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Trumponomics – How the Trump Economic Plan Will Work

2016 February 25
by Ian Welsh

Ok folks, let’s say what people keep refusing to say:

Trump’s economic plan makes sense and will work.

Okay?

What Trump wants to do is to use tariffs to return production to the United States. He has mentioned a 35 percent tariff on cars produced in Mexico, for example.

Donald TrumpThis is not crazy, this is not insane. This is how economies were largely run for most of capitalism’s history.

If a country is running a trade deficit, that means it has more demand than it is filling domestically. If it has unused capacity, and less than full employment (both are true in the US, I would want to see the US running under 2 percent unemployment consistently for years before I was sure it was at full employment), then the stuff it is making overseas, which can be made at home, should be made at home.

Blah, blah, blah—competitive advantage. I’ve written the articles on why comparative advantage is irrelevant most of the time. Read them.

Free Trade is Betrayal

Ricardo’s Caveat 

Ricardo, who created the doctrine of comparative advantage, thought that free trade did not work under the circumstances in which the US now finds itself.


(I am fundraising to determine how much I’ll write this year. If you value my writing, and want more of it, please consider donating.)


Free trade, if you don’t have full employment, is a rounding error. In that case, the only things you should be importing are things you need which you literally can’t make yourself. And if you can’t make them because you don’t know how, you should be learning.

Free trade works when countries have full employment and capacity utilization. Only then does it make sense.

Trump wants bilateral trade deals. Country X sells America what America can’t make for itself, and America sells Country X what it can’t make for itself.

Keynes, by the way, felt that countries should produce almost all of what they needed for their daily consumption, trading only in that which they absolutely could not make and luxuries.

Trump is right.

Trump also wants full universal health care. That will free up a lot of money.

Trump wants to tax the financial industry, that will give him a lot of money.

As for his nativist policies, well deporting millions of people while at the same time not allowing the industries which hired them to leave the country will result in increased wages and employment for the working class. Immigration is a great thing, and a net economic positive, when you are running full employment and protectionist policies. If you refuse to have full employment due to deliberate government policy, well, then immigration’s so great not for the natives.

(See “How the Federal Reserve Crushed Wages for Over 30 Years.”)

As the Rolling Stone article about Trump pointed out, Trump is winning because Trump is telling a lot of truth. Other politicians are beholden to big money interests and cannot possibly work in your interest because they are already bought. (This includes Clinton, but not Sanders).

This is simply a fact.

The policies which work for ordinary people are well known: bilateral trade deals, protection of core industries, the ability to feed your own nation, tight labor markets, etc.

Trade is often a bad thing. It creates a race to the bottom, allowing countries to compete against each other for the worst wage, the worst treatment of workers, and the worst pollution. It isn’t always a bad thing, but it is best when managed, not when free, and a country is most securely prosperous when it is primarily reliant on its own domestic market.

Now Trump won’t do all of what should be done. He won’t, for example, radically raise taxes on rich people. But he despises the financial industry and will hammer them, he will put up tariffs, he will redirect domestic demand to domestic industry.

You may not like it, but Trump’s economic plan will work. It will produce a MUCH better economy for his supporters than did Obama or Bush (or even Clinton).

Can he get it through?

Well, he will be a Republican President, so presumably he will have Republican majorities in the House, Senate, and Supreme Court.

Let’s say they balk, though. After all, he will be hurting a lot of their owners.

Trump is PRESIDENT.

Most people don’t really understand what that means because Presidents rarely use their full power.  Trump controls the NSA and the CIA, for example. They spy on Congress (no, don’t waste my time pretending they don’t). They either know or can find out every little bit of dirt on every member of Congress.

The vast majority of Congress members are corrupt. Again, don’t even try and deny it. They are almost all subject to corruption charges if the President wants to push it through the Justice Department. They can vote for his plans, or they can go to prison.

Now, the DOJ has immunized most of Wall Street and the Big Bankers for their crimes leading up to the 2008. Do you believe they have stopped committing crimes?

Right.

