It is a measure of how bad things are going for Donald Trump that “his campaign called his delivery of a prepared economic speech in Detroit evidence of a newfound political discipline.” Trump has reached the point where demonstrating an ability to read a speech without going off-script to say something insane actually counts as success.
Because I am an economist, I was pleased when I heard that the Trump campaign was finally bothering to say something about economic policy. The economy is, after all, the issue that is ultimately driving much of the disenchantment in this country. But as important as economic issues are, it is also a relief not to feel compelled to write about, say, Trump’s existential threat to our constitutional system.
It is not typically necessary for me to identify exactly when I am finalizing a column, because there is usually at most a few days between writing and publication. Given the frequency with which Trump manages to add a new outrage to his long list of disqualifying moments, however, no one knows how many controversies he will ignite in a given day.
For the record, therefore, it is now Wednesday, August 10, at 7:24pm EDT. As of this writing, the conversation has completely turned from his mess of an economic plan to his chilling comment that “Second Amendment people” could do something to stop President Hillary Clinton’s non-existent plans to repeal the constitutional provision regarding firearms.
By the time you are reading this column, however, all of that could be old news as well. Maybe the incredible shrinking House Speaker Paul Ryan’s attempt at damage control, suggesting that Trump’s comments were merely “a joke gone bad,” will have ended this latest scary interlude. But maybe not.
Even if it does, however, there is no way of knowing what unhinged Trump moment is coming next. By tomorrow or Friday, we might all be scratching our heads over, say, a suggestion that Trump wants to invade some country or other. Or he might endorse Newt Gingrich’s call to bring back the infamous House Un-American Activities Committee. There really seems to be no limit to what he might do that will dominate the next news cycle.
Notwithstanding all of that, however, there is still—incredibly—a non-zero chance that Trump will win the presidency this November. Unless he delegates all policy decisions to his vice president or someone else, therefore, Trump’s recent statements about economic policy might end up mattering to the world.
A Non-Plan From an Unserious Candidate: Trump Continues to Support a Random and Changing Set of Half-Baked Ideas
Donald Trump may or may not be as successful or rich as he says he is. He may or may not have created jobs—and if he did, he may or may not have paid his employees and contractors what he owed them. In any event, however, Trump thinks that his business experience qualifies him to be president.
This means that Trump’s economic policies ought to be new, innovative, and dazzling. After all, he blames everything that is wrong on the “stupid people” who are currently running the country, including the Republican establishment that Trump trashed in the primaries and during his nominating convention.
Trump-the-business-genius, therefore, ought to be able to tell voters what he would do differently. Only he can solve our problems, he says. What are these brilliant ideas?
There are none. To an amazing degree, Trump is instead simply adopting Republican economic orthodoxy. Cut taxes, reduce safety and environmental regulations, drill-baby-drill, and on and on.
True, he departs from the orthodoxy in dangerous ways on international trade. Because that is such a large topic, I plan to discuss it in a future column—unless Trump manages to make even that issue irrelevant by stoking another, bigger controversy.
For nearly everything else, however, Trump’s economic playbook is warmed-over supply-side orthodoxy. Because his speech (which was apparently written by a group of people with no known expertise in economic policy) failed to lay out a full-scale plan for economic growth and prosperity, my analysis here can only follow up on a few of Trump’s smattering of loosely related suggestions.
Lest there be any doubt, let me be clear that these policies, separately and together, would push the economy in the wrong direction. I am hardly the only one to have reached this conclusion, of course.
There is nothing deep or mysterious going on here. Trump is all in for trickle-down economics, and trickle-down economics does not work.
Tax Cuts for the Rich, of Course
In October of last year, when Trump’s candidacy was still expected to flame out, he surprised everyone by issuing what almost looked like a tax plan. I say “almost” because, as I wrote at the time, his comments never really added up to a complete proposal. At best, he appeared to have cribbed Jeb Bush’s tax plan and made the numbers bigger.
Unsurprisingly, he has now abandoned that non-plan. Somewhat surprisingly, he has instead apparently decided to adopt the tax plan that House Republicans have been pushing for what seems like forever. (Again, I have to say “apparently” because he merely called that plan a starting point, without really committing to it.)
The self-proclaimed bold visionary thus continues to be a plagiarist. Even worse, the ideas that he is now appropriating are bad, pointless, or both.
Trump focused, for example, on the Republicans’ proposal to reduce the number of tax brackets from the current seven to three (12 percent, 25 percent, and 33 percent). This, of course, is supposed to strike a blow for simplicity.
But this is one of the oldest dodges in the tax demagogy game. The number of brackets has nothing to do with the complexity of the tax system. Once a taxpayer has determined her taxable income, it takes about eight seconds to find the tax owed from the tax table that the I.R.S. provides. We could have one rate or a hundred, but the time necessary to figure out a person’s tax bill would not change.
The complicated part of the tax system, of course, is in computing taxable income in the first place. The little-known reality, however, is that the vast majority of people do not itemize their deductions, which is where most of the complication comes in.
