as the president-elect of the united States, Donald Trump, refers to the members of his cabinet, what we have come to know about the likely orientation and the impact of the economic policy of his government?
Without doubt, continue having huge uncertainties. As in many other areas, the promises and statements of Trump over economic policy have been inconsistent. Although he routinely accuses others of lying, many of their statements and promises economic –in fact, his entire vision of governance– seem to be worthy of the propagandists of the "big lie" of nazi Germany.
Trump will be in charge of an economy that is in a strong upward trend in the GDP for the third quarter grew at an impressive annual rate of 3.2% and unemployment stood at 4.6% in the month of November. By contrast, when president Barack Obama took office in 2009, he inherited from George W. Bush an economy that was sinking into a deep recession. And, in a similar way to Bush, Trump is another republican president to take office despite losing the popular vote, only to pretend they have a mandate to undertake political extremists.
The only way in which Trump reconcile its promises of increased expenditure on infrastructure and defence with the great tax cuts and reducing deficits is a strong dose of what used to be called voodoo economics. Decades of the "trim excess" in the government has left little to cut: the employment in the federal government, expressed as a percentage of the population, is today at a level lower than it was 30 years ago, in the era of small government, under president Ronald Reagan.
With so many former military officers appointed to serve in the cabinet of Trump, or to serve as advisors, even as Trump has approaches with the Russian president Vladimir Putin and anchored an informal alliance of dictators and authoritarian governments around the world, it is likely that the united States spends more money on weapons that don’t work for use against enemies that do not exist. If the secretary of health of Trump manages to disrupt the careful balance that underlies Obamacare, or the costs will increase or services will deteriorate –is more likely to occur in both situations.
During the campaign, Trump promised to act with a heavy hand with the executives who outsource american jobs. Now Trump clings to the news that the company Carrier will keep about 800 jobs in Indiana, the state where the headquarters of such company, and points to this fact as proof that their approach works. However the agreement will cost taxpayers $ 7 million and still allows this company manufacturer of heating and air conditioning for homes outsource up to 1,300 jobs to Mexico. This is not an industrial policy or economic, and will do nothing to help increase wages and create good jobs throughout the country. It is an open invitation to corporate executives who are in search of grants type of alms blackmail the government.
in The same way, it is likely that the increase in infrastructure spending made through the tax credits, which will help hedge funds, but not to the accounting balance sheet of the united States: the long history of these programs demonstrates that they offer little value in comparison with the amount of money invested. The cost to the public will be especially high in an era in which the government can take loans with interest rates close to zero. If these public-private partnerships are just like the other places, the government will assume the risks and the hedge funds will take profits.
The debate of just eight years ago about the infrastructure list "to be initiated" seems to be a distant memory. If Trump chooses projects ready to be initiated, the long-term impact on productivity will be minimal; if you choose actual infrastructure, the short-term impact on economic growth will be minimal. And, a stimulus which takes time to bear fruit has its own problems, unless handled very carefully.
If Steven Mnuchin, the person chosen by Trump for the office of secretary of the Treasury of the united States who worked for a long time for Goldman Sachs and hedge funds, as are others in your business sector, the experience that will bring to the position will be a linked to tax evasion, not to the construction of a tax system is well designed. The "good" news is that tax reform was inevitable, and was likely to be carried out by the speaker of the House Paul Ryan and his staff, given the tax system that the republicans have tried to achieve since a long time ago: a system for the rich, that is less progressive and more respectful with the capital. With the abolition of the inheritance tax, the republicans will finally make it realize its ambition of creating a plutocracy dynastic, that is far from the maximum of "equality of opportunity" that the party once claimed.
Large tax cuts and large increases in the costs inevitably lead to large deficits. Reconcile this with the promise of Trump on deficit reduction is likely to entail a return to the magical thinking of the Reagan years: despite the fact that we have the evidence along with patents for decades that show otherwise, this time the stimulus to the economy that promote tax cuts for the rich will be so great that, on the facts, the tax revenues actually increase.
This story does not end well for the voters angry and displaced people, and those who voted for Trump in the so-called "Rust Belt". Rampant budgetary policies will induce the U.s. Federal Reserve to normalize interest rates more quickly. Some envision an inflation early-stage (because of the low rate of unemployment); some others believe that the long period of ultralow interest rates has distorted the capital markets, and others want to "replenish their ammunition", so that the Fed may lower interest rates if the economy slows again.
Trump has argued that the Fed should increase interest rates. It is almost certain that the Fed, which was the first step towards the normalization of interest rates in early December, to comply with this task, and Trump very soon regret having wished that. It is very possible that the monetary tightening will exceed the fiscal stimulus, slowing down the growth stimulus of Obama that today in day is on the march. The higher interest rates will weaken the jobs in the construction sector and will increase the value of the dollar, which will lead to higher trade deficits and fewer jobs in the manufacturing industry, just the opposite of what was promised by Trump. Meanwhile, their tax policies will have limited benefits for middle-class families and working class, and these benefits will be more than offset by the cuts in health care, education and social programs.
If Trump starts a trade war –let’s say, for example, if Trump is going after the fulfillment of his promise to impose a tariff of 45% on imports from China and build a wall on the border with Mexico– the economic impact will be even more severe. The cabinet of billionaires Trump could continue to buy its bags and Gucci bracelets $ 10,000 of Ivanka, but the cost of living of americans on foot would be substantially increased; and, when not counting with components from Mexico and other places, the manufacturing jobs would make it even more scarce.
there is No doubt, yes it will create some new jobs, mainly in the offices of lobbying from K street in Washington, D. C., while Trump returns to fill the swamp they promised to drain. In fact, the peat-bog american legal corruption you probably will reach a depth not seen since the administration of president Warren G. Harding in the 1920s.
And really there is no positive aspect in the cloud that today looms over the united States and the world. While the government of Trump will be bad for workers and the economy of the united States, it is likely that their policies on climate, human rights, the media, and on how to ensure that peace and security are equally or even more harmful to the rest of the world.
Copyright: Project Syndicate, 2016.
www.project-syndicate.org
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