Now let’s look at the Federal Reserve: All members of the Board of the Federal Reserve, except for the Chairman, can be fired by the President for cause, i.e., not doing their job. The Federal Reserve has two mandates: controlling inflation and maintaining full employment.

Right. They buckle, or they are gone.

Now, forget all this. Watch a Trump rally. Note how he treats hecklers, how he talks of wanting to punch them, and how gives license to his supporters.

What do you think will happen to lawmakers who oppose the great Trump when they go back to their districts and encounter Trump supporters?

Context: There are many stories of working class men punching out their bosses and so on when they insulted FDR.

Trump is running as the fascist version of FDR: He’s the class traitor. He’s a billionaire who knows how the game is played, knows it is crooked, and is going to betray his own kind to work for the American people.

He will be popular. Once his economic plan works, he will be even more popular. He will be idolized by those who support him. The people who hate him most will be deported, powerless, or crawling on their belly for his approval (most of the media).

Remember, FDR improved the US economy.

But Hitler and Mussolini, they really improved Germany and Italy’s economies.

This, my friends, is why I kept warning that current elites were setting the conditions for the rise of a man on horseback, from fascism or the far left.

People will only tolerate economic failure for so long.  After that they will go with anyone, and I do mean anyone, who promises that they will fix it, and who seems credible and, most importantly, not part of the elite who caused the problem in the first place.

Trump will crush Clinton if he runs against her, because she is the very essence of an entitled elitist. He will destroy her in ways you cannot even imagine. It will be ugly, really ugly, but his core critique will be the same as his core critique of Jeb: “You are part of the group that fucked up America.”

And he’s right.

Bernie, on the other hand, is not. Whether he can win against Trump, I do not know, but he is not nearly as vulnerable to the charge that he’s one of the elite, and, by the way, minus the nativism, his economic plan and Trump’s are a lot alike.

A lot.

Sanders plan will work for the same basic reasons Trump’s will work.

But people need to stop deceiving themselves. Trump is not a joke, he is not stupid, and he is not incompetent. He will almost certainly be a popular President amongst the people who voted for him, who are, by the way, the part of the population most willing to be violent.

If Trump becomes President, he may be President for a very long time.

44 Responses
  1. V. Arnold permalink
    February 25, 2016

    Yes, Trump has all the markings of a demigod; and the U.S. is ripe for a being such as that.
    Much danger lies ahead…

  2. Ivory Bill Woodpecker permalink
    February 25, 2016

    But will the Establishment be willing to allow the mob to elect Trump?

    Our host did mention an “airplane accident” last time.

    Such extreme measures may not be necessary, however, as the Establishment does have the unaccountable computerized voting machines.

    The Founding Oligarchs set the system up to prevent both the mob from taking power and to prevent an ambitious oligarch from becoming a monarch.

    This may be the year we see if that system works well enough.

  3. batalos permalink
    February 25, 2016

    Good article

    Do you think the GOP Convention is going to try to use supers against Trump?
    And if it does try that then what are the main possible scenarios

  4. markfromireland permalink
    February 25, 2016

    Really Ian, you’ve excelled yourself with this one.

    mfi

  5. Claudia Egelhoff permalink
    February 25, 2016

    D. Trump has backtracked on the “free universal health care” idea, according to Gail Collins in the NYT today :

    “I checked with his campaign. He wants people to be able to establish health savings accounts. He is also looking into the possibility of letting the states run Medicaid with federal block grants, and making health insurance premiums tax-deductible.”

  6. jsn permalink
    February 25, 2016

    IBW,
    What works against a pacified left won’t work against a militant right. Trump is already courting the police, if polling data gives him a window the touch screens will become punched screens.

  7. V. Arnold permalink
    February 25, 2016

    jsn
    February 25, 2016

    Oh god, please do not feed the trolls…

  8. markfromireland permalink
    February 25, 2016

    What works against a pacified left won’t work against a militant right.

