My view is that Donald Trump’s economic policies are remarkably well considered – when viewed from his point of view. At the risk of being lynched in the street by well-meaning Australians, here are the disclaimers to that statement:
- He has been elected democratically, based on promises he made, and he wants to deliver those for people in the only time he has. He wants the benefits to be apparent in the next 4 years (– assuming he is not displaced/impeached.) That means that when we’re viewing this from his point of view, we shouldn’t consider long-term ramifications of his policies when reviewing them.
- I’ve looked at this from an economic, not moral standpoint. It is entirely possible to do something morally terrible which is good for the economy. In fact, many of the things on Trump’s list do precisely that.
- I think he has ‘lucked into’ these policies rather than constructed them deliberately. Any realistic review of his interview with The Economist would show an even half-informed reader that Trump is not able to articulate a single coherent sentence on the subject of Economics.
Trumps key policies and why they’re good
I’m hooked on watching the news now that Trump has made it so enjoyable. It was from this ‘hobby-level interest’ that I formed my view about his economic prowess.
The Guardian has a list of his key campaign policies which is more thorough than those I note here.
- Increase spending on the US military: Spending on the military is a great thing to do to help the country economically. Spending on the military is often associated with innovation, employment and growth benefits.
- Increase spending on American Infrastructure (including a wall with Mexico): Admittedly, Trump is proposing an extension to the already incredible amounts of infrastructure spending that were signed off before he came into power. American infrastructure is in a sorry state which raises the cost of doing business, for example, by increasing the cost of transporting goods. These expenses should not be underestimated. They have been estimated at $4 trillion in GDP impact. Interest rates are at historically low levels. At times like this, it makes sense for the government to borrow money and, so long as there is a decent business case for a payback on an infrastructure investment, to spend the money now. It creates jobs for people who build infrastructure and stimulates the economy in so doing.
- Reducing taxes: Ronald Reagan cut taxes when he was president and is widely acknowledged with having taken the country out from recession by doing it. (To be fair, he did also significantly increase the government spending deficit.) Cutting corporation tax is often cited as the best way to stimulate the whole economy although, again, to be fair, the theorists and those who have studied practical implementations of this sort of scheme do not say it is a clear-cut winning policy.
- Ignoring global warming and environmental cutting regulation: It’s one thing to want less carbon in the air if you’re insulated from the effects of that sort of policy. It’s quite another when you work in an industry negatively affected by EPA ‘interfering’ – like a coal miner. Regulation raises the cost of doing business and deters investment (especially if the rules keep changing.) In the long term, ignoring externalities like carbon emissions leads to sub-optimal investments. Ignoring global warming is a stupid long-term economic policy. In the short term though, it could foster investments and provide jobs.
- Tariffs and renegotiated trade deals: Protectionism builds walls around jobs in the short term. In the first few years, the country which implements them is likely to see a benefit.
- Cutting government spending – especially in healthcare: The US government has a massive deficit, the funding of which occupies over $200 billion a year in interest payments every year. Cutting it helps with those interest payments. Debt is not always bad news, especially when the government is spending it on the right things but interest payments this high probably are.
Trump’s more stupid economic policies
Trump famously aims to keep Muslim people and Mexicans out of the country.
- Cutting immigration: As I have covered elsewhere in this blog, migration is often positive for an economy. It is Trump’s bigotry which is terrible economic policy (along with being illegal.)
Morality Free Zone
Economics and GDP growth are only one view we should take on life. Economic benefits don’t necessarily flow to everyone and economists are wont to look bewildered when people try and apply any kind of moral compass to their decisions.
That said, it is hard to argue that the vast majority of the key pillars of Trump’s economic policy seem likely to have a positive economic effect. That is especially within the 4-year timeframe h’s been elected for. Take tariffs.
I don’t think coal mining jobs are going back to the USA. I don’t agree with his economic policies. But the system we have elected him and gave him 4 years. The policies he ran on do have merit within that timeframe, and it’s what a minority of Americans asked for. So…, there’s that.