Donald Trump offers an economic bowl of cold GOP gruel: lower taxes, government spending cuts, and regulatory relief – except on foreign trade, where he decisively broke with decades of Republican orthodoxy.
His domestic policy seems largely geared to making amends with what’s left of the moderate wing of the Republican Party by proposing a full-on embrace of supply-side economics.
The dubious heart of this policy is Arthur Laffer’s proposition that tax cuts spur economic growth, and ultimately yield higher tax revenues by putting more money into the pockets of businesses and households.
Even if evidence of Laffer’s thesis working in the real world is about as rare and reliable as actual Loch Ness monster sightings, it’s hard to see how tax cuts would stimulate an economy that suffers from a rampant reluctance to spend.
The Federal Reserve Bank essentially has been putting bushel baskets full of $100 bills out on its front steps every morning, begging banks, corporations, state and local governments, and individual consumers to swoop up what was as close to free money as anyone is likely to see.
How Trump’s promised tax cuts would provide the trillions of dollars needed to tackle concrete challenges before the nation’s leaky roof eventually falls in is not at all clear.
On foreign trade, Trump has been charting new waters all year. Although his signature lines of clothing are made in China and Mexico, he has at least stumbled to the realization that a full-bore attack on past and pending free trade agreements has broad appeal among working-class voters, especially ones who are predisposed toward xenophobia.
To lend an ounce of gravity to his largely visceral stance on foreign trade, Trump enlisted an academic economist, UC Irvine business school professor Peter Navarro.
Navarro is the author of ideas on international economics that are tailor-made for a jingoistic politician but have almost no traction among most serious economists.
He is perhaps best known for a screed titled “Death by China” and an accompanying documentary narrated in an “Apocalypse Now” tone by Martin Sheen, the actor who has apparently never met a conspiracy theory that he didn’t instantly espouse.
Trump, who has been lambasting China since the start of his campaign, has found his muse in Navarro and can now be expected to double-down on his trash talk about the threat he thinks China presents to America.
Those of us of a certain age can recognize a distressing parallel between the Trump-Navarro brand of nationalist hysteria and the virtually identical mood that seized the nation back in the 1980s, when an ascendant Japan seemed on the verge of eclipsing the United States.
That was a time when the otherwise estimable journalist Theodore White warned that the Japanese are “on the move again in one of history’s brilliant commercial offenses as they go about dismantling American industry.”
So what became of that wolf at the door?
The world is a complex place full of nuances and subtleties that defy the need for slogans intended to inspire fear. China is a formidable power, but there are more reasons to conclude that China’s best days are behind it and not ahead.
Trump’s protectionist notions would do little more than reward some Americans by imposing losses on others. The higher tariffs on imported goods Trump threatens to impose might bring a trickle of manufacturing jobs home, but those tariffs would increase consumer prices for all of us.
There would be blowback from our trading partners, who would retaliate with sanctions. Among those immediately imperiled would be California’s 75,125 exporting firms, the vast majority of which are small and midsize enterprises.
And then there is the army of blue-collar workers, estimated to number more than 500,000 statewide, whose jobs are directly linked to the flow of trade through our seaports.
Policymaking very seldom offers easy choices. But if it’s a matter of picking your poison, know that Trump’s approach to foreign trade would be unquestionably lethal.
Jock O’Connell is a Sacramento-based international trade economist affiliated with Beacon Economics. firstname.lastname@example.org.