If Donald Trump is elected, Americans are likely to see their incomes decline by thousands of dollars every year. The world economy is already on thin ice, with many countries on the edge of a recession. A Trump presidency will push us over the edge, and Americans are likely experience crashing incomes, millions of lost jobs, and untold businesses failing.
There are four things about a Trump presidency that I expect to cause a great deal of economic damage: restricting trade, expanding the size of government, causing a debt crisis, and weaker property rights.
We Can’t Punish China Without Punishing Ourselves More
First, Trump promises to tax trade with foreign countries like China and Mexico, even allies like Canada and Japan. Tough trade talk sounds good, but a giant tax on China won’t hurt Chinese producers as much as it hurts American consumers, especially working-class families. Of course, the hypocrisy in all this is a Trump tariff will hurt many, many of Trump clothing brands like Trump ties manufactured in China and Trump shirts made in Bangladesh. David Letterman confronted the Donald four years ago on this, and Trump hasn’t changed anything.
The reality is that free trade is good. The world has grown rich together on free trade since 1945, but Trump promises to destroy that, and I believe him. When Trump says he will raise tariffs by 45 percent, the effect will be higher prices. Higher prices will limit what you can afford. Fewer cars, fewer clothes, fewer everything, even if your paycheck is stable.
The second danger is that American paychecks will not be stable. Under President Trump, your paycheck will shrink. A host of Trump policies will cause the demand for labor to fall, meaning fewer jobs and a slow decline in pay overall. I pity the young men and women graduating from high school and college and entering the hollow job market in 2017, 2018, and 2019.
The main reason paychecks will shrink is that Trump has promised “government will pay” for everyone’s health care. Free health care means shadow taxes on payrolls and limits on how often people can see their doctor. It’s called rationing in other countries. Imagine your child is sick: you call on Monday morning for an appointment, but you will not be able to see a doctor for two weeks, if you’re lucky. Meanwhile, your compensation may go up, but the government will be skimming even more of it, so take-home pay will get smaller.
A Debt Crisis Is a Horrible Thing to Live Through
The third thing Trumponomics will do is cause a debt crisis. The size of the U.S. national debt rose above $19 trillion dollars a few days ago. This is the first modern election where the national debt is larger than gross domestic product (GDP). The debt has grown immensely during the Obama presidency. Not only does the Trump campaign have no plan to cut federal spending, his health-care promise implies a bigger government.
Who pays for Trump’s big government? No one. More accurately, the future will pay for his largess, plus interest. According to the non-partisan Tax Foundation think tank, a Trump presidency will slash tax revenue by $12 trillion dollars over the next decade, which will make the debt problem even worse. Won’t such lower rates stimulate the economy? Yes, but the dynamic effect would still cause a $10 trillion larger debt, matching Obama’s worst deficits of $1 trillion per year.
Try to imagine a family with credit card debt that is bigger than its annual household income. This is the problem America faces, and Trump’s policy would simply add more credit cards, which is not a good solution for the kids. We have to appreciate that someday soon this mountain of debt will crumble. It will not just be a sad story of slower growth, it will be a story of negative growth. Millions of jobs will disappear, interest rates will spike to double digits, and those lucky enough to keep jobs will have very low salaries.
Say Goodbye to Property Rights
Fourth, property rights will be less secure under a Trump presidency because he is already threatening to abuse the government’s authority to take private property. The Constitution calls this the right of “eminent domain,” and it was designed for extremely limited, public use. In recent decades, wealthy private developers like Trump have convinced local governments to essentially abuse eminent domain for private development.
This abuse was scandalously affirmed in one of the Supreme Court’s most controversial decisions, Kelo v. New London in 2005. It’s a decision conservatives despise because increased abuse hurts the confidence of investors. In countries where property rights are strong, growth is strong.
Could Trump surprise us and turn out to be like Ronald Reagan—the former Democrat, former movie star, who led a resurgent conservative Republican wave? I doubt it. Reagan was a principled conservative since at least 1964’s famous “A time for choosing” speech, a speech given 17 years before he took up residence at the White House in 1981. Trump is an empty suit at best, a RINO at worst.
My best guess is that the world economy is ripe for a recession, and the next president will either use that crisis to reaffirm free-market principles or react furiously with big-government power grabs. I would not rule out Trump trying to nationalize whole industries and establish national price controls—that’s the way he thinks. Power. Strength. Size. He makes the childish mistake of equating the government with the country.
It’s wrong, of course, and it’s the opposite of Reagan.