Why Trumponomics won’t make America great again

Posted by: totemphile on 14 May 2017

Why Trumponomics won’t make America great again

The impulsiveness and shallowness of America’s president threaten the economy as well as the rule of law

DONALD TRUMP rules over Washington as if he were a king and the White House his court. His displays of dominance, his need to be the centre of attention and his impetuousness have a whiff of Henry VIII about them. Fortified by his belief that his extraordinary route to power is proof of the collective mediocrity of Congress, the bureaucracy and the media, he attacks any person and any idea standing in his way.

Just how much trouble that can cause was on sensational display this week, with his sacking of James Comey—only the second director of the FBI to have been kicked out. Mr Comey has made mistakes and Mr Trump was within his rights. But the president has succeeded only in drawing attention to questions about his links to Russia and his contempt for the norms designed to hold would-be kings in check.

Just as dangerous, and no less important to ordinary Americans, however, is Mr Trump’s plan for the economy. It treats orthodoxy, accuracy and consistency as if they were simply to be negotiated away in a series of earth-shattering deals. Although Trumponomics could stoke a mini-boom, it, too, poses dangers to America and the world.

Trumponomics 101

In an interview with this newspaper, the president gave his most extensive description yet of what he wants for the economy (see article). His target is to ensure that more Americans have well-paid jobs by raising the growth rate. His advisers talk of 3% GDP growth—a full percentage point higher than what most economists believe is today’s sustainable pace.

In Mr Trump’s mind the most important path to better jobs and faster growth is through fairer trade deals. Though he claims he is a free-trader, provided the rules are fair, his outlook is squarely that of an economic nationalist. Trade is fair when trade flows are balanced. Firms should be rewarded for investing at home and punished for investing abroad.

The second and third strands of Trumponomics, tax cuts and deregulation, will encourage that domestic investment. Lower taxes and fewer rules will fire up entrepreneurs, leading to faster growth and better jobs. This is standard supply-side economics, but to see Trumponomics as a rehash of Republican orthodoxy is a mistake—and not only because its economic nationalism is a departure for a party that has championed free trade.

The real difference is that Trumponomics (unlike, say, Reaganomics) is not an economic doctrine at all. It is best seen as a set of proposals put together by businessmen courtiers for their king. Mr Trump has listened to scores of executives, but there are barely any economists in the White House. His approach to the economy is born of a mindset where deals have winners and losers and where canny negotiators confound abstract principles. Call it boardroom capitalism.

That Trumponomics is a business wishlist helps explain why critics on the left have laid into its poor distributional consequences, fiscal indiscipline and potential cronyism. And it makes clear why businessmen and investors have been enthusiastic, seeing it as a shot in the arm for those who take risks and seek profits. Stockmarkets are close to record highs and indices of business confidence have soared.

In the short term that confidence could prove self-fulfilling. America can bully Canada and Mexico into renegotiating NAFTA. For all their sermons about fiscal prudence, Republicans in Congress are unlikely to deny Mr Trump a tax cut. Stimulus and rule-slashing may lead to faster growth. And with inflation still quiescent, the Federal Reserve might not choke that growth with sharply higher interest rates.

Unleashing pent-up energy would be welcome, but Mr Trump’s agenda comes with two dangers. The economic assumptions implicit in it are internally inconsistent. And they are based on a picture of America’s economy that is decades out of date.

Contrary to the Trump team’s assertions, there is little evidence that either the global trading system or individual trade deals have been systematically biased against America (see article). Instead, America’s trade deficit—Mr Trump’s main gauge of the unfairness of trade deals—is better understood as the gap between how much Americans save and how much they invest (see article). The fine print of trade deals is all but irrelevant. Textbooks predict that Mr Trump’s plans to boost domestic investment will probably lead to larger trade deficits, as it did in the Reagan boom of the 1980s. If so, Mr Trump will either need to abandon his measure of fair trade or, more damagingly, try to curb deficits by using protectionist tariffs that will hurt growth and sow mistrust around the world.

