, have no coherence and will lead to a massive American budget deficit.
Trumponomics is Reaganomics without the subtlety. Despite being vilified as a lightweight by heavyweight economists, Reagan’s time is remembered as a time of prosperity in the US. Having economists as your cheer-leaders can be political suicide: just ask David Cameron. Reagan, the two-term president, was also responsible for the ‘Reagan Democrats’. These were traditional Democrats who voted Republican in support of Reagan’s vision for America. Could there be hidden ‘Trump Democrats’ out there?
This time around, people don’t seem to care for the views of experts; Trumponomics may be incoherent, divisive and inconsistent, but will anyone care on election day?
In terms of details, Trump seems to break his economic plan down to four categories he plans to reform: trade reform, tax reform, energy reform and regulatory reform.
Bear in mind that, when fact-checked, the vast majority of what he’s claiming about current economic conditions are false. But people don’t seem to care, and he keeps going up in the polls.
His trade reform ideas are based on a fundamental misunderstanding of basic economics and trade. He’s assuming trade deficits are synonymous with job losses. They are not. (For example, the UK has the highest trade deficit in Europe but one of the lowest rates of unemployment.) However, on the stump, bashing foreigners plays well and so he argues that it’s China’s fault that America has a trade deficit with China but everybody knows this is not the case.
He wants to appoint trade negotiators whose goals will be to “win for America”, narrow the trade deficit, increase domestic production, and get a fair deal for workers. He has no affiliation: he wants to renegotiate NAFTA, which corporate America would hate; and he wants to withdraw from the TPP, which the left would love!
Internationally, he terms China “a currency manipulator” but at the same time, he also wants to apply tariffs and duties to countries that “cheat”. Could this be a reference to low-tax Ireland, post-Apple?
Here’s what he has to say on globalisation: “Our politicians have aggressively pursued a policy of globalisation — moving our jobs, our wealth and our factories to Mexico and overseas.”
Here he is on China, underscoring his willingness to use economic policy as a threat: “The 45pc tariff is a threat. It was not a tax, it was a threat. It will be a tax if they don’t behave. Take China as an example. I have many friends, great manufacturers, they want to go into China. They can’t. China won’t let them. We talk about free trade. It’s not true free trade; it’s stupid trade.”
So he believes in free trade, but only when it suits America.
When it comes to personal taxes, Trump is just Reagan with terrible hair. His platform is lower taxes for everyone, making raising a family more affordable for working families. With an eye on young families, he wants to exclude childcare expenses from taxation.
Critically for Ireland, he wants to limit taxation of business income to 15pc for every business.
“Under my plan, no American company will pay more than 15pc of their business income in taxes. Small businesses will benefit the most from this plan,” he said.
On tax inversions and using tax loopholes to attract US companies, he has stated: “Our lower business tax will also end job-killing corporate inversions, and cause trillions in new dollars and wealth to come pouring into our country.”
As for energy reform, Trump’s policy is a drillers’ charter. He aims to cancel the Paris Climate Agreement (to limit global warming to 2C) and stop all payments of US tax dollars to UN global warming programmes.
His views on regulation are pure, textbook Reagan. Is it any wonder the US public sector is staunchly Democrat when Trump intends to “remove bureaucrats who only know how to kill jobs [and] replace them with experts who know how to create jobs”?
“I will have one overriding goal when it comes to regulation: I want to keep jobs and wealth in America.” He sees the dead hand of regulation everywhere, including the banks, when even most of the right wing accept that the 2008 crash was caused by too little regulation in the banking sector.
“The banks aren’t loaning money to people that need it . . . The regulators are running the banks,” he said.
In classic Trump style, he claims not to believe the figures on unemployment. He has stated that the 5pc unemployment rate is “one of the biggest hoaxes in American politics.”
He is going to solve all this by a “trillion-dollar rebuilding programme” to patch up roads, airports, bridges, water systems and the power grid.
When questioned on how all this will be paid for, Trump has moved from saying he would repay the US national debt in its entirety to arguing he would spend $500bn on infrastructure, suggesting that ultimately the US can always default on its borrowing.
“I would borrow, knowing that if the economy crashed, you could make a deal.
“The interest rates are so low?… this is the time to borrow and to borrow long-term. We can have the money and rebuild our infrastructure.”
“I am the king of debt. I do love debt… I love playing with it.
“We can buy back government debt at a discount, in other words, if interest rates go up . . . we can buy bonds back at a discount”
So he says he is going to borrow, but then when you look at his website, it still claims that he intends to eliminate the $19trn national debt burden. Maybe he intends to repay it by defaulting on everything á la Communist Russia in 1919. Remember, Trump has defaulted a number of times himself when he has gone personally bankrupt. So he has form.
He has a personal view of the Federal Reserve and its independent head Janet Yellen. Everything Yellen says is of enormous consequence to the financial markets which in the past two days have been extremely volatile. But here’s what The Donald had to say about her on Monday: “She’s keeping [rates] artificially low to get Obama retired. Watch what is going to happen afterwards. It is a very serious problem. And I think it is very political. I think she is very political and to a certain extent, I think she should be ashamed of herself.”
So it’s anyone’s guess what his economics mean. He holds no position on anything and his views change depending on who he is talking to. None of this makes much sense, but no one seems to care because he has turned the election into a reality TV show. Simply being on camera may be enough.