A huge win for Donald Trump in the South Carolina primary. Jeb Bush is out. Rubio and Kasich and especially Cruz are still in, but the Trump steamroller is rolling.
Of course, this suggests a few questions. If Donald Trump were to become President, what would his policies be? And for right this second, what would his economic policies be? To look for an answer, I turned to my trusty Internet to see who Mr. Trump’s economic advisers might be.
Guess what. As far as I could tell, there are none. That’s right, none. No well-known economists. No obscure economists. No one. Nada. Yes, he talks to Carl Icahn, a very rich Wall Street player, but no expert in public policy, and to Steve Wynn, who runs beautiful casinos, but again, is not an expert in public policy.
What Mr. Trump himself has suggested as economic policy is fairly straightforward:
• Deport as many Hispanic undocumented aliens as he can as fast as he can.
• Slap a very stiff tariff on far eastern manufactures and challenge China to a trade war.
• Lower tax rates on corporations and very high income taxpayers.
• Cut fraud, waste and abuse from the federal budget. (That one is surely a joke.)
There are some serious problems here.
First, there simply are no means to deport that many people (as many as 11 million) except over a very long time, inasmuch as each person involved can call for and get a hearing. To remove 11 million people each with rights to Due Process is a daunting project indeed.
Second, do we really want these people to leave? They are doing some of the hardest labor in the country in mining, agriculture, hospitality, and manufacturing, for low wages. If they suddenly (or even gradually) left, the work they are doing would simply not be done at all. The economy would be staggered.
Americans show no interest in these low wage, back-breaking jobs. There are few able-bodied, eager to work native laborers left without jobs.
Taking millions of hard workers out of the labor force would be like firing a cannon ball through the economy — unlikely to have good effects.
The trade war idea is even worse. There is just no precedent in history for a good end to a trade war. We are not going to have one this time either. China is a great trading partner — by and large, with some immense exceptions. They send us good quality products at low prices. They take large amounts of the paper dollars we pay them and invest those dollars in the U.S., in Treasury bonds and other assets, thus keeping the U.S. solvent without further recourse to the Fed printing press.
If we stop buying Chinese widgets, they can stop buying U.S. lumber or coal or hides, stop buying U.S. bonds and corporations. The prospects are dismal for anything but misery for U.S. workers and investors if we start a trade war with China.
It’s a good idea to not have any wars of any kind, and that includes trade wars. You cannot bully a nation like China and trying to do it will lead to sorrow. Trade wars sound good but absolutely never are.
Next, lowering taxes. Like any other human being, I detest taxes. But taxes are the price we pay for civilization, as a Supreme Court Justice said long ago. We, through our legislature, have demanded a great many goods and services from the federal government, especially defense preparedness and old age and health protection.
We have been avoiding paying for them in full for at least fifteen years now by deficit spending. The rationale has always been that cutting taxes would spur economic growth so powerfully that it would offset the tax revenues initially lost by the tax cuts. It never worked and the deficit has grown by a factor of about six since we started this policy in 2001. The economy has been lagging as well.
Nothing that the tax cutters promised has come true — except that taxes have been lower. This is a good thing but it cannot go on forever. At some point, there is a breaking point. If Mr. Trump continues with tax cuts, the inevitable day of inevitable default simply gets closer and closer. That’s going to be a bad day.
“There is a lot of ruin in a nation,” as Adam Smith said over 200 years ago. But there is a limit somewhere and we don’t want to get anywhere near it.
So, what might be a Trump economic plan? What might be Trumponomics?
First, an absolutely ironclad promise that the U.S. will never again allow a major or even a medium-sized U.S. bank to fail. That there will never be another Lehman Brothers. That there will never again be a credit panic in this country. Yes, despite the Tea Partiers, there are some banks that are too big and too important to fail. If Glass-Steagall needs to be reimposed and we have to break up some big banks, so be it. But we must never have another 2008, where the economy came close to utter disaster.
“Too big to fail” is a good, not a bad policy. If the bankers have broken the law, put them on trial. But we must never allow the supply of credit to “seize up” as it briefly did in 2008. That should be bedrock. No more Depressions and no more Great Depressions ever. No life-threatening collapses of credit.
Next, let’s try immigration reform that favors high productivity, highly educated workers. Asia and Europe and Canada have legions of motivated, educated men and women with an entrepreneurial bent. Foolish immigration laws keep them out. Let’s get them in here as fast as possible. Great immigrants make a richer, more prosperous America. The idea that immigration is a bad thing is deflated by a single word: America.
Let’s insist that students repay their debts except in cases of extreme hardship. There is no reason at all that hard-working Joe Six Pack should pay for Cannabis Charlie’s tuition for the study of video games.
Have an actual plan to start reducing the national debt, even if it means raising taxes on high income taxpayers. There is just no reason at all why taxes on the uppermost in income and wealth should be as low as they are in the USA. If rich people are truly rich, they can pay higher taxes without giving up anything else important. Thus the taxes have zero economic cost.
That’s what it means to be rich. This nation keeps the rich safe and has given them a forum to get and stay rich. There is a debt to be paid here. The rich should pay more tax, but only at a very high level.
Again, let’s have an actual plan for this: an idiot with a plan can beat a genius without a plan, as Mr. Buffett says.
Let’s have an end to the endless war against fossil fuels: the evidence that they are truly harmful in this country is extremely mixed, at best. To turn the whole economy upside down and cost hundreds of thousands of persons their jobs and their businesses based upon computer models about what the weather will be like in 2076 — when we don’t know what the weather will be next week — is not just foolish, but cruel.
There is a great deal more to say, but the election is still almost nine months away. Still time to deliver a healthy Trumponomics baby. Again, as Mr. Buffett would say, let’s start with a plan.