    Not so much pacified as passive by choice. But you’re right, a militant rightwing movement is an altogether different creature. What passes for “left” in the US self-emasculated a long long time ago and are rightly seen either as willing collaborators to the American ruling class or that class’ useful idiots.

    mfi

  9. RJMeyers permalink
    February 25, 2016

    This is the scariest part about Trump–that his plans may actually work, that people will love him for it, and that they will do so while wading in rivers of blood in the streets. Well, much more blood than we currently have running in them…

    I’ve tried to roughly quantify the Hillary, Sanders, Trump choices based on ballpark estimates of millions deported, dead, or in poverty given the likely policies of each:

    https://rjthefirst.wordpress.com/2016/02/25/choices-2016/

    I admit its not very rigorous, and Trump especially has some very hard to estimate potential to increase deaths drastically.

  10. EmilianoZ permalink
    February 25, 2016

    I doubt that Trump really despises the financial industry and will hammer them. There is no real estate business without banks. Wall Street created the housing bubble that handsomely inflated his real estate value. He wont do anything against Wall Street or the Fed that can risk downing the value of his properties.

  11. different clue permalink
    February 25, 2016

    I believe that raising tariffs that way would be “illegal” under NAFTA, WTO, MFN for China, etc. If I am correct and a President Trump tries it, upholders of the FFTAs (Forced Free Trade Agreements) will try every kind of legal countermeasure.

    It could force the issue of abrogating or repealing or withdrawing from every FFTA so that tariffs become legal again. If so, a Trump Presidency could be very long-term historically valuable just for that.

    Free Trade is the new Slavery. Protectionism is the new Abolition.

  12. S Brennan permalink
    February 25, 2016

    Good Post Ian;

    DBA, Trump loses, or necks out a weak victory against Sanders, but beats the shit out of Hillary, bilateral trade, working class resentment against a ~ “self-emasculated “left” who are willing collaborators and useful idiots to the ruling class”

    I think you got it all. Nothing to add.

  13. Ian Welsh permalink
    February 25, 2016

    He would have to leave the FTAs and the WTO, yeah.

    They can sue all they want, they can’t collect against the US. If they seize US properties in their own countries, Trump can seize more in the US in almost every case.

    International “law” works because the US enforces it, pretty much. When the US doesn’t, it doesn’t. There are some marginal cases, having to do with Europe enforcing it, but that’s all ).

  14. Mallam permalink
    February 25, 2016

    Absolute garbage, Ian. Trump doesn’t know shit about policy. You think he supports universal health care? He couldn’t even tell you a coherent plan of how health care should work besides “no one should die in the street” — hooray, he’s a step up from Ron Paul. He babbles about “competing across state lines”, health savings accounts, etc; why, it sounds just like your average Republican health care plan! Listen to what he actually says. He won’t raise taxes on rich people at all, let alone “radically”. Ted Cruz has now overtaken Trump on “whose tax plan benefits the wealthy the most”, but that’s a damn low bar.

    Pat Buchanan and George Wallace knew about policy — odious white supremacists that they were (are in Pat’s case). Trump is all white supremacy with a strong man persona.

  15. Mellanoid Jesus permalink
    February 25, 2016

    Its hard to disagree with most if not of all of these proposals. This article makes Trump out as some sort of fascist. The cult of personality issue with Trump is a problem though, which is why I prefer Bernie’s social democratic approach to be more palatable and honest.

    Both are arguing for the same things. One as a pseudo fascist left winger and the other as a European social democratic populist.

    Do not be alarmed by fascism, yes I understand the back story on to the word but I am using it to describe Trumps demagogue like appeal.

  16. tony permalink
    February 25, 2016

    Mallam, I don’t know how healthcare policy works either. All I know it costs half the money here as it does in the US and I get healthcare by going to a hospital. If I were a US president, I’m sure there is someone, somewhere in the world who knows how a functional healthcare system work. Maybe even in Canada!

    It’s not a complex decision for a president. It’s just about who you serve.

  17. atcooper permalink
    February 25, 2016

    Here’s Taibbi on Trump: http://www.rollingstone.com/politics/news/how-america-made-donald-trump-unstoppable-20160224

    It’s a decent article to send to establishment lefty friends.

    In it both repeal of the law that allows insurance regional monopoly, and repeal of the ban on collective bargaining for pharmesuticals are mentioned as ideas Trump has put forth.