A deeper problem is that Trumponomics draws on a blinkered view of America’s economy. Mr Trump and his advisers are obsessed with the effect of trade on manufacturing jobs, even though manufacturing employs only 8.5% of America’s workers and accounts for only 12% of GDP. Service industries barely seem to register. This blinds Trumponomics to today’s biggest economic worry: the turbulence being created by new technologies. Yet technology, not trade, is ravaging American retailing, an industry that employs more people than manufacturing (see article). And economic nationalism will speed automation: firms unable to outsource jobs to Mexico will stay competitive by investing in machines at home. Productivity and profits may rise, but this may not help the less-skilled factory workers who Mr Trump claims are his priority.

The bite behind the bark

Trumponomics is a poor recipe for long-term prosperity. America will end up more indebted and more unequal. It will neglect the real issues, such as how to retrain hardworking people whose skills are becoming redundant. Worse, when the contradictions become apparent, Mr Trump’s economic nationalism may become fiercer, leading to backlashes in other countries—further stoking anger in America. Even if it produces a short-lived burst of growth, Trumponomics offers no lasting remedy for America’s economic ills. It may yet pave the way for something worse.

Source: http://www.economist.com/news/...en-economy-well-rule 

 

 

Posted on: 14 May 2017 by Haim Ronen

I imagine that it will be difficult for a while to muster any reaction from the members after discussing and debating Trump in depth and vigorously for months only to have the topic taken away from us.

Posted on: 14 May 2017 by Skip

I generally agree with the Economist.  I had read it for years, until it endorsed Obama for reelection.   Now I see it as just another liberal news magazine with more highbrow tone and more gray on the pages.   Trump is the vehicle for the Republican agenda.   Anything that happens of consequence will be consistent with the Republican agenda, not primarily the Trump agenda.   People like me see lower taxes, smaller government,  and reduced regulation as a good thing.  It will be a bumpy road given the tweets and the resistance.   All the Trump resistance is resistance to the Republican agenda.  The agenda, whatever happens, will be hard on the beneficiaries, but the states will take up the slack in most cases.  It will leave more money in the private sector (i.e. the RICH)  and that is a better place for it than in the government.   I am glad we did not get Obama's third term, no matter what they say in the media.

Posted on: 14 May 2017 by imperialline

I like lower tax, smaller government, less regulations on Wall street, but I do not like the fact the we have a brash, boy President, especially he sacrificed Flynn for following his orders in dealing with the Russian.

PS: To Naim - Why does the Trump thread get taken away from us?

Posted on: 15 May 2017 by Innocent Bystander
imperialline posted:

I like lower tax, smaller government, less regulations on Wall street, but I do not like the fact the we have a brash, boy President, especially he sacrificed Flynn for following his orders in dealing with the Russian.

PS: To Naim - Why does the Trump thread get taken away from us?

That it went didn't surprise me in the slightese - I'm sure it was the increasingly unpleasant personal nature of the comments, denigrating or seeking to insult members for their views, rather than simply debating views. Hopefully if this thread continues that will be avoided by all.

Posted on: 15 May 2017 by totemphile

It's been taken off the forum for moderation after one member was way out of order in his personal comments. It probably will be back up at some point, cleaned up by the moderators. Threads normally are...

 

 

Posted on: 15 May 2017 by Richard Dane

There were a couple of complaints about certain posts on the Trump thread.  As per policy I have moved it to an isolated area of the forum so I can review at some point, hopefully later today or tomorrow.

Such "breaks' as this also give a little bit of time for hotter heads to cool down a little...

Posted on: 15 May 2017 by Haim Ronen
Richard Dane posted:

There were a couple of complaints about certain posts on the Trump thread.  As per policy I have moved it to an isolated area of the forum so I can review at some point, hopefully later today or tomorrow.

Such "breaks' as this also give a little bit of time for hotter heads to cool down a little...

That sounds good. It makes more sense to delete the few toxic posts than remove a whole engaging thread with such heavy participation. Also posting a warning to members who are veering off the acceptable form of communication might prevent the situation. 

