Trump Has a Posture, Not a Plan, on Economics
Donald Trump said he'd use his speech to the Detroit Economic Club on Monday to unveil a new plan for revitalizing the American economy. Sadly, what he offered wasn't new, and it wasn't a coherent plan. The specifics Trump did put on the table would cripple rather than revitalize the U.S. economy.
His ideas fall under four main headings: taxes, regulation, energy and trade. In each case, current U.S. policy could certainly stand some improvement. When Trump says taxes should be simplified, he's right; when he says the burden of regulation is greater than it should be, he's right. Trump's correct, too, in saying that this slow recovery has left many people hurting. But his ill-considered promises fail to address the real issues.
He proposes simplifying the tax system by reducing the number of income-tax bands to three (from seven), as well as cutting personal rates, lowering the business tax rate to 15 percent, and repealing the estate tax. His proposed personal tax rates of 12 percent, 25 percent and 33 percent are higher than he previously suggested, but even with some narrowing of tax deductions and the closing of the carried-interest loophole (both good ideas, by the way), the loss of revenue would be substantial.
Lower taxes are great: They encourage effort and investment. But permanent tax reductions require permanent spending reductions, and on that subject Trump has almost nothing to say. A tax proposal that cuts revenue deeply without considering the implications for spending solves nothing.
When it comes to regulation, Trump is similarly unconcerned with results. Minimizing the burden of regulation on business requires careful justification and good design. Trump says he's going to cut regulations "massively," starting with a moratorium on new ones. Such sweeping declarations are worthless. Smart regulatory reform has to move case by case, and demands close attention to detail -- not the candidate's style.
But Trump's pronouncements on taxes and regulation are temperate compared with his position on energy. He proposes to roll back the Obama administration's "anti-energy" policies, without regard to how this might increase emissions of carbon and other pollutants. Again, Trump's plan acknowledges no trade-offs, no complications.
To cap it all, there's trade. Here, Trump's proposals are specific -- but they would be patently destructive of U.S. productive potential and living standards. He threatens to scrap the North American Free Trade Agreement if it cannot be renegotiated to his liking; he promises to ditch the Trans-Pacific Partnership; and he says he'll apply punitive tariffs to countries such as China, which he regards as cheats. These measures would disrupt the global supply chains that U.S. businesses rely on, raise prices for American consumers, and stifle competition and innovation. That's assuming the U.S. can embark on a one-sided trade war without provoking retaliation against its own exports.
Policies have consequences, and presidential candidates ought to show they understand this. So far, Trump hasn't -- and until he does, his ideas don't deserve to be called a plan.
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