    They are both good ideas.

  18. February 25, 2016

    The “spirit” of what you say I think is correct, but your detail and facts are…. really idiotic.

    First, FDR did not improve the economy. He was almost upset by another populist businessman (Wendell Wilkie) who was trouncing FDR because of the continued lack of employment until the war broke out. (Until Pearl Harbor the majority of Americans wanted nothing to do with ANOTHER foreign war that wiped out an entire generation).

    And Hitler (a socialist) actually ran on government control and anti-gun rights in opposition to Trump. (He did promise Universal Healthcare – but more in the vein of Obama and Clinton as a freebie – not as a cheaper method to cover it since it is ALREADY been paid for).

    I actually believe as Dick Morris (whose father was Trump’s lawyer for years and knows Donald) said today – Trump is a pragmatist who simply likes to solve problems. He is NOT a ideological party man.

    If he TRULY believes that there is too much waste in DC, he just might close down the EPA, NEA and DOE and yes – he would be ruthless.

    But it is hard to imagine anyone being as bad as Obama has been the past 8 years in civil liberties. True, Donald supports the Patriot Act and all the spying mechanisms, but his total aversion for 30 years to NAFTA, TPP, NAU and others makes me believe that while he would not be a “liberty” guy – I doubt he would be any worse than Obama and Bush. And if he brought down the debt and revived the economy – I could live with that. It CERTAINLY would be no worse than Cruz or Rubio who are both bought and paid for by the establishment.

    Dick Morris on what kind of President he think Trump would make – http://www.dickmorris.com/what-kind-of-president-would-donald-trump-be-dick-morris-tv-lunch-alert/

  19. Mallam permalink
    February 25, 2016

    Fantastic, tony. But Ian is making a claim that trump supports UHC without any evidence. So you go to the evidence of some sort of thought process behind it, and it’s either argle bargle nonsense, or Republican boilerplate. But beneath the surface what you really see is someone who has no ideological coherence at all, except for his own Strong Leader persona, which also happens to be hitched to the wagon of fascists and white supremacists.

    And once again, he will not raise taxes on the wealthy, let alone radically. He will lower them according to what he’s released.

  20. cybrestrike permalink
    February 25, 2016

    This, my friends, is why I kept warning that current elites were setting the conditions for the rise of a man on horseback, from fascism or the far left.

    People will only tolerate economic failure for so long. After that they will go with anyone, and I do mean anyone, who promises that they will fix it, and who seems credible and, most importantly, not part of the elite who caused the problem in the first place.

    Those elites threw away their history books long ago. They don’t know what’s coming, and will freak out if/when Trump wins. And he can indeed defeat Hillary.

    The rank-and-file Democrats and Centrists don’t realize that yet. The smugness and cluelessness of Daily Kos Clinton supporters is hilarious. They’re in for a shock too.

  21. February 25, 2016

    I think that it is plausible that Trump could win, but the grounds given in this post are too materialistic. If he wins, it won’t be because of his positive policy ideas.

  22. February 25, 2016

    Oh yeah, and as I said before, same for Clinton. Whether she wins or loses won’t be decided by her policy positions. A Trump vs Clinton match-up is a match-up of competing identity politics, not health care proposals.

  23. February 25, 2016

    Triple post!!! I keep afterthoughting tonight.

    I realize that comments sections are not representative of the “real world”, but. Read the comments sections of major news website articles whenever Trump is the topic, and what seems to get his supporters truly hot under the collar isn’t the economic policy, it’s making Mexico pay for the wall etc. Which is economic too, of course, but ending austerity is not the top of the agenda, as it were.

  24. Sluggo permalink
    February 25, 2016

    If you voted for lesser of two evils, you’re responsible for this shit. Thanks a lot, douchebags.

