Donald Trump’s Economy Will Look Like Obama’s

Donald Trump’s Economy Will Look Like Obama’s

Donald Trump’s proposals—such as they are—will squeeze our suffocating economy even more tightly. We need the opposite.
Abby McCloskey
By

After the weakest economic recovery of our lifetime, 2016 offers an opening for revival. Unfortunately, some Republicans are ready to trade in one bad economy for another. The GOP frontrunner, Donald Trump, has put forward few ideas to grow the economy. Indeed, his plans could plunge the country into another recession.

This, apparently, has been lost on a wide swatch of the GOP. In a recent CNN/ORC poll, 60 percent of GOP voters said Trump would best handle the economy—that was 48 points higher than voters rated Ted Cruz.

News flash: Trump cannot grow the economy by sheer force of his personality, being a billionaire, or being a (supposed) Republican. It comes down to the policies he’d pursue. So far, the ones he’s promised would be disastrous. (Full disclosure: I’m an advisor for Jeb Bush.)

Yes, We Have Big Challenges

The U.S. economy is facing big challenges. In his last State of the Union address, President Obama said “anyone claiming that America’s economy is in decline is peddling fiction.” This is nonsense. While improvements have been made, notably the unemployment rate dropping to 5 percent, significant weaknesses remain and show no sign of letting up.

Notably the unemployment rate dropping to 5 percent, significant weaknesses remain and show no sign of letting up.

The next president will need to address the fact that more and more Americans have decided it no longer makes sense to work thanks to flat wages and a sticky safety net expanded by Obamacare. The labor force participation rate is 62.6 percent—the lowest in nearly 40 years.

Economic growth has failed to cross the 2 percent threshold for any sustained period of time, and the Congressional Budget Office projects that low growth will be the norm through 2089 unless Congress makes big changes.

The ability of American children to rise up and do better than their parents has flat-lined since the 1980s, meaning that a child born poor in America is more likely to stay poor. And the federal debt is still on track to surpass the U.S. gross domestic product (GDP) in 25 years.

These are big challenges that call for strong leadership. Ironically, these challenges have helped lay the groundwork for Americans to demand a high-risk, potentially high-reward candidate to turn things around (a.k.a. Trump).

Deporting Illegal Immigrants Will Shock the Economy

But instead of growing the economy, Trump seems focused on running it asunder. Economists have many different formulas for economic growth. But at its most basic level, an economy can grow in three ways: labor, capital, or the interaction of both, which is technology. Trump’s plans would negatively shock all three.

We would likely see massive hiring freezes combined with unfilled low-wage jobs, which would have ripple effects throughout the economy.

Trump’s plan to deport 1 in 30 people in America would drastically reduce the labor force. It would not only be the impact of having 11 million people leave the country, but creating uncertainty about who is being deported in when. We would likely see massive hiring freezes combined with unfilled low-wage jobs, which would have ripple effects throughout the economy.

Some may argue that deporting illegals will free up low-wage job opportunities for U.S. citizens. But with the economy already approaching full employment at 5 percent, the problem for Americans doesn’t appear to be the lack of jobs as much as the lack of good-paying ones or ones that match their skill-sets.

Indeed, one of the bright spots of the American economy is that, due to immigration, our population isn’t shrinking and aging at the same rate we see in developed European countries. To be sure, American lawmakers must deal with the illegal immigration. But deporting all illegals in a short time period could trigger an even greater crisis.

Free Trade Lowers Your Expenses

Trump’s plans would similarly be detrimental for capital. He has threatened trade wars with our largest trading partners, China and Mexico, which would dramatically reduce investment, weaken domestic industry, and increase the costs of goods and services everyday Americans buy.

Trump has laid out no convincing plans to deal with the federal debt, which pushes down on economic growth and sends our taxpayer dollars to China.

Traditionally, Republicans have demanded less government involvement in the economy, not more. With his trade plans, Trump is turning that truism on its head. Research shows that countries with free trade have stronger economies. The United States has already dropped to 12th place in the Heritage Index of Economic Freedom under Obama. Trump would further that decline.

Moreover, Trump has laid out no convincing plans to deal with the federal debt, which pushes down on economic growth and sends our taxpayer dollars to China instead of investing in capital and technology at home.

Trump’s tax plan explodes the federal debt. According to the Tax Foundation, it would cost $10 trillion over the next ten years, even when accounting for growth effects. His tax plan alone would more than double projected federal deficits from $7.6 trillion to $17.6 trillion between 2016 to 2025. Federal debt would reach 115 percent of GDP by 2025, instead of the 78 percent as currently projected. This is a risky proposition for a president well known for defaulting on his debts.

It’s easy to slash tax rates. The mark of a leader is being honest about how to pay for it. Instead of decreasing government spending to free up room for his tax cuts, Trump wants to increase government spending beyond its already historic levels.

Bloviating Is Not a Plan

When Mexico inevitably doesn’t pay for the gigantic wall across our southern border, the bill will come to U.S. taxpayers. This is no different from the massive infrastructure spending Clinton is proposing, unless Trump makes tough choices about spending cuts elsewhere.

It’s time to grow the economy and address the challenges of the twenty-first century head-on.

Democrats, of course, have a worse problem. Clinton’s plan to grow the economy includes higher taxes, more government spending, and more Washington overreach—a continuation of the last seven years, and then some. As for Sanders, while we have been fortunate not to see socialism play out in the United States in any concerted way, it’s been played across Europe. Socialist policies would make the current growth challenges we are facing look like the American Dream.

It’s time to grow the economy and address the challenges of the twenty-first century head-on. There are numerous Republican candidates with pro-growth economic plans, including serious proposals for tax reform, entitlement reform, regulatory reform, budget reform, and welfare reform. Thus far, Trump is not one of them.

Being outrageous won’t make the economy great again.

Abby McCloskey is an economist and founder of McCloskey Policy LLC. She was an economic advisor for Jeb! '16, and served as Gov. Rick Perry's policy director for '16.

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