Left confused by Trump’s election? Don’t worry. Here you will find the complete breakdown of Donald Trump’s economic policy which seems to offer a mix of some good, more of the same and some more dangerous policies. Throughout Trump’s campaign the world was subjected to an outrageous but effective barrage of insults, gaffes and blunders unthinkable in the supposed beacon of democracy. Actual debate about such important things as economic policy were put aside in an election campaign comparable to a dystopian personality contest. Perhaps policy detail was of little significance to the angered mass of people disenfranchised with the status quo. Nevertheless, Trump’s economic policy is important if not crucial in determining America’s future.
So what lies ahead for the US economy under Trump? Firstly, Trump has indicated his intention to use fiscal policy to stimulate the stagnating US economy. In a country where according to the Economic Policy Institute, there has been broad based wage stagnation for the last thirty years, this might be what the country urgently needs. By using fiscal policy to invest in the country’s infrastructure, its bridges, roads, airports or even broadband, American businesses will benefit. If American businesses benefit, then this should provide increased job opportunities for Americans not least the jobs created in construction in the first place. The last time such spending was used in the US was under Obama’s American Recovery and Reinvestment Act of 2009. Many economists argue the $800 billion was crucial in easing the impact of the recession and the prevention of a second down turn. Critiques of such spending, which will come most unequivocally from Trump’s own party, will say that this policy offers little more than bigger debts for the US government which already amount to an impressive $18 trillion. Interestingly such a policy should receive cross-party support and is an indication that President Trump may have some workable policies.
More controversially, Trump is planning a huge programme of tax cuts for American businesses and individuals. Continuing the Republican Presidential tradition of entering power and cutting taxes, Trump will hope to embody a Reagan-esque reformation of the tax system. Although difficult to discern from the rhetoric of the Trump campaign website, corporation tax will be slashed under a Trump administration to a measly 15%, making it one of the lowest rates in the western world. This will benefit businesses residing in the US massively. Whether or not this will result in more jobs or just wealthier executives is however, much less clear. If we are to look at such a policy historically, cuts in corporation tax have only tended to benefit the wealthiest within companies, an analysis of the UK’s own corporation tax reduction is evidence to this. This is because larger profits yield larger dividend and this is normally paid out to the already wealthy shareholders within and outside the company.
Trump also wants to see the top rate of income tax cut to 33%, easily the lowest in the Western world. This reverses Obama’s attempts to increase taxes on the richest from 2009. This idea of trickle-down economics, first endorsed by Reagan, has been proven ineffective for so long by leading academics such as Nobel prize winner Stiglitz, that its endorsement would be laughable, if it were not the prospective economic policy of the world’s largest super power. This will ensure the supporting ‘neo-liberal’ ideology of low tax, low regulation and low Labour rights survives well into its fourth decade. In reality this will leave the rich richer and the poor poorer, solidifying the US as the country of the haves, the have-nots and the have-yachts. It is perhaps painfully ironic that economic inequality, which fundamentally supported Trump’s election from the anger of a disenfranchised class, is set to get even worse under his administration.
The resulting lack of government revenue from these two tax areas will either cause a huge fiscal deficit or more likely, will be coordinated with a reduction in government spending. This will see government programmes like ‘Obama Care’ stripped of funds. As was publicised on Saturday this policy will not be destroyed altogether, rather left as a useless piece of legislation. In effect, this will cause a drop in living standards for millions of Americans who will lose affordable health insurance policies.
America might be the country of Silicon Valley, but it’s also the country where 15% of the population relies on food stamps to survive.
In terms of international economic policy Trump’s campaign gained huge popularity on an anti-globalisation, anti-free trade stance. Millions of workers from de-industrialised heartlands turned to Trump in admiration of his pro-isolationist policies. He simply said what they all wanted to hear, that their jobs along with their lively hoods, their self-respect, had been uprooted and moved abroad. This current brand of international capitalism that is in constant source of cheaper production throughout the globe has left a resentful class of people in Western states dismayed by job losses and wage stagnation. It is little wonder then, that talk of protectionism in the form of Tariffs and the withdrawal from trade deals such as NAFTA rang such an accord with huge swathes of the US electorate. The impact of such protectionism will almost certainly be negative. America is an enormous importer of goods from economies such as China and simply cannot afford to put up barriers to trade. Interestingly, even though Trump espoused this isolationist stance it does not mean he truly believes in it and it will be interesting to see if he back peddles on such assurances.
Trump’s overarching domestic economic policy is quite simple, infrastructure and taxes. The former may even gain cross party endorsement and economic growth. Yet it is in the latter where economic sustainability will be undone. Lower taxes across the board will accelerate burgeoning wealth inequality in the United States. America might be the country of Silicon Valley, but it’s also the country where 15% of the population relies on food stamps to survive. In terms of international economic policy, the situation is also worrying, America cannot afford to put up such economic barriers to free trade and continue its current living standard. Trump’s economic policy can be summarised as the good, the same and the dangerous; the good can be seen in a sensible infrastructure investment plan, more of the same can be seen in his tax plans and his international policy area represents the downright dangerous.