  25. V. Arnold permalink
    February 25, 2016

    When all is said and done; just step back and look at the bread and circuses. The U.S. is one sick society, sunk into collective insanity.
    The candidates are all unqualified douchbags (as Sluggo says).
    Trump is the perfect symbol of the worst of humanity and I’ll have none of it.
    I self exiled and every day of the 4,365 days I’ve been gone, has proved my decision correct…
    You made it, you live with it…

  26. V. Arnold permalink
    February 25, 2016

    Noam Chomsky; Trump is winning because white America is dying;

    http://www.huffingtonpost.com/entry/donald-trump-noam-chomsky-white-mortality_us_56cf8618e4b0bf0dab31838f

    Read it and weep…

  27. Dan Lynch permalink
    February 25, 2016

    Very good post, Ian.

  28. Ben Hosen permalink
    February 26, 2016

    Scary. Because as you’ve noted, the consequences to various out groups (Muslims, Latinos, Blacks, gays, anyone will do really in short order) could get very bad very fast, with everyone else too cowed or too fat and happy to do anything about it. Worse is that I see this playing out the same way that Hitler’s economic miracle did. When you have a bad hand with a few high cards? Fuck it go to war and see if we get lucky. An old, old story in human history. This one has a few Gigatons of nukes to throw around.

  29. Lisa permalink
    February 26, 2016

    If he sticks to his guns it has a good chance of working. But it puts the Democrat elites in a hard place, they want the neo-liberal neo-con policies to continue, hence HRC.

    Trump wll overturn most of them, so will Sanders and Trump wll hammer HRC at the polls. Only Sanders has a chance of beating him.

    What will they do?

  30. cripes permalink
    February 26, 2016

    What’s most significant in all this brouhaha is the refusal of voters to support their respective party’s approved candidates. It’s an open revolt, largely for the same reasons, albeit with wildly different perspectives how to attack late stage clepto-capitalism that is crushing 80-90% of the population.

    However, I would give little credence to the idea any candidate will do almost anything they say during a campaign. Not racist, poor-bashing, regime changing monster Hillary who is now shamelessly courting the black vote and the black misleadership class. Not Trump, who is a political neophyte and conventional greedy New York realtor and completely full of shit, although he is unstable enough to cause damage. And, sadly, not Bernie Sanders, who will cave and compromise his way through his administration, completely obstructed by the republicans and his own party; a Jimmy Carter one-termer on steroids.

    The oligarchs will continue on their merry path of self-destruction and the population will either plod along behind them or mount an assault against oligarch rule. The clown show we are witnessing only proves how empty the remnants of our democracy are and might help this process along.

    It’s not the faces, it’s the forces.

  31. Lisa permalink
    February 26, 2016

    Neocon Kagan Endorses Hillary Clinton

    “n a Washington Post op-ed published on Thursday, Kagan excoriated the Republican Party for creating the conditions for Trump’s rise and then asked, “So what to do now? The Republicans’ creation will soon be let loose on the land, leaving to others the job the party failed to carry out.”

    Then referring to himself, he added, “For this former Republican, and perhaps for others, the only choice will be to vote for Hillary Clinton. The [Republican] party cannot be saved, but the country still can be.””

    https://consortiumnews.com/2016/02/25/neocon-kagan-endorses-hillary-clinton/

  32. Ian Welsh permalink
    February 26, 2016

    Ah, the “Hitler was a socialist” argument. Added to FDR “did not improve the economy”.

    I guess some remedial education posts may be in order.

  33. cripes permalink
    February 27, 2016

    Well, in the last republican debate, Trump kept babbling something about removing the barriers that prevent people from buying health insurance across state “lines” and how that would give everyone market choice and a lot of options. And negotiating for lower drug prices ’cause he’s such a great negotiator. Even Rubio panned him for that gobbledygook.

    Least noticed was Ben Carson, the only physician on stage, asserting that health care was a “privilege and not a right.”

    Wow.

  34. Jerome permalink
    February 27, 2016

    Trump would get crushed in a general election. Yes, he does have a couple of issues where he attracts a broad swath, but his skeleton’s are nightmares. The media created this monster, and I expect they are just now about to tear him down. Should be fun to watch.

  35. Ivory Bill Woodpecker permalink
    February 27, 2016

    A neocon has publicly preferred Hillary?

    Fascinating, as a certain Vulcan/Terran scientist might say.

