The Black Hole of Trumponomics

Take away the dubious numbers and ask: Why did his advisers even bother?

No need for conservatism.

Photographer: Mark Wallheiser/Getty Images

Wilbur Ross and Peter Navarro, two advisers to Donald Trump, argue in the Wall Street Journal that the federal government would have just as much revenue with Trump’s big tax cuts as it would have without them (and so those tax cuts will neither increase the deficit nor require large spending cuts). They claim that even organizations which tend to find that tax cuts on investment boost economic growth, such as the Tax Foundation, are underestimating the benefits of Trump’s plan because they are not taking into account the pro-growth effects of his trade, energy and regulatory policies.

Ross and Navarro refer readers to a paper they wrote for the campaign to get a more accurate picture of how these policies would affect the economy. The paper’s method is to start with the Tax Foundation’s lowest estimate of how much revenue the Trump plan would lose, which is $2.6 trillion over 10 years, and then explain how each ignored factor -- energy, trade and regulation -- would eat away at that estimate.

One problem: The Tax Foundation’s lowest estimate assumes Trump would not really follow through on his statements that he would apply his proposed 15 percent tax rate on corporations to businesses that pay taxes under the individual income tax. How Trump would handle this issue is a black hole from which no information can escape. If Trump makes good on his promises, the Tax Foundation’s revenue-loss estimate rises to $3.9 trillion.

It’s trade, more than regulatory or energy policy, that drives the Ross-Navarro analysis. The alleged growth benefits of Trump’s trade policy are responsible for nearly three-fourths of the improvement in their deficit estimates.

Their methodology on this point is simple: They assume that Trump will negotiate better trade deals so that the current $500 billion U.S. trade deficit drops to zero, and assume further that this change in our trade balance is accomplished without reducing consumption or investment. Every dollar in reduced imports, that is, would instead go to an American producer, and nothing we do to reduce imports would hurt the U.S. economy at all.

All of these assumptions are extremely dubious. Take the argument by Ross and Navarro that it would be easy to eliminate the trade deficit. They rest this argument heavily on the claim that other countries’ tax systems are an unfair trade practice that we just need to combat. But as I explained earlier, they completely misunderstand those tax systems, which are not, as they claim, “backdoor tariffs” on American products.

I’m left with two questions. First, why the conservatism? If it’s so easy and beneficial to eliminate a $500 billion trade deficit, why didn’t Ross and Navarro promise Trump would work twice as hard and create a $500 billion trade surplus? Second, why did they produce a paper at all?

They could have just said that Trump is a great man and will make everything work out just fine. Take away the verbiage and the spuriously precise numbers, and that’s all they have done.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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    Ramesh Ponnuru at

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