The economics of President Trump: the good, the bad and the unknown

By Matt Heffler

President-elect Donald Trump looks on in the Oval Office of the White House on Thursday, Nov. 10, 2016 during a meeting with U.S. President Barack Obama in their first public step toward a transition of power in Washington, D.C. (Olivier Douliery/Abaca Press/TNS)
President-elect Donald Trump looks on in the Oval Office of the White House on Thursday, Nov. 10, 2016 during a meeting with U.S. President Barack Obama in their first public step toward a transition of power in Washington, D.C. (Olivier Douliery/Abaca Press/TNS)

It should be no surprise that, as a liberal, I am disappointed in the results of the presidential election. Hillary Clinton was very far from my first choice, but her economic agenda was still much more progressive than Donald Trump’s. The silver lining in this election is that Trump is a former Democrat, and ran as much more of a moderate on a variety of economic issues than other Republican candidates. However, his overall economic plan is also severely underdeveloped at this point, so there is plenty of room for speculation about the policies his administration will pursue.

Most notably, Trump’s stance on trade is far from that of a classic conservative. In fact, it draws many parallels to the stance of Bernie Sanders. With Trump in the White House, it’s a pretty safe bet that the Trans-Pacific Partnership (TPP) will never see the light of day, and other similar trade deals will not be up for discussion. The TPP is not the economy-destroying deal with the devil that many make it out to be, but it is hard to reject the evidence that it, as with many other trade deals, has the negative side effect of making it easier to ship more American jobs overseas.

Unfortunately, the rest of Trump’s trade message is pure snake oil. His claims that he can bring back thousands of manufacturing jobs by re-negotiating our existing trade deals, which is a complete fantasy. America’s economy is naturally transitioning away from manufacturing and towards service. While I agree with him that it is stupid to speed up the process through flawed trade deals, there is just no evidence to suggest that he (or anyone else) could bring back the ones we have already lost.

Perhaps the most non-conservative stance that Trump took early in his candidacy is his desire for increased infrastructure spending. Another goal that Trump shares with Bernie Sanders, infrastructure spending is a staple of economic stimulus policies that almost all progressive economists call for. This kind of spending puts people to work immediately, and creates public goods that all people can enjoy. Assuming that the new infrastructure would be publically owned, I fully support Donald Trump in this respect.

Unfortunately, Trump’s anti-establishment message rings hollow in the rest of his policy proposals. Perhaps the best examples of this are his tax plans. His proposals in this area are very similar to the typical Republican proposals. Though his do include a marginal tax cut for the middle class (which not all Republican plans have), the large majority of cuts (as a percentage of the total amount of money saved) will go to the top tax brackets.

While I have nothing against cuts at lower brackets, the cuts at higher brackets won’t help the economy as much as a classical economist would lead you to believe. The reason is that the more money a person has, the less of it they spend as a percentage of total income. This is referred to as the marginal propensity to consume (MPC). The majority of cuts will be going to those with much lower MPCs, meaning less money will be actually injected into the economy. If that money were instead used to fund programs that subsidize the poor and the middle class, the economy would actually see a sizeable boost in addition to reducing economic inequality. Instead, Trump’s tax plan will bring a much smaller boost to the economy and will only worsen our inequality.

Trump also has vowed to reign in regulation that he claims is holding back our economic recovery. However, a lack of regulation is what caused the recession in the first place, as financial institutions were free to gamble with the future of the global economy. Trump has even gone as far to say that he wants to “dismantle” the Dodd-Frank Act, which is currently America’s strongest piece of regulatory legislation on our financial institutions. While rolling back these regulations could certainly provide a boost to the financial sector of the economy, it would also bring severe instability, and put the global economy at risk once again.

That brings us to the biggest unknown of the Trump presidency: health care. While we know for sure that Trump is prepared to “repeal and replace” Obamacare almost immediately, we have no idea what the new plan will be. His current proposal is to replace Obamacare with “something terrific.” I fear that this “terrific” new policy will be going back to our pre-2009 health care system, which would leave more than 20 million people uninsured.

While I am not optimistic that America’s economy will improve under Trump’s presidency, I truly hope it does. I will be the first to congratulate him on policies that improve the economy for the average American, but also the first to criticize if they don’t.

Matt Heffler is a Collegian columnist and can be reached at [email protected]