Posted on: 15 May 2017 by Holmes

Skip 

How is the money better with the Rich than the government? The rich don't look after the workers, that doesn't seem part of their agenda, which is patently more wealth. Money with the government ought to be spend sensibly and democratically to benefit all tax payers? 

Posted on: 15 May 2017 by DrMark

The reasons "Trumpanomics" (just as the case with Clintonomics, Bushanomics, Obamanomics, etc) will not "make America great again" is quite simple. You can't spend more than you make (it doesn't work for people, companies, or governments), we have seriously abused the privilege of having the world's reserve currency, and the real pink elephant in the room, that neither party ever addresses is the military budget (I refuse to term it "defense spending") which is spending this country into insolvency.

Social Security is already essentially broke - the so-called "trust fund" is full of nothing but IOUs from congress. HUGE cuts coming soon there, some of a more stealth nature, come more in your face.

Add to that (in another non-partisan situation) the Fed's ZIRP has created TREMENDOUS capital mis-allocation and another debt bubble that is going to burst. These clowns are raising rates now as gingerly as they can for the worst possible reason - so they have some dry powder when the bubble bursts. This has NOT been an economic recovery - all Obama did was take out the credit card, run it up, and give the money mostly to Wall St, the banks, and the corporations...for the most part the very people who drove us headlong into the last economic crisis.

All its going to take is some precipitating event, and the dominoes will start to fall, and 2008 will look like a walk in the park. Could be a war (we seem to like those - and I mean a real war, not these "sport wars" we've been throwing money at for nearly 20 years),  or more likely, one of the many credit bubbles that have sprouted up; USA student loans, Canadian real estate, sub-prime auto lending, or corporate debt. Whatever it is, trillions of dollars have been created out of thin air (look at the Fed's balance sheet) and a LOT of it will never get paid back, so watch out below.

Trying to take over the world is always expensive, and inevitably leads to ruin. And this moron is not going to make anything great.

Posted on: 15 May 2017 by ChrisSU
totemphile posted:

Why Trumponomics won’t make America great again

His displays of dominance, his need to be the centre of attention and his impetuousness have a whiff of Henry VIII about them.

 

 

 

If you don't like the guy, it's probably best not to massage his ego?

Posted on: 15 May 2017 by totemphile

I doubt Trump reads the forum, maybe he should.

A to massaging his ego, this article is rather damning, I don't see how Trump could feel complimented by it.

 

Posted on: 15 May 2017 by ChrisSU

I suppose the chance of him reading the forum are about the same as him reading the Spectator (in which I assume this was published) - approximately nil. If he did, though, I'm sure he's quite capable of ignoring the bits he doesn't like, even if that's 99% of it, and lapping up the bits that he does. Somehow I imagine he would be rather chuffed at being compared to Henry VIII. 

Posted on: 15 May 2017 by Paul Davies
ChrisSU posted:

I suppose the chance of him reading the forum are about the same as him reading the Spectator (in which I assume this was published)

Actually, it's from The Economist.

Posted on: 15 May 2017 by ChrisSU
Paul Davies posted:
ChrisSU posted:

I suppose the chance of him reading the forum are about the same as him reading the Spectator (in which I assume this was published)

Actually, it's from The Economist.

Yes, my mistake. I'm not sure that increases the odds on him reading it, though...

Posted on: 15 May 2017 by imperialline
ChrisSU posted:
Paul Davies posted:
ChrisSU posted:

I suppose the chance of him reading the forum are about the same as him reading the Spectator (in which I assume this was published)

Actually, it's from The Economist.

Yes, my mistake. I'm not sure that increases the odds on him reading it, though...

I think it is more like the Economist's problem, since it is written for the educated, the intellectuals, and it is not meant for the people who like or believe in conspiracy theories, or stories about the deep state.

Posted on: 15 May 2017 by Skip
Holmes posted:

Skip 

How is the money better with the Rich than the government? The rich don't look after the workers, that doesn't seem part of their agenda, which is patently more wealth. Money with the government ought to be spend sensibly and democratically to benefit all tax payers? 

