Trump’s Far Fetched Economic Viewpoint

Economists say Trump’s economic plan will increase debt by $5-10 trillion, at least 26 times that of what Clinton proposed during the campaign.  Though the election is now over, it’s still useful to compare the two models.

CBS News noted:

“A new Washington study says Donald Trump’s tax and budget plans would make the national debt skyrocket by $10 trillion or more over the coming decade, mostly because of his ambitious and expensive tax cuts….The Committee for a Responsible Federal Budget says Democrat Hillary Clinton’s agenda — which relies on tax increases to pay for proposals such as making the Affordable Care Act more generous — would increase the debt by about $250 billion over 10 years….All told, Trump’s policies would result in the $19.3 trillion national debt spiking to 127 percent of the size of the U.S. economy by 2026. Clinton’s plans would closely track current law, in which the debt would equal 86 percent of the economy….By contrast, a tax proposal released last week by House Speaker Paul Ryan, R-Wisconsin, promises no net loss of tax revenue and is therefore only able to lower the top individual tax rate to 33 percent and the top corporate rate to 20 percent.”

trump-tax-plan-to-help-top-one-percent

And from CNBC a few months later in September 2016:

“Trump’s stated plans to stimulate the economy through the building of infrastructure, boosting military spending and making sharp tax cuts would increase the national IOU by $5.3 trillion, or roughly 26 times more than Hillary Clinton’s plan would, according to a report Thursday from the Committee for a Responsible Federal Budget….Many economists have put the Trump debt price tag in excess of $10 trillion…The estimate for Trump is sharply higher than the analysis of Clinton’s plans, which are projected to increase the debt by $200 billion…While Clinton is calling for aggressive new spending programs, she also is proposing offsetting hikes on estates, investments and financial institution taxes, among others.”

One analyst remarked, “According to a new report from the nonpartisan Committee for a Responsible Federal Budget, the most fiscally conservative presidential contender left standing is . . . Hillary Clinton.” The CRFB’s findings included: “It is quite encouraging that Secretary Clinton has outlined specific offsets for her new proposals. By our estimates, these savings would cover nearly all the new costs…”

debt-to-gdp-under-clintons-campaign-proposals

cost-and-savings-under-clintons-campaign-proposals

Experts on the right and left have dismissed Trump’s economic plan as disastrous. Traditional conservative publications such as The National Review reject several pillars of the proposal and agree with aspects that continue typical GOP policies of the past 35 years. Respected liberal source, The Nation, calls it “economic fairy dust”. They describe the approach as “pushing the same old failures of Reaganomics: tax cuts for the rich and deregulation, along with nostalgia for an industrial era long gone.” Time’s article title on the subject shows that they generally agree with the latter position: “Donald Trump’s Economic Plan Is Magical Thinking”. They elaborate:

“He’s selling the same economic magical thinking that any number of Republicans have over the last 40 years—tax cuts without spending cuts….This is not a bipartisan issue. It’s a simple fact. The tax cuts in 2001 and 2003 under George W. Bush didn’t jump start sustained growth, nor did any of the tax cuts pushed through by President Obama post 2008….the overall GDP growth rate in this country was far higher in the 1950s and 60s when the tax rate was higher too (as taxes have been cut over the last 40 years, levels of start-ups per capita, along with other levels of business dynamism, have fallen)….Reagan cut taxes (though he eventually raised them as well, negating about half of his own cuts), but he failed to cut spending—that’s why the national debt actually tripled under his watch.”

Seven states with Tea Party backed governors and cooperative legislatures, most widely publicized regarding Kansas and Louisiana, experienced tremendous economic failures. They had promised their constituents various programs to radically cut taxes, greatly reduce budgets and give extra preference to corporate interests, which they put into practice. As one journalist commented, Kansas governor Sam Brownback “went around the country telling anyone who’d listen that Kansas could be seen as a sort of test case, in which unfettered libertarian economic policy could be held up and compared right alongside the socialistic overreach of the Obama administration, and may the best theory of government win.” Prosperity for the average citizen did not follow. In Kansas, for example, their credit rating was downgraded, job growth trailed neighboring states, healthcare was drastically cut, schools were significantly underfunded and revenue shrunk by $700 million. Brownback’s leadership provided a stark example of how Reaganesque trickle down economics can harm a state’s finances and market conditions.

