What Economists Think

Hello. If you are anything like me, and I suspect you might be, you are still reeling from the election. You're still in disbelief that we have to see Trump and Pence and Conway on a regular basis. You're curious to know if their bark has half the bite they seem to think it has. I mean, should I REALLY be careful about publicly criticizing the President-elect? Would they really throw Constitutional protections straight out the window when the people who hated Obama the most cited their fears of Obama circumventing The Constitution? Sure, you and I both know they didn't really know what in hell they were talking about, but does the new administration?

So many questions. So close to an aneurysm.

I'm a student. Right now I'm working on my minor degree in history. As a student of history, I gotta tell you, I'm pretty shook up. (Yes, I said shook. We educated elites have to find every possible way to connect to the "real people," dontcha know?) In the twelve days since Trumpence won the electoral college, I've only seen things that shake me up even more. Did you see that video of those people Washington D.C.? I'll post it at the bottom. Jaysus, help us.

Last week I was asked to make my final paper for my History of Economic Thought class an examination of what economists have to say about Trumpence's economic plans for the country. My professor also said, "Be Nice!" I wasn't really sure I could do both, to be honest. But I rummaged through my interior trunk of "Hats of Professions I've Thought of Being," found my Journalist hat and stuck it on my head. Presto! I'm an impartial observer! I can make no promises that I can be impartial beyond this paper, but for the sake of the grade, here it is. Let me know what you think, if you don't mind!

              Presidential elections seem to always start off with a bit of a circus feel to them. There is a new sense of excitement, or possibly chagrin, every time a new candidate throws his or her cap into the ring. Every night for months on end, the news is led with an update on which candidate said what to whom. The 2016 election cycle was all this and more. While never at the same time, there were a total of twenty-one men and women who felt they’d be right for the job. Most of these dropped out before the primaries even got rolling. On June 16, 2015, with much self-generated fanfare, the fifteenth candidate to enter the race declared his intention: Donald J. Trump. From the beginning, Trump’s candidacy was met with ridicule and incredulity. His platform was built on opinions that many Americans felt, and continue to feel, were less than acceptable for one who wants to be the leader of the free world. Add to that the fact that policy-wise, it took almost a year into his campaign before he gave any specifics as to what his plans were for the country. It took even longer for him to divulge his economic and tax plans. When he finally did, though, many people had much to say.

            With his signature slogan, “Make America Great Again,” Trump, citing his much-debated business acumen, claimed that his economic and tax plans would do just that by being “the most pro-growth, pro-jobs, pro-family plan put forth perhaps in the history of our country.”[1] Here are some of the highlights of this plan:

• ·       Tax cuts of $4.4 trillion over the next ten years
• ·       Creating only three tax brackets (reduced from the current seven): 12%, 25%, and 33% depending on income
• ·       A revised tax code that promises that no business should pay more than 15%
• ·       A “Penny Plan”, by which 1% of the government would be shrunk
• ·       Boost military spending and infrastructure spending
• ·       Create twenty-five million new jobs over the next decade
• ·       Place 35% tariffs onto Mexican imports

As stated, these are highlights. There are some specifics to give one pause. For instance, while he grants a child care credit for families who have to pay for that service, he also removes the single parents’ ability to claim as Head of Household, long a tax benefit to that group. Overall, Trump’s economic plan, in its entirety, hasn’t been particularly well received by the economic community. On November 1, 2016, The Wall Street Journal published an article that stated, “a group of 370 economists, including eight Nobel Laureates in economics, have signed a letter warning against the election of Republican nominee Donald Trump, calling him a ‘dangerous, destructive choice’ for the country.”[2] Those who signed include 2015’s Nobel winning economist, Angus Deaton, and Oliver Hart of Harvard University who was one of the winners of this year’s prize.

The author of the article notes that the letter to voters lacks partisanship, and instead focuses on Trump’s history of “promoting debunked falsehoods.” It also accuses him of misinforming the electorate with conspiracy theories, and for failing to listen to credible experts. The letter makes no mention of his opponent in the election, Hillary Clinton, nor does it make any endorsement of any candidate (a separate group of nineteen Nobel Prize winning economists posted a separate letter that did endorse Ms. Clinton). Robert Shiller, economist at Yale University, stated, “It isn’t Republican versus Democrat. It isn’t a normal political statement. It is a feeling of outrage against a demagogue.”

Peter Navarro, a professor at the University of California, Irvine and an economic advisor for Trump’s campaign stated in the same article that the economics profession has been so wrong about the impact of trade deals, a central part of Trump’s plan. He said that economists were wrong regarding both the North American Free Trade Agreement (NAFTA) in 1994, and they were wrong about the accession of China to the World Trade Organization (WTO) in 2001. The economic community, he said, “has little standing to criticize Mr. Trump’s position on those pacts.” He further reiterated, “You shouldn’t believe economists or Nobel Prize winners on trade.”