Thanks for the comment.   Sorry for the pedantic reply that follows.

The government is a drag on the private sector.  The bigger the government is, the smaller the private sector will be.  

Components of GDP by expenditure[edit]

 
U.S. GDP computed on the expenditure basis.

GDP (Y) is the sum of consumption (C), investment (I), government spending (G) and net exports (X – M).

<dl><dd>Y = C + I + G + (X − M)</dd></dl>

 

All government spending, and this includes government jobs, will have to be funded by borrowing or taxes.  Neither is good for the private sector.   The private sector is solely responsible for economic growth.   Economic growth is our friend.   Government spending is the opposite.  In my view, government jobs are not really like private sector jobs.  They make the pie smaller, not bigger.  They are taxes, either currently or waiting to happen.

Once again, sorry for the pedantic tone.  The Rich pay most of the taxes, do most of the investment, and are responsible for most of the consumption.   As private sector consumption, investment, and net exports grow, the economy will grow.   They give us the jobs that allow us to pay for the government you love so.  The Rich are our friends, not our enemy.

Posted on: 16 May 2017 by winkyincanada
Skip posted:

 

Economic growth is our friend.  

Only if we value having more "stuff" over preservation of natural resources and protection for the natural environment.

Posted on: 16 May 2017 by Eloise
Skip posted:
All government spending, and this includes government jobs, will have to be funded by borrowing or taxes.  Neither is good for the private sector.   The private sector is solely responsible for economic growth.   Economic growth is our friend.   Government spending is the opposite.  In my view, government jobs are not really like private sector jobs.  They make the pie smaller, not bigger.  They are taxes, either currently or waiting to happen.
Once again, sorry for the pedantic tone.  The Rich pay most of the taxes, do most of the investment, and are responsible for most of the consumption.   As private sector consumption, investment, and net exports grow, the economy will grow.   They give us the jobs that allow us to pay for the government you love so.  The Rich are our friends, not our enemy.

It doesn't matter who does the spending though Skip ... both can stimulate growth.  The ironic thing is that (contra to most people's belief) its actually in a time of recession when government spending should be increased, and during times of comfort then spending can be cut back.

As for "The Rich are our friends, not our enemy." this only applies when the Rich are responsible.  When they are getting rich but ALSO paying fair wages.  When they are getting rich but also investing for the future.  The problem (in the UK, not sure if the USA is the same) is that wages are squeezed so much that the Rich are not paying enough for people to live on.  They no longer earn enough on basic wages to pay for housing and feed and clothe them and their family.  The system called Capitalism is failing.  

So what do you suggest... should all those "just about managing" people be allowed to fall back and fail.  Perhaps you are thinking they should die and eliminate some of the surplus population (no I don't really think you mean that, I hope, but that is the logical extension of your thinking).  But what about things like school and (dare I mention it) health care - should these be things which are making huge profits?  Surely the profits they make are only taking money out of the economy especially (again as in the UK) many of the companies offering these services are not UK based so the profits are heading out of the UK economy.

You finished with "The Rich pay most of the taxes, do most of the investment, and are responsible for most of the consumption." well thats just right because they have most of the disposable income.

Posted on: 16 May 2017 by MDS
Skip posted:
Holmes posted:

Skip 

How is the money better with the Rich than the government? The rich don't look after the workers, that doesn't seem part of their agenda, which is patently more wealth. Money with the government ought to be spend sensibly and democratically to benefit all tax payers? 

Thanks for the comment.   Sorry for the pedantic reply that follows.

The government is a drag on the private sector.  The bigger the government is, the smaller the private sector will be.  

Components of GDP by expenditure[edit]

 
U.S. GDP computed on the expenditure basis.

GDP (Y) is the sum of consumption (C), investment (I), government spending (G) and net exports (X – M).

<dl><dd>Y = C + I + G + (X − M)</dd></dl>

 

All government spending, and this includes government jobs, will have to be funded by borrowing or taxes.  Neither is good for the private sector.   The private sector is solely responsible for economic growth.   Economic growth is our friend.   Government spending is the opposite.  In my view, government jobs are not really like private sector jobs.  They make the pie smaller, not bigger.  They are taxes, either currently or waiting to happen.