Contrast that to California and Minnesota, where new moderate Democrat governance correlated with significant economic success. The Golden State surpassed France to become the world’s 6th largest economy. In 2015, its economy expanded by 4.1 percent, while the national average went up by 2.4 percent and France grew by 1.1 percent. California has led the nation in growth since 2011, last year creating more jobs than Texas and Florida, the next two populous states, added together.

california-becomes-worlds-sixth-largest-economy

We can observe a similar very positive transformation in Minnesota. As one reporter described in October 2016:

“When he took office in January of 2011, Minnesota governor Mark Dayton inherited a $6.2 billion budget deficit and a 7 percent unemployment rate…Gov. Dayton raised the state income tax from 7.85 to 9.85 percent on individuals earning over $150,000, and on couples earning over $250,000 when filing jointly — a tax increase of $2.1 billion….Between 2011 and 2015, Gov. Dayton added 172,000 new jobs to Minnesota’s economy — that’s 165,800 more jobs in Dayton’s first term than [earlier Republican governor] Pawlenty added in both of his terms combined. Even though Minnesota’s top income tax rate is the fourth highest in the country, it has the fifth lowest unemployment rate in the country at 3.6 percent. According to 2012-2013 U.S. census figures, Minnesotans had a median income that was $10,000 larger than the U.S. average, and their median income is still $8,000 more than the U.S. average today….

“By late 2013, Minnesota’s private sector job growth exceeded pre-recession levels, and the state’s economy was the fifth fastest-growing in the United States. Forbes even ranked Minnesota the ninth best state for business (Scott Walker’s ‘Open For Business’ Wisconsin came in at a distant #32 on the same list). Despite the fearmongering over businesses fleeing from Dayton’s tax cuts, 6,230 more Minnesotans filed in the top income tax bracket in 2013, just one year after Dayton’s tax increases went through. As of January 2015, Minnesota has a $1 billion budget surplus, and Gov. Dayton has pledged to reinvest more than one third of that money into public schools. And according to Gallup, Minnesota’s economic confidence is higher than any other state.”

Apparently, Trump used to recognize this kind of difference in economic performance regarding political policy.  See the video clip below of what he told CNN’s Wolf Blitzer in 2004: “I’ve been around for a long time and it just seems that the economy does better under the Democrats than the Republicans.”

An editorial in Forbes by Jere Glover offers a big picture overview:

“It is simply a fact that since World War II, Democratic presidents have seen 24.4 million more jobs created on their watch—an average of 78.6% more jobs created per year of Democratic administrations—than have Republican presidents. Ditto real GDP growth, 44% higher under Democratic presidents. On the flip side, unemployment has been 18% higher under GOP presidents.”

Since beginning his in-depth research on this topic in the mid-1980s, Glover has compiled a large amount of official government data that undergirds those assertions.  Here are some sample charts:

economy-performance-by-democrats-vs-republicans-2

Look at the difference in performance for the first 2700 days of a Republican versus Democrat president’s term regarding the Dow Jones Industrial Average. Notice that Republican president Coolidge’s high points are built up just before the worst financial crash in U.S. history that led to the Great Depression:

djia-performance-first-2700-days-of-a-presidents-term-1900-2016

I hear a lot of complaints about today’s economy generally, but very rarely do I come across a well-rounded argument against what should be obvious to everyone: we’re in radically better shape than we were in January 2009 when Obama took office:

the-obama-economy

u-s-median-household-income-and-poverty-rate-1990-2015

housing-prices-2005-2016

u-s-unemployment-rate-2007-june-2016

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