That Donald Trump's Economic Plans Would Cause A Recession Really Doesn't Matter At All

22 Jun 2016

That Donald Trump's Economic Plans Would Cause A Recession Really Doesn't Matter At All

The last couple of days have seen a pretty impressive posse riding in to slam Donald Trump’s various economic and tax plans. And much of the criticism is entirely justified by the normal standards of economics. Slashing taxes in the manner suggested would indeed give the economy a nice boost and then, according to the usual models, lead to a bust later. The thing is this doesn’t actually matter. It doesn’t matter for two reasons – firstly, that the President doesn’t actually decide what tax rates are, what spending is going to be. Sure, there’s a President’s Budget but that’s a wish list sent to Congress. Absolutely no President at all gets the budget they ask for. They can expend their political capital and get a couple of things done, that they can do.

Obama got health care reform and the ARA but even that second wasn’t what he and advisers actually wanted. The second reason is that I seriously doubt that Trump’s economic plans are in fact serious. Agreed, this part is opinion and opinion only but I regard absolutely everything he’s saying now as just a salesman, and a good one at that, telling people what he thinks they want to hear. In this of course he’s no different from any other politician on the stump, perhaps just a bit more brazen about it.

But the piling in really has been widespread:

The heart of Trump’s economic proposals come down to tax, trade, and immigration policy. He’s put forward a tax package that experts have found would cost $9.5 trillion and hand nearly all of the benefits to the wealthiest. He’s promised to levy huge tariffs on imports from countries like China and Mexico and he’s railed against trade deals. And he says he’ll deport 11 million undocumented immigrants while building a wall along the Mexican border.

That’s Think Progress, pretty much Clinton Central in terms of political outlook.

A new analysis concludes Donald Trump’s economic proposals, taken at face value, could produce a prolonged recession and heavy job losses that would fall hardest on low- and middle-income workers.

That’s the Wall Street Journal which is not quite so left or even centrist. Although we should be careful here – the WSJ’s editorial pages are so right that it makes even me uncomfortable while the news pages are actually quite Democratic leaning. One of those surveys of the political inclinations of reporters at various publications once showed that the WSJ leaned more Democratic than most of the press even, let alone the population as a whole.

Hillary Clinton is of course making hay with this story:

Hillary Clinton delivered a blistering assault on Donald Trump’s business record on Tuesday, warning that his reckless economic policies would trigger a financial crisis worse than the one in 2008.

Returning to the important swing state of Ohio on Tuesday, Clinton, the Democratic party’s presumptive nominee, castigated Trump for his proposals on trade, taxes and immigration, claiming that his policies, if enacted, would throw the US back into a recession.

The specific report that triggered this was from Moody's MCO -0.18% and can be read here:

Three scenarios are considered. First, we
take Mr. Trump’s proposals at face value as
outlined on his campaign’s web site and in
his speeches and interviews. The second scenario
assumes that Mr. Trump’s policies are
fully adopted, but on a smaller scale than he
has proposed. The third scenario assumes a
President Trump will need to negotiate with
a somewhat skeptical Congress, resulting in
his policies being scaled back and adjusted
in response to political realities. This final
scenario would be a reasonable baseline, or
most likely scenario, were Mr. Trump to win
the election.

The actual report, rather than the reports about it, conforms to my analysis above. Trump would simply never get what he’s asking for so we can discount the effects of what he is asking for. Presidents simply never do get the budget they ask for, everything is filtered through Congress. And as they say about that third and most likely outcome:

It is very unlikely that the next Congress
would completely go along with Mr. Trump’s
economic policy proposals, even if only
on a small scale. The current Republican controlled
Congress supports tax cuts and
reform, and less non-military spending, but
it has been largely steadfast in its opposition
to larger deficits. It is difficult to envisage
any future Congress acquiescing to the much
larger deficits that would result from Mr.
Trump’s proposals. In this scenario, the next
Congress makes Mr. Trump’s proposals more
workable and deficit-neutral. It would be a
potential baseline, or most-likely scenario, if
Mr. Trump became president.

The outcome still is not good for the simple reason that parts of those economic plans are not good. Shrug, that’s what happens with bad economic policy. But those outcomes are nowhere near as bad as is being generally bandied about when people make the incorrect assumption that Trump would get what he asked for.

Which brings us to my opinion of what is going on here. I start this by assuming that Trump really is what he appears to be. Somewhere between a very good salesman and a fairground barker. The secret to success in either of those two occupations is to ask for the stars and settle for the Moon. Combine this with having to actually get elected in the first place and all is explained. Some very large part of the country is insistent that steady as she goes just isn’t good enough. Bernie Sanders got close to being able to over turn the Clinton machine and that’s another example of the same thing. Much of the country wants something different than more of the same from the Beltway Bandits. So, Trump is promising whatever he thinks will garner those votes. Further, he’s vastly over promising knowing that he’ll never get what he asks for. There’s an old salesman’s point that you can always lower a price to get the deal but never raise it. Ask for the absurd and settle just for the unreasonable.

Sure, I agree, the actual proposals that Trump is touting would not be good for the US economy. The closing down of trade with China is an absurdity for example. But I say that this doesn’t matter. Simply because no one, not even Trump, thinks he’d ever get these ideas implemented, America just doesn’t work that way. This is all showground stuff to gain votes, no more and no less than that.


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