Once again, sorry for the pedantic tone.  The Rich pay most of the taxes, do most of the investment, and are responsible for most of the consumption.   As private sector consumption, investment, and net exports grow, the economy will grow.   They give us the jobs that allow us to pay for the government you love so.  The Rich are our friends, not our enemy.

Skip

If I may, I think this argument is too binary. Yes, there's a legitimate choice to be made between scale and nature of government. But I'd suggest to you that there is a minimum below which a civilised society and a market economy could not properly function.  Government provides services that the private sector can't properly perform like tax collection, the judiciary, foreign relations, etc.  Such functions need to be, and seen to be, impartial. For an economy based on private sector innovation, investment to flourish, that sector needs a competent public sector to provide a level playing field for competition, state infrastructure, regulation etc. Government spending, if wise and efficient, is the private sectors' friend.  Without it the private sector would fail. 

Posted on: 16 May 2017 by DrMark

"For an economy based on private sector innovation, investment to flourish, that sector needs a competent public sector to provide a level playing field for competition, state infrastructure, regulation etc."

Please tell me where this Shangri-La exists, because I'd like to move there. Here all I see is a bunch of PACs and lobbyists getting laws passed to funnel tax money into their coffers so that they need not concern themselves with the laws of supply and demand or economics, and many of the regulations passed are to make it nearly impossible for the little guy to compete because the cost of compliance is onerous to all but the biggest players. And it is BOTH parties (speaking of the USA) - the red-blue, left-right charade is why nothing materially changes, and things are only getting more severe.

What you say does have some truth in it, but I have not seen much (if any) wise and efficient government spending in my life. I would almost rate the Interstate Highway system as the last government success story, and that was implemented under Eisenhower. (Who ironically warned the country on leaving office to be on guard for the excess influence of the "military-industrial complex".

And all you need to see the "Deep State" (if people must assign a name to it) is a pair of eyes, not a conspiracy theory. There is a whole cadre of people along with their influence peddlers that never change irrespective of who gets voted in. Many sensible people who have served in government acknowledge it and recognize it - this bloviating buffoon in the White House sure as hell isn't smart enough to figure it out.

Posted on: 16 May 2017 by DrMark

This was too good not to share:

Isn’t Donald Trump Exactly What We Deserve?

 
by David Macaray


Besides the grinding repetition, the reason I can’t bear to watch comedians do their Donald Trump shtick is that their material is so obviously based on the premise that this guy is somehow unworthy of being our president. That his being elected was a monumental goof, a mistake, that we don’t deserve him.

In addition to being insufferably smug and self-congratulatory, that assumption is bogus. It is demonstrably false. If we step back and take an unsentimental, warts-and-all look at ourselves, we realize that Trump is not only worthy of being president, he seems the obvious choice for it.

Consider: The U.S. is, first and foremost, a nation of consumers. Manufacturers know it, advertisers know it, the Ukrainians know it, and Trump knows it. Indeed, there’s nothing we Americans won’t buy if it’s properly advertised and promoted. And say what you will about Trump, but the man is, first and foremost, a fanatical salesman and promoter.

Consider: We Americans are practical people, which is why we don’t form queues at poetry readings. There’s no shame in that. We simply aren’t a nation of poetry lovers. But we do form queues (often unbelievably long, serpentine queues), beginning at midnight, waiting for the store to open so we can purchase the newest technology. That’s because we’re a nation addicted to buying stuff. And Trump knows how to sell stuff.

Consider: We gush over rich people. We idolize them. But because that realization seems vaguely “un-Christian,” we pretend we don’t. We tell our children that “money isn’t everything,” but we don’t even believe that ourselves. We are in awe of Wall Street because Wall Street is Taj Mahal rich. And Trump is rich.