Clearly, not all economists take such a negative view of Trump’s economic plans. Most, but not all. Jim Takersley who covers economic policy for The Washington Post, wrote in August of this year that Trump’s plans could have some positive effects; positive for Trump’s companies, that is.[3] The article highlights financial entities known as “pass-through” entities, which are not liable for corporate income taxes, but whose owners are taxed at individual rates on their share of the profits. This is the most common structure for small business, Tankersley wrote, and the most common structure for corporate holdings in the Trump Organization. While Tankersley is loath to accuse Trump of designing his tax plan to benefit his own companies, he does point out that this does shine one more light on the “tensions between Trump’s policy proposals and his personal financial interests.”[4]

Online magazine, The Economist, takes a frank look at near-term, mid-term, and long-term possibilities. Noting that Trump is in the enviable position of being the Republican president with a Republican House and Senate, The Economist’s commentary states that Trump can effect “profound and lasting change.”[5] Lest one think the author is striking a diplomatic tone, the next sentence reads, “…the economic consequences of Mr. Trump’s presidency could be enormous, and costly.”[6] R.A. states that stability in the short-run falls to the markets, as Trump won’t be president for another two months. While what Trump says can affect the general feeling of investors, it’s up to the investors to stabilize the markets. “In the medium run,” writes R.A., “Trump’s policy platform could be stimulative.” Though his plan has lacked in specifics and clarity, it’s always been clear that Trump would cut taxes dramatically, while spending on defense and infrastructure. Such deficit spending would almost certainly boost the economy. R.A. goes on to say that, “If Mr. Trump manages to keep America out of an immediate economic crises, the long-run effects of his presidency will prove most profound.”[7] Citing Trump’s intention to re-work existing trade deals, as well as negotiating new deals, R.A. says that this is where Trump’s economy has the most potential for success, but also the most potential for failure. These potential failures would not only be a direct effect of financial mis-steps, but also as a result of such things as Trump’s denial of climate change, which could be globally disastrous, financially and otherwise. R.A. saves his true feelings for the last paragraph, and doesn’t hold back:

Yet even if Mr. Trump does not land America and the world in a serious new conflict or a global depression, his effect on the trajectory of global growth and development could be substantial and terrible. Mr. Trump may kick into reverse a process of globalisation [sic] which had already stalled. That will not restore to workers a golden age of prosperity and security. Instead, it will increase the extent to which the global economy feels like a zero-sum competition, increasing the risk of political conflict…. At the same time, the international cooperation that occasionally provided some cushion against financial or economic hardship in the developing world could break down. And climate change will worsen. The picture of Trump world is far darker for those outside the rich world than within it. Yet within, it is dark enough.”[8]

            Larry Summers who served not only as President Bill Clinton's treasury secretary but also as President Barack Obama's National Economic Council director has the same fears, though his are tied more to the fact that Trump intends to roll back financial regulations that were put in place to protect us from crises like the Great Recession of 2008.[9] “The idea that we would repeal Dodd-Frank…. I think that would be a catastrophic kind of error.”[10]

Still, not all is doom and gloom. Jay Yarow and Jeff Cox are optimistic based on two important points: 1) Trump has a like-minded Congress that is looking to succeed, if for no other reason than to cast the blame of poor performance over the last eight years back onto Obama, and 2) Trump has surprised us by winning the nomination and the presidency, he can surprise us again with a great and booming economy.[11] Given that Trump’s stated first priority is getting people to work on infrastructure, Yarow and Cox feel that Trump could possibly be very good for the economy. In fact, it would be more than good enough to offset the massive tax-cuts Trump is looking to make. Though Trump’s proposals do seek to benefit the wealthy more than the working class, Trump’s supporters seem to believe that his economy can be implemented responsibly to where it would benefit everybody.

The key message in all of this is that responsibility is paramount. Though rhetoric can win an election, it mustn’t run a country. The office of the United States president is not one that operates with autonomy. There are checks and balances for a reason. By the reckoning of many, if not most, of our country’s economists, that reason has just won the presidential election.

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[1] News, BBC. What Is Trump's Economic Plan, September 16, 2016

[2] News, The Wall Street Journal. Prominent Economists, Including Eight Nobel Laureates: “Do Not Vote for Donald Trump, Nick Timiraos, November 1, 2016

[3] News, The Washington Post. Donald Trump’s new tax plan could have a big winner: Donald Trump’s Companies, Jim Tankersley, August 10, 2016

[4] Ibid.

[5] News, The Economist. The Economic Consequences of Donald Trump, R.A., November 9, 2016

[6] Ibid.

[7] Ibid.

[8] Ibid.

[9] News, CNN Politics: The Axe File. Summers: Trump’s Economic Plan Could ‘Cripple Government for a Generation, Tim Skoczek, November 20, 2016

[10] Ibid.

[11] News, CNBC. Donald Trump Can Be Very Good For the US Economy, Jay Yarow, Jeff Cox. November 9, 2016

As promised, see Americans being Nazis. Awesome, right?