    If he speaks for the other neocons, that could mean that THE Lobby, The Lobby To End All Lobbies, The Mother Of All Lobbies, the lobby of the neoconservatives’ actual country, will enter the fray against Trump–which could lead to the Corporate Media receiving new orders: “Ratings be damned. DESTROY TRUMP!”

    As Jerome said, that would be fun to watch if and when it happens.

    ****************************

    Some of our colleagues have raised the spectre of right-wing populist militancy.

    When Hitler struck his bargain with the German Establishment, he had a large, seasoned paramilitary force behind him, composed of fighters hardened in a brutal, futile war and/or years of street battles. Trump boasts no such force.

    The German Establishment was willing to bargain with Hitler because they were terrified of the other large mob of street fighters, the Communists. No such large, militant Left exists in the USA, to frighten our oligarchs into allowing Trump to become a dictator (assuming that is even his ambition).

  36. john caruso permalink
    February 27, 2016

    We have been living under a plutocracy for decades. Every Congressmen has several lobbyists and PACs in his/her back pocket. Until we outlaw PACs and limit political contributions to something like $500 we will never have a democracy. Democracy in this country is dead. As Pat Buchanan said a few years ago, “Democracy is a fraud in this country.”

  37. BlizzardOfOz permalink
    February 28, 2016

    If he speaks for the other neocons, that could mean that THE Lobby, The Lobby To End All Lobbies, The Mother Of All Lobbies, the lobby of the neoconservatives’ actual country, will enter the fray against Trump–which could lead to the Corporate Media receiving new orders: “Ratings be damned. DESTROY TRUMP!”

    @Ivory Bill, even you’re Eskimo-baiting now? I never would have thought. The left hates the country in question for their policies; the right hates them for their hypocrisy in opposing those same policies in other countries. It looks like the neocohens are about the be self-exiled from the Republican Party and are already pledging to vote for Hillary – good riddance, you can have them.

  38. Ivory Bill Woodpecker permalink
    February 29, 2016

    I never dreamed I would find myself holding my nose and accepting neocons as allies, but “politics makes strange bedfellows”.

    I would be relieved if The Lobby joins the fray against “Il Douche.”

  39. Ivory Bill Woodpecker permalink
    February 29, 2016

    I dislike the piratical status quo, but if the only alternative is Caesarism, I’ll hold my nose and salute the Jolly Roger.

  40. Unfavorable Semicircle permalink
    March 1, 2016

    So we’re going to have jobs and manufacturing in the US after tariffs are imposed on imports. Am I reading that correctly? How much are prices across the board going to have to increase to pay more for US workers performing the same jobs that those in China and Mexico will do for much less? If you don’t get them made in the US and we have to pay for another country’s exports plus high tariffs, the lower-income people in the US are the ones who suffer. Oh, but who cares…Trump is going to give them tax breaks to pay for more expensive goods!

  41. March 5, 2016

    I too see protectionism, bilateral trade replacing globalism, and much higher taxes on the FIRE economy, and on wealth itself, but, I believe it will be implemented under a Clinton presidency (who will justify her shift to the left as having heard, loud and clear, the message sent by Bernie Sanders and his supporters).

  42. March 5, 2016

    My thinking leads me to the exact opposite conclusion. I believe Clinton will come in with a progressive, socialist mandate.

    I believe that the world/U.S. will be hit by some sort of “black swan” and the Republicans will take a dive (purposely saying so many dumb things that it makes it impossible for the majority of people to vote for them), and Hillary will be voted in as the best (most experienced) person to handle the uncertain future that has been caused by the black swan event.

    If you are right, I will have to question all of my foundational beliefs in regards to how the elite manage the masses (I think the world works a lot more in the manner that someone like Walter Lippmann would see “best”).

    I too see protectionism, bilateral trade replacing globalism, and much higher taxes on the FIRE economy, and on wealth itself, but, I believe it will be implemented under a Clinton presidency (who will justify her shift to the left as having heard, loud and clear, the message sent by Bernie Sanders and his supporters).

    I can’t wait for the election.

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