In fact, the people who form the bulk of Trump’s voting base, working-class voters (or those who were formerly working) with high school educations, are the least likely to have complicated tax lives.
At best, therefore, the Trump tax plan simply promises those people that by giving their bosses an easier time on taxes, the benefits will trickle down to them. As I said, this is hoary Republican orthodoxy, not Trumpian innovation.
In fact, Trump even manages to replicate Republicans’ hypocrisy regarding tax policy for low-income people. He is, after all, the nominee for a party that has railed against the “takers” who have “no skin in the game”—the party whose 2012 presidential nominee disparaged the 47 percent of people who paid no federal income taxes during the worst year of the Great Recession.
That everyone pays state and local taxes, federal payroll taxes, and so on, never deterred Republicans from focusing on those whose incomes were too low to pay federal income taxes at a time when the unemployment rate topped ten percent.
Yet there was Donald Trump on Monday in Detroit, touting as one of the benefits of his plan his claim that, “[f]or many American workers, their tax rate will be zero.” Why bother mentioning that his proposed tax reduction for working Americans has been estimated to be 0.2 percent (about a hundred dollars per year), as opposed to a 5.3 percent cut (tens or even hundreds of thousands of dollars per year) for the top one percent?
Again, however, this is standard hypocrisy on the right, where so-called flat tax proposals would similarly exempt poor people from paying federal income taxes. Trump is simply trying to replicate that move, promising to toss some crumbs to the supposedly undeserving poor while focusing tax cuts on the wealthiest Americans.
Trumps Shares Republicans’ Obsession With the Estate Tax
If Donald Trump were capable of embarrassment or shame, he might have decided to skip over another part of the Republicans’ orthodoxy on taxes. One might think that Trump would want to steer clear of Republicans’ proposals to eliminate the estate tax.
Trump, after all, is the classic example of a pampered heir who thinks that he is a self-made man. Even more than the first President Bush, who was famously mocked for “being born on third base but thought he hit a triple,” Trump received tens of millions of dollars from his father, far beyond the “small loan” of a million dollars that Trump described earlier in his campaign.
Of course, Trump has also managed to end up with less money than he would now have if he had merely let someone else invest it for him. So even if business savvy actually did translate into presidential chops in economic policy—which it most emphatically does not—Trump would be among the least qualified businessman who could run for president.
Again, however, we saw Trump in Detroit, adopting the Republicans’ focus-group-tested term “death tax” to describe the estate tax, and promising to repeal the dreaded levy. Bold!
By now, it is relatively common knowledge that the estate tax has an exemption of almost $11 million per couple. Any money that an estate gives to charity is also exempt from tax. And wealthy people who care the most about avoiding the tax can turn their estate lawyers loose to create trusts and other legal devices to reduce or eliminate the tax.
The net result is that less than 0.2 percent—fewer than 2 out of every 1000—of people die with an estate that pays even a penny of tax.
Beyond the naked demagoguery, however, Trump also fails to notice that tax cuts are not free. That is, even if he thinks that the government should not impose an estate tax, he needs to tell us what will happen when we decide not to collect the twenty billion or so dollars that we collect each year from the largest estates.
In one sense, of course, $20 billion is small change, amounting to less than one percent of federal revenues. But twenty billion dollars is also double the amount of money that President Obama proposed to spend on Head Start in 2016.
And Republican budget-cutters were supposedly so concerned about deficits that they cut $1.4 billion from the Administration’s proposed budget for veterans’ benefits for 2016. (This is how we honor our veterans.) Twenty billion dollars starts to look like a lot of money.
The point is that Trump cannot pretend that no one suffers when we cut taxes. He needs to explain why the estate tax—which is not only the most progressive tax in our system but is also the least “distorting” of all available revenue-raising tools—must be jettisoned during an era of worsening inequality and painful penny-pinching that shortchanges our country’s many needs.
Summing It Up: Nothing to See Here Except Reverse Robin-Hood
Again, Trump has not actually laid out anything remotely resembling a full-scale economic plan. Instead, he has abandoned what he had previously touted as his tax plan and replaced it with off-the-shelf Republican ideas that will worsen inequality but that will do nothing to improve the economy.
In short, what we have heard from Donald Trump so far provides no reason to believe that he has a business mogul’s magic solution to improve what is already a much-improved economy.
Why did he even bother? Trump’s campaign would surely rather be defending its empty economic policy statements than explaining his more provocative embarrassments, from his attacks on a war hero’s family to his transparent lie that the National Football League had sent him a letter complaining about the presidential debate schedule—to say nothing of his claim that the election will be rigged.
But given the lack of content of Trump’s economic suggestions, the only reason that they would rather be talking about tax policy must surely be because it is boring, which means that even though his policy preferences are damaging and regressive, there is at least one topic on which he is not scaring the daylights out of people.
As he has already proved many times, however, Trump will always do something to change the conversation yet again, bringing it to another disturbing place.