Trump’s Frankenstein economics – Politico
NEW YORK — Economists and Wall Street executives portrayed Donald Trump’s economic platform as a kind of Frankenstein’s monster, stitching together old ideas from the left and right.
The plan, which many said defies ideological classification, includes a heavy dose of trickle-down tax cuts mixed with old-fashioned protectionism, reform-conservative social policy and a deregulation plan that should make Wall Street rejoice.
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The question is whether this very unusual mixture of policies rolled out in Detroit on Monday will prove captivating enough to any of Trump’s constituencies to stall his recent slide in the polls and recapture the momentum that drove him against all odds to the Republican nomination.
But the initial reaction from economists, financial services executives and Republican analysts was less than positive as critics ripped the plan for lacking specifics while relying on broad generalizations to attack free-trade deals.
“This economic plan appears to be the good, the bad and in some cases the ugly,” said Lanhee Chen, a fellow at the Hoover Institution who was a top policy aide to Mitt Romney in 2012.
On Wall Street, analysts also criticized the speech as vague and reliant on questionable statistics. “My general response is that one speech does not make an economic plan and most of what he relied on was hyperbole,” said David Kotok, chief investment officer at Cumberland Advisors. “Let him do a dozen more of these and flesh out the specifics and then you could actually begin to analyze things.”
One area where Trump provided some specifics was on tax cuts for both individuals and corporations. The GOP nominee likely slashed the original cost of his $10 trillion tax plan by junking his proposed rates of 0, 10, 20 and 25 percent and replacing them with House Speaker Paul Ryan’s proposed rates of 12, 25 and 33 percent. He left intact his proposal to cut the top corporate rate from 35 percent to 15 percent.
Even with the slightly higher individual rates, the tax plan will likely produce a hefty price tag with benefits tilted toward those earning the highest incomes. Trump added a proposal to allow families to deduct the cost of child-care from their taxes, an idea that, according to Trump adviser Stephen Moore, says could cost $20 billion per year and largely benefit wealthy families, rather than low-income earners who spend more of their money on child care but pay little in federal taxes.
These tax proposals leave Trump open to attacks from Hillary Clinton’s campaign that his plans are more of the same trickle-down approach that Democrats say has exacerbated economic inequality.
“The child care deduction is a horrible idea,” said Chen. “If they are going to be in general election mode and try to appeal to independents and women voters, the proposal should be tailored to serve those voters and this policy isn’t. I want to be sympathetic but they wound up in the wrong place.”
On trade, Trump continued to hammer away at deals from NAFTA to the proposed Trans-Pacific Partnership, saying they have eroded U.S. manufacturing. He pledged to junk existing deals in favor of better ones. He did not, however, specify how his deals would be better. And he did not contend with the role automation has played in the reduction in manufacturing jobs.
And at times he seemed to make the case for TPP without realizing it. “China engages in illegal export subsidies, prohibited currency manipulation, and rampant theft of intellectual property,” Trump said. “They also have no real environmental or labor protections, further undercutting American workers.”
The United States has no significant trade deal with China. The Obama administration has largely pitched TPP, which would mostly reduce tariffs on U.S. exports, as setting rules of the road on intellectual property, environmental and labor standards for a dozen nations that represent nearly 40 percent of global gross domestic product. If enacted, supporters say, China will eventually have no choice but to join and adhere to these rules.
And while Trump’s robust attacks on free trade may resonate with blue-collar workers in the industrial Midwest who are crucial to his chances, they are vehemently opposed by most of corporate America and Wall Street.
After initially pledging to ignore big donors and fund his own campaign, Trump has since made a big push for deep-pocketed backers to help keep up with Clinton’s fundraising machine. His recently rolled-out economic team is loaded with Wall Street players. The protectionist elements of his approach, which harken back to the Smoot-Hawley tariffs of the Great Depression era, will make donor outreach much harder.
“He’s not really a Republican and this is mostly an economic policy that the Clinton campaign could have put together,” said Douglas Holtz-Eakin of the conservative American Action Forum. “This was a political creation not a policy creation and so in the end you have this weird stew of policies that is supposed to create a unique 21st century economy that would instead deliver us back to the economy of 1964.”
And while the trade aspects of the speech might appeal to frustrated voters unhappy with slow wage gains, it also included a pledge to halt new regulation, including on Wall Street, an approach that could also give Clinton an opening to critique Trump as doing the bidding of the banking industry.
“Upon taking office, I will issue a temporary moratorium on new agency regulations,” Trump said in a line that lobbyists will love but that Democrats immediately seized on to launch new attacks.
“Donald Trump fashions himself a populist, but his economic plan just recycles the failed policies of deregulation and massive tax cuts for the rich and corporations,” Larry Mishel of the left-leaning Economic Policy Institute, said in a statement reacting to the speech.
With his proposed ban on new regulations, Trump risks reversing gains he has made with swing voters potentially worried about Clinton’s long-standing ties to Wall Street.
Critics of the speech also suggested Trump may not have helped himself by relying on outdated statistics and attacking the unemployment rate as a fake. Trump cited the low labor-force participation rate, which has been rising lately and reflects long-term demographic changes, as well as a 58 percent unemployment rate among African-American youth. Many of those included in this statistic are in school rather than working. The unemployment rate among younger African-Americans who want a job is far lower.
Nonetheless, Trump insisted: “These are the real unemployment numbers — the 5 percent figure is one of the biggest hoaxes in modern politics.”
The actual unemployment rate is 4.9 percent, not 5 percent. And no serious economist views it as a hoax. Broader measures of joblessness have also fallen to near-term lows, undercutting Trump’s point.
A new CNN poll shows Clinton drawing even on the question of who would be better equipped to manage the economy. And Trump critics say that relying on misleading or entirely invented statistics and questioning the validity of existing numbers is not the best way to turn this trend around.
“There are legitimate arguments to be made about soe economic indicators not accurately reflecting the frustration many Americans have about the economy not living up to its potential,” said Kevin Madden, a Republican and partner at Hamilton Place Strategies. “But framing the unemployment rate as a ‘hoax’ actually ends up diverting the debate. It may rally a core group of already ardent supporters, but the end result is a litigation of a conspiracy theory that matters very little to voters genuinely open to being persuaded on economic issues.”
But the broadest critique of Trump on Monday was that he gave an incoherent speech with little in the way of clear message. “He decided he needed to get female voters to stop hating him, so he included the kids thing. He needs blue-collar workers so he did the anti-trade and immigration stuff. And he wants to agree with congressional Republicans so he did the Ryan tax cuts,” said Holtz-Eakin. “In the end, he just winds up in no-man’s land with no clear idea what the plan really is.”