U.S. Economy

Getting Mad at the Wrong Trump Economic Blunder

His assertion about taxes is far worse than an old phrase he thinks he coined.

Did he just say that?

Photographer: Jim Watson/AFP/Getty Images

So President Donald Trump gave another interview to another news organization that transcribed it so we can all see how muddle-headed and ill-informed he is. This time it was the Economist, and -- at least among the econowonks who dominate my Twitter feed -- this was the passage that got everybody all exercised:

But beyond that it’s OK if the tax plan increases the deficit?

It is OK, because it won’t increase it for long. You may have two years where you’ll … you understand the expression “prime the pump”?

Yes.

We have to prime the pump.

It’s very Keynesian.

We’re the highest-taxed nation in the world. Have you heard that expression before, for this particular type of an event?

Priming the pump?

Yeah, have you heard it?

Yes.

Have you heard that expression used before? Because I haven’t heard it. I mean, I just … I came up with it a couple of days ago and I thought it was good. It’s what you have to do.

Ha ha ha! Trump thinks he just coined the term "prime the pump" a few days ago! Economists and politicians have been using it for generations! In fact, even Donald Trump has been using the phrase since at least late last year, when he told Time magazine's Michael Scherer in his Person of the Year interview:

“Well, sometimes you have to prime the pump,” he says. “So sometimes in order to get jobs going and the country going, because, look, we’re at 1% growth.”

OK, this may indicate a problem with the president's aging mental faculties. Although, for someone who talks as incessantly as he does, it doesn't seem that crazy that he would occasionally forget what he's said. I write a column pretty much every day, and several times I have started writing something only to be warned by a muffled alarm in the back of my head that it sounded really familiar -- and find that I had written exactly the same thing only a few months before. Someday, I assume, that alarm is going to stop working. I don't think that will render me mentally incompetent; I do think it may make me pretty tiresome to be around.

More to the point, this just seems like a pointless thing to get worked up about. The economic approach Trump was outlining, while not exactly "priming the pump" as economists understand it, is not without its defenders. Plus, focusing on misstatements seems like it just generates sympathy for Trump among those who aren't versed in the teachings of Lord Keynes. As University of Georgia political scientist Cas Mudde, an expert in populist movements, put it on Twitter this morning:

But none of that is why I'm writing this column. I'm writing this column because, in the middle of his historically naive explanation of Keynesian pump-priming, Trump threw out a statement that is dramatically, dangerously wrong -- and the interviewers from the Economist didn't correct him on it.

That statement is, of course, "We’re the highest-taxed nation in the world." Here are the latest numbers on tax burdens among affluent nations (from a column I wrote when the Organization for Economic Cooperation and Development released them in December):

Tax Burdens, Ranked

Total tax burden as a percentage of gross domestic product

Source: Organization for Economic Cooperation and Development

Includes state and local taxes. Data is from 2015, except for Australia, Japan and Poland, which is from 2014.

Among the 35 members of the OECD -- our peer countries, more or less -- the U.S. has the fifth-lowest tax burden. That's not to say that some taxes aren't higher in the U.S. than elsewhere, or that some Americans don't pay higher taxes overall than, say, some Czechs. U.S. statutory corporate tax rates are among the highest in the world -- although the revenue they generate is, as a share of gross domestic product, below the OECD average. And U.S. personal income tax rates and revenues are relatively high -- although still far from the highest.

Still, the mistaken belief that the overall U.S. tax burden is the world's highest can lead one to a pretty dire misreading of the country's fiscal options. The arguments for and against short-term pump-priming aside, the U.S. faces Social Security and Medicare spending commitments that -- at least until most of the baby boomers have died off -- will eventually necessitate bigger deficits, higher taxes or painful entitlement cuts (or all three). If the U.S. really were the highest-taxed nation in the world, raising taxes would seem to be out of the question. But ... the U.S. is nowhere near being the highest-taxed nation in the world. And the next time President Trump says that in an interview, any journalist who does not stop him right there and tell him the truth (just print out my chart and bring it along!) is not doing his or her job.

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

    To contact the author of this story:
    Justin Fox at justinfox@bloomberg.net

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    Brooke Sample at bsample1@bloomberg.net

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