Trumponomics – How the Trump Economic Plan Will Work

Ok folks, let’s say what people keep refusing to say:

Trump’s economic plan makes sense and will work.

Okay?

What Trump wants to do is to use tariffs to return production to the United States. He has mentioned a 35 percent tariff on cars produced in Mexico, for example.

This is not crazy, this is not insane. This is how economies were largely run for most of capitalism’s history.

If a country is running a trade deficit, that means it has more demand than it is filling domestically. If it has unused capacity, and less than full employment (both are true in the US, I would want to see the US running under 2 percent unemployment consistently for years before I was sure it was at full employment), then the stuff it is making overseas, which can be made at home, should be made at home.

Blah, blah, blah—competitive advantage. I’ve written the articles on why comparative advantage is irrelevant most of the time. Read them.

Free Trade is Betrayal

Ricardo’s Caveat

Ricardo, who created the doctrine of comparative advantage, thought that free trade did not work under the circumstances in which the US now finds itself.

(I am fundraising to determine how much I’ll write this year. If you value my writing, and want more of it, please consider donating.)

Free trade, if you don’t have full employment, is a rounding error. In that case, the only things you should be importing are things you need which you literally can’t make yourself. And if you can’t make them because you don’t know how, you should be learning.

Free trade works when countries have full employment and capacity utilization. Only then does it make sense.

Trump wants bilateral trade deals. Country X sells America what America can’t make for itself, and America sells Country X what it can’t make for itself.

Keynes, by the way, felt that countries should produce almost all of what they needed for their daily consumption, trading only in that which they absolutely could not make and luxuries.

Trump is right.

Trump also wants full universal health care. That will free up a lot of money.

Trump wants to tax the financial industry, that will give him a lot of money.

As for his nativist policies, well deporting millions of people while at the same time not allowing the industries which hired them to leave the country will result in increased wages and employment for the working class. Immigration is a great thing, and a net economic positive, when you are running full employment and protectionist policies. If you refuse to have full employment due to deliberate government policy, well, then immigration’s so great not for the natives.

(See “How the Federal Reserve Crushed Wages for Over 30 Years.”)

As the Rolling Stone article about Trump pointed out, Trump is winning because Trump is telling a lot of truth. Other politicians are beholden to big money interests and cannot possibly work in your interest because they are already bought. (This includes Clinton, but not Sanders).

This is simply a fact.

The policies which work for ordinary people are well known: bilateral trade deals, protection of core industries, the ability to feed your own nation, tight labor markets, etc.

Trade is often a bad thing. It creates a race to the bottom, allowing countries to compete against each other for the worst wage, the worst treatment of workers, and the worst pollution. It isn’t always a bad thing, but it is best when managed, not when free, and a country is most securely prosperous when it is primarily reliant on its own domestic market.

Now Trump won’t do all of what should be done. He won’t, for example, radically raise taxes on rich people. But he despises the financial industry and will hammer them, he will put up tariffs, he will redirect domestic demand to domestic industry.

You may not like it, but Trump’s economic plan will work. It will produce a MUCH better economy for his supporters than did Obama or Bush (or even Clinton).

Can he get it through?

Well, he will be a Republican President, so presumably he will have Republican majorities in the House, Senate, and Supreme Court.

Let’s say they balk, though. After all, he will be hurting a lot of their owners.

Trump is PRESIDENT.

Most people don’t really understand what that means because Presidents rarely use their full power. Trump controls the NSA and the CIA, for example. They spy on Congress (no, don’t waste my time pretending they don’t). They either know or can find out every little bit of dirt on every member of Congress.

The vast majority of Congress members are corrupt. Again, don’t even try and deny it. They are almost all subject to corruption charges if the President wants to push it through the Justice Department. They can vote for his plans, or they can go to prison.

Now, the DOJ has immunized most of Wall Street and the Big Bankers for their crimes leading up to the 2008. Do you believe they have stopped committing crimes?

Right.

Now let’s look at the Federal Reserve: All members of the Board of the Federal Reserve, except for the Chairman, can be fired by the President for cause, i.e., not doing their job. The Federal Reserve has two mandates: controlling inflation and maintaining full employment.

Right. They buckle, or they are gone.

Now, forget all this. Watch a Trump rally. Note how he treats hecklers, how he talks of wanting to punch them, and how gives license to his supporters.

What do you think will happen to lawmakers who oppose the great Trump when they go back to their districts and encounter Trump supporters?

Context: There are many stories of working class men punching out their bosses and so on when they insulted FDR.

Trump is running as the fascist version of FDR: He’s the class traitor. He’s a billionaire who knows how the game is played, knows it is crooked, and is going to betray his own kind to work for the American people.

He will be popular. Once his economic plan works, he will be even more popular. He will be idolized by those who support him. The people who hate him most will be deported, powerless, or crawling on their belly for his approval (most of the media).

Remember, FDR improved the US economy.

But Hitler and Mussolini, they really improved Germany and Italy’s economies.

This, my friends, is why I kept warning that current elites were setting the conditions for the rise of a man on horseback, from fascism or the far left.

People will only tolerate economic failure for so long. After that they will go with anyone, and I do mean anyone, who promises that they will fix it, and who seems credible and, most importantly, not part of the elite who caused the problem in the first place.

Trump will crush Clinton if he runs against her, because she is the very essence of an entitled elitist. He will destroy her in ways you cannot even imagine. It will be ugly, really ugly, but his core critique will be the same as his core critique of Jeb: “You are part of the group that fucked up America.”

And he’s right.

Bernie, on the other hand, is not. Whether he can win against Trump, I do not know, but he is not nearly as vulnerable to the charge that he’s one of the elite, and, by the way, minus the nativism, his economic plan and Trump’s are a lot alike.

A lot.

Sanders plan will work for the same basic reasons Trump’s will work.

But people need to stop deceiving themselves. Trump is not a joke, he is not stupid, and he is not incompetent. He will almost certainly be a popular President amongst the people who voted for him, who are, by the way, the part of the population most willing to be violent.

If Trump becomes President, he may be President for a very long time.