Consider: We love celebrities, and Trump was a TV celebrity. We love glamour, and the Trumps are glamorous. Wife Melania and daughter Ivanka are exotic creatures. Granted, that is more a testament to cosmetic surgery than the generosity of Mother Nature, but exotic creatures nonetheless. And as much as we pretend to respect “authenticity,” we don’t. Plastic is good.

Consider: Unlike much of the world, we Americans have always despised intellectuals. We pretend we don’t, but we do. We resent cultural snobs, know-it-alls, smarty-pants media types, and “deep thinkers,” and we admire salt-of-the-earth businessmen, self-made moguls, and (counter-intuitively) military officers.

That’s partly because of our native egalitarianism, and partly because we don’t wish to be reminded of our ignorance. We prefer brevity and plain talk to complexity. We embrace slogans (“Make America Great Again”), and avoid nuance, ambiguity, and self-doubt. Arguably, if we don’t count Ronald Reagan, Trump is the most anti-intellectual president since Andrew Jackson.

Consider: We admire conspicuous muscle and power. Accordingly, as long as the combat doesn’t occur on our own soil, we prefer war to peace. We pretend we don’t, but we do. If that weren’t the case, our defense budget wouldn’t be so absurdly bloated, and we wouldn’t have been engaged in all the military adventurism that has defined us since the end of World War II.

Consider: We Americans are a narcissistic people. We pretend we aren’t, but we are. We don’t have to be tied down and water-boarded to confess that we think we’re the greatest country in the world. Not only the greatest country in the world, but very likely the greatest country in the history of the world. If that ain’t narcissism, what is it?

And yet, for all this, we still pretend we don’t deserve Trump? We still pretend to be surprised that we elected a shallow, dishonest, narcissistic bully as our president? As Kurt Vonnegut wrote in Mother Night, “We are what we pretend to be. So we must be very careful about what we pretend.” 

 
Posted on: 16 May 2017 by Skip

Several of you may need a hug, but don't count on me.

I don't know where to begin to reply, except to say that Government is too big and spends too much.  Government  is not part of the problem.  Government is the problem.  Government creates a class of dependents who rely on it and never move out of the basement.   This sentiment is a Reagan-based reply but is still true today, especially in the US.   It is apparent in the US more than ever and I bet you see it in the UK.    Government will never be my friend.   If you are on this forum because of your high dollar Naim system, I doubt it is yours.

I love this forum and it would behoove Naim to host a cocktail party for the Padded Cell.  Despite the long flight,  I would make it a priority to be there.    We would love to host you here if you are feeling energetic.  With a little notice, we could do it at the Clinton Library.   Except for the terrorists, if any.

 

 

Posted on: 16 May 2017 by MangoMonkey

Whatever...

Any system that leads to 1% of the population having more wealth than 90% of the population is flawed. And for everyone's sake - this has to be reversed - sooner rather than later. If not, we'll have the french revolution  all over again - and that won't be pretty.

The govt is my friend. It wasn't even my govt. I studied  Informatik at the technical university of Berlin. Education in Germany is free - and I wasn't even a German citizen. Sure - it was tax payer money - but you've got one more person who can contribute to the private sector and/or to the public sector - be a tax payer - and support the next generation. I guarantee you - you're using software written by me. 

Trickle down economics is BS - The 1% can only spend so much -  Money just goes into their coffers to die. The same money more equitably and fairly distributed would lead to way more economic growth and consumption.

 Arguments have to be nuanced though - and the truth is somewhere in the middle - too much govt - and you end up with up communist rusia/china - and we know how well that works for the folks.

Too little, and we have the wild west - do you really want the fire fighters, the police, to be privatized?

Health system - while i'm a proponent of single payer - I've seen both well run govt. health systems (New zealand, Australia, Germany) and horrific ones (India). 

Posted on: 16 May 2017 by Peter Dinh

Lots of smart folks from this forum, perhaps we elect Richard Dane to be the President, and others hold important positions, and the world problems would disappear in no time,

Posted on: 16 May 2017 by Christopher_M
Skip posted:

I love this forum and it would behoove Naim to host a cocktail party for the Padded Cell.

On the European side of the Atlantic we tend to wait to be asked