Presumptive Presidential nominee Donald Trump is spearheading a new dispensation of populism in the United States, it is in such populist fashion that he has approached his manifesto and most especially his proposed economic policy. For the most part, he has captured the attention of disgruntled Americans and has truly ridden the wave of indignation sweeping through the country.
However, the campaign has largely eluded the pragmatism of the Washington elite, especially the Republican bigwigs who are straining to bring both Trump and the party in line. But as a Trump presidency becomes even more likely, let us consider what Trumponomics has to offer.
In typical Conservative fashion, Trump’s tax proposal envisions a lighter burden for American taxpayers, especially those of the middle class who he believes are being ‘absolutely destroyed’. A 0% income tax rate for single filers on $25,000 and married filers on $50,000 seems to hold a promise of happy days for low-income families and individuals. However, a Trump premiership will see the serious slimming down of federal tax revenues with 70 million people moving from paying up to 15% income tax to nothing at all.
Given the large incisions that will have to be made into the federal piggy bank for Trump to deliver on debt reduction promises ($19tn worth of debt to be precise) one only wonders how government-funded social security programs that support working and middle-class Americans will survive.
With a complete removal of the Estate Tax (something of an inheritance tax) which he expressed his disdain for five years ago in his book Time to Get Tough and a stark relaxation of the corporate tax rate from 35% to 15%, Trumps tax plan is also set to exacerbate inequality in the United States.
Need I add that America is a global leader in inequality, edging further in that table certainly won’t ‘make America great again’. However, what is most worrying about Trump’s tax proposal is that it almost seems like an attempt to rehash the ‘Trickle down Economics’ of the 80s. I’m guessing he didn’t get the memo then, “It doesn’t work”.
Even with the classic ‘American dream’ rhetoric and what seems like sympathy for the middle class it all just seems disingenuous and impractical. Very much aligned with the rest of his strongman politics is Trump’s outlook on Trade which I anticipate to be very problematic not just so for the United States but for the Global Economic community. How so?
Well, with talk of imposing tariffs against China and forcing large American corporations like Apple and Ford to manufacture in the US, Trump will be successful in tearing apart the Sino-American relationship which, politically has been precarious during the Obama administration however the many fruits of an ever-growing commercial relationship are being enjoyed.
Robbing the American consumer and multinational of the comparative advantage available in the rest of the world is a feature of the new American isolationism that hails from Trumps populist drive to Pennsylvania Avenue.
Probably his most daring aspiration, to be “America’s greatest ‘jobs’ President”, although very regal has very little in the way of meat on the bones as to how he would accomplish it. Nevertheless, it carries with it a great deal of allure especially in an economy that has been undercut by low labour costs in the far east as well as by their southern neighbours Mexico, who have been frequent recipients to his outrageous retort.
As to the means to which Trump hopes to meet this end one is left to infer that the reduced tax burden on corporations and a heavy-handed response to those who are caught outsourcing jobs is believed in the Trump camp to be the best course of action for creating jobs for Americans.
Quite frankly, this is hypocrisy on Mr Trump’s part considering that many of his products are manufactured abroad and a great many of his hotels and major real estate properties are dotted across the world.
All in all, what I have called Trumponomics in this article is nothing special and brings nothing new to the world of political economy. Nevertheless, its destructive power must not be underestimated neither must it be said that a democratic mandate, an opportunity to execute will not be given because what we are seeing across the pond is something that the ‘Washington Bubble’ failed to anticipate due to the huge political rift between the political class and the ordinary people. Great work must be done to cater for those who were once disenfranchised because they are now part of the equation, but in this version of events, things are not adding up.