Trumpism Does Add Up

If Princeton professor Alan Blinder were my student and had written a paper such as what appeared in the Wall Street Journal on 3/25, it would be marked either ‘incomplete’ or a ‘D’.

He’s a pretty well known guy and should know better.

Prof. Blinder has forgotten a few econ stats of Trumpism (he’s probably right on the reduction of revenue):

  1. Trump plans on cutting expenses in the government drastically. Goodbye most of EPA, Dept. of Commerce and Dept. of Education. The Defense Department is going to run better on 10% less money. There will be efficiencies at HHS. by replacing Obamacare with something that costs less and is optional based on customer circumstances. The TSA is privatized. Another saving. Medicare can run better on less money. Do these add up to 20% of expenses? Maybe. Blinder can do the math on his rework.
  2. He misses economic growth which is going to accelerate with lower taxes. Worked for Reagan, will work again. This will have a positive revenue effect, which Blinder doesn’t mention.
  3. If and when Trump renegotiates the treaties with China and Mexico to make them more balanced, our implicit subsidies of these two will also go away. This saves money. Our tariff is about 3%, and China and Mexico should get to the same rate.
  4. If tariffs are kept down, then Ford, Nabisco, et. al. can freely relocate their plants. Notice that they’re all coming out of unionized, high-wage states such as Michigan and Illinois. Trade expands. I would agree that Trump does need a little reeducation on this point, but I think he’d shift away from protectionism once elected.
  5. Now, the effect of all this on the dollar would be interesting. It’s high now, but might go higher, which might hurt exports. Wake up the Ex/Im Bank.

So, I think we’re making maybe a $100 MM investment in Trumpism before it begins to work as outlined above, but we should be at a surplus before the end of his first term. Prof, how about a redo? Maybe Paul Gigot of the Journal will edit the redo better.

Subsequent comment: Trump wants to cut individual and corporate rates to 15%, which is great, but somewhere the revenue impact of this needs to be outlined, along with spending cuts to the budget, so it doesn’t get out of whack.

 

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