If Donald Trump could script his presidency, every week would probably look like the one just past. You get on the phone with some corporate big shot who’s considering closing a plant in the Rust Belt. You offer some carrots, you threaten implicitly, you make a deal: Jobs stay, factories don’t close, and maybe next time they even open. (Nothing will make Trump happier than the day he gets Apple to open a minor widget factory in Wisconsin.) Then you hold a big rally, brag about your dealmaking prowess, promise that CEOs won’t be shipping jobs overseas with impunity anymore … and then fly back to Trump Tower and wait for the next opportunity to do it all again.
Unfortunately this is not an optimal approach to economic policy. It ignores deep Hayekian insights about the problems inherent in picking winners and punishing losers from on high. It expands an economy of favors and phone calls in which insiders will inevitably profit more than innovators. It embodies the crony capitalism that only yesterday Republicans opposed.
At the same time – well, it could be worse. Trump is putting a celebrity spin on something that happens under both parties: George W. Bush’s administration came in with steel tariffs and went out with the Wall Street bailout, which was followed by the GM bailout under President Barack Obama; meanwhile, ethanol salesmen and sugar moguls and defense contractors and green-energy tycoons all jostle for their share of federal favors, and at the state level the bribery is even starker. Trump will make the cronyism more personal and public, and his own conflicts of interest will bear watching. But if he sticks to jawboning individual companies – as opposed to instituting tariffs and starting trade wars – he won’t necessarily make the underlying sclerosis that much worse.
But strong-arming individual companies also isn’t going to do that much to help the mass of heartland voters to whom he promised a Trumpian New Deal. Saving jobs that Carrier planned to ship to Mexico is a meaningful thing for the workers involved. But even if you scale up the same deal-making dramatically, you’re still talking about a footnote to the unemployment rate and average wage.
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And it’s disappointment with wages writ large, and male-breadwinner wages especially, that’s crucial to the economic element in Trump’s populist appeal. Even with unemployment falling, years and decades of slack wage growth are a crucial fact on the economic ground, and an issue that both parties – the Republicans in their paeans to heroic entrepreneurs, the Democrats in their promise of new welfare spending – have talked around more than they’ve addressed.
They’ve talked around it, of course, because there is no single policy lever to pull that delivers higher wages, and the policies involved can be slow, subtle, and uncertain in their effects. Perhaps Trumpism’s immigration restrictions and infrastructure spending and corporate tax cuts can have a clearer impact than other presidents’ approaches; it’s not impossible. But if the rest of his agenda is conventionally Republican, he could end up with a disappointingly conventional Republican result: Rising GDP, but stagnant take-home pay.
However: It is possible for policymakers to raise take-home pay directly even without big boosts in the underlying wages. Cutting payroll taxes would do it. The earned-income tax credit does it. Middle-class tax cuts do it. Child tax credits do it. A wage subsidy would do it. The list of possibilities is long.
Several of those possibilities are immediately available to Trump, if he wants to reach for them. His daughter’s child-care subsidy could be reconfigured to deliver more to the working class; it could be combined with the larger earned-income tax credit envisioned by Paul Ryan or the wage subsidy that Sen. Marco Rubio is championing, and both could be folded into a tax reform that makes good on Trump’s Treasury nominee’s recent promise to prioritize middle-class tax cuts over tax cuts for the rich.
None of this would solve the long-term dilemma of slow wage growth. But it would make it immediately easier, often to the tune of thousands of dollars a year, for Americans who aren’t employed by companies amenable to Trumpian jawboning to pay bills, raise children, take vacations, and pursue the American Dream.
It would also cost money, money that conventional Republican economics – and Trump’s official campaign tax plan – tends to reserve for upper-bracket tax cuts. Which is why the tax policy to expect from Trump is probably a modest gesture toward Middle America paired with a sweeping, 1-percent-friendly, supply-side tax cut.
But it could be otherwise. So far Trump has induced free-trading Republicans to sound like protectionists, and once-libertarian Republicans to nod along to his mercantilism. If he bends the party’s tax orthodoxy as well, he would be able to deliver something bigger than last week’s public-relations win: not just manufacturing jobs for a fortunate few, but more money for the many.