Trumps Economic Proposals
Analyzing Trumps economic plan is difficult as there are almost no details to his statements. While Harris held a rally and laid out her ideas and stayed on script, even though most of what was said either won’t work or isn’t feasible, Trump hasn’t been able to stay on script or offer much in the form of details either. However, we can look at past policies and recent statement to look at, after he produced a 20 point plan earlier last week.
“Carry out the largest deportation operation in American history”
Analysis: Immigration is very much an economic issue. As much as Trump wants more border security, deporting those currently in the United States will cause real issues economically. Already there is a shortage of labor that immigrants often fill, and that other may not want. With the labor shortage, wages in hospitality and the food industry are driving up costs, and this will likely go higher if mass deportation is threatened. A far better plan would be to create a path to citizenship for those currently here and working.
Verdict: Could be a disaster for inflation and a moral nightmare.
“End inflation, and make America affordable again.”
Analysis: OK, great. But Trump offers little in specifics. Inflation is a product of increased demand over supply, and that has been aided by government policies pouring cash into the economy. Trump has proposed little of this compared to Harris, but with current personal debt reaching all time highs, and the possibility of a spending cliff approaching, Trump may have no choice but to continue current policies or risk a recession.
Verdict: This statement offers little in actual ideas.
“Large tax cuts for workers, and no tax on tips”
Analysis: Large tax cuts for workers has no supporting information, but no taxes on tips can be brilliant. It would need very specific criteria to ensure this benefits the right workers, especially restaurant workers who rely on tips, but this is beneficial to low income workers, which is a very good thing. If not written properly, it can result in other classifying payments as tips, so how the law is written is important. But this worker group is often forced to hide cash, and thus hide income, often producing workers who are well paid obtaining government benefits. If done properly, it can result in helping the lowest income workers and helping reduce those filing for government benefits.
Verdict: Likely Trumps best idea.
“Make America the dominant energy producer in the world, by far!”
Analysis: Energy is a broad term. Electricity. Natural Gas. Oil. All qualify as energy. The United States produces the second most energy overall on the planet, second to China, which needs to use most of what it produces. The US is first in Natural Gas exports, and this has been increasing under Biden. Energy companies don’t produce just to produce; they produce at a rate that the sell price keeps it profitable. So even if Trump demands more drilling or production, no company is going to overproduce and this see supply overtake demand. Trump can make this claim, but production is already up, and international demand has a far larger say in what the US produces and when than any president.
Verdict: Largely meaningless statement
“Stop outsourcing, and turn the United States into a manufacturing superpower”
Analysis: Every candidate in history promises manufacturing, but the fact is it wont happen to a significant degree as long as US labor cost is so much higher than abroad, and no one wants to tell workers they should be paid less. So what we see are manufacturers dividing up by country to reduce shipping costs: companies build factories in countries to sell to those markets. So while we may have some investments in manufacturing locally, the exports are reduced as investments are made in manufacturing abroad for the overseas markets.
Trump has used Tariffs to increase demand for US made items, and it can help in the short term, but also increases the costs on those buying the goods. We also have to expect that foreign nations may retaliate with tariffs of their own.
The Biden administration kept many of the Trump tariffs in place, which will give us an idea of how temperamental the economic impacts can be. A sudden elimination of tariffs will boost foreign nations, but increasing tariffs can have the negative impact of increasing prices to US consumers and potential retaliation.
“Make the 2017 Tax Cuts and Jobs Act permanent, and reduce the corporate rate from 21 to 20%, bring the national debt to zero” – Combination of Trump statements
Analysis: Its hard to argue that the 2017 cuts were not skewed toward the wealthy and corporations. It also came at great cost, reducing government revenue and the tax base. This was even more of a problem once the pandemic hit, and increased government spending blew up the national debt.
Trump has stated he wants to eliminate the national debt, but no one has been able to provide a path to do this with a 20% corporate tax rate. The 2017 plan is set to expire next year, and both candidates support keeping at least the cuts for those making under $400,000 a year in place, Trump not only wants to keep the corporate tax cut in place, he has spoken about lowering it.
Both parties end up in the same boat: Wanting tax cuts, but not finding a feasible way to pay for it. Significant income tax increases on high earners (over $500,000) or the wealthy can help offset this, as long as they also see increased enforcement and elimination of loopholes. In this, we have the greatest contradiction with Trumps statements: you simply cannot reduce the national debt and annual deficit without raising tax revenue, and you cannot raise tax revenue while keeping the 2017 tax cuts in place.
Verdict: It doesn’t work. You cannot keep the past tax cuts, lower the corporate tax, and expect to close the annual budget gap and eliminate, or even decrease, the national debt.
To view an analysis on Harris’ proposals, click here.