For decades, the last two decades at Brookings, I was a specialist on the Soviet political and economic system and the last 15 years I have taught the US presidency at Duke. In 1993 Stiglitz became my hero in his battle with Summers over the latter's Hayekian policy in Russia, which Stiglitz called pure ideology. Correct. Then Summers continued his Hayekian policy in the Clinton deregulation and as Obama's czar.



Last year I supported Trump because of his left-wing populism and Clinton's Eisenhower-Goldwater policy. He is a toss of the dice, but I thought he basically agreed with Stiglitz on foreign economic policy. Now Stiglitz sounds like Summers and Krugman, although without the latter's hysteria. What is going on?



In fact, no one knows what Trump will do. So far as I can tell, his foreign economic policy is based on sophisticated changes in the corporate tax system to bring outsourcing under control and an attempt to correct the main infiinte supply of labor produced by it and our immigration policy. He obviously is not going to deport large numbers of people or limit himself to a wall I assume he will severely limit incoming immigration through needed, enforceable reforms and get his 60 Senators by combining it with amnesty.



Trump's economic policy seems sophisticated Keynesianism like Reagan's that increases the deficit. How in heavens name do you get a fiscal stimulus that both parties have opposed for 30 years? It must be through tax cuts.



But a tax cut is especially importrant now. The zero interest rate was explicitly trickle down--asset stimulus. Increase the market, increase the spending of the rich--the top 20% who own stocks--and they will increase the demand among the 80%. It failed. It distorted the economy and benefitted only the market. Interest rates need to be normalized, but Krugman is right that that may negatively affect growth. So you have to keep demand high on the fiscal side just to compensate and tax cuts are the only way to increase the deficit.



Trump speaks symbolically and he told the NYT editors that he negotiates by beginning with extreme positions and moves to a compromise. It is for Democratic economists like Stiglitz to come up with the alternatives that Democrats propose. We have to move towards a VAT and that is what "flat tax" means politically. The only good idea I have read comes from Ted Cruz--abolish the Social Security tax and replace it with a VAT. Ryan's replacement of things like food stamps with an increase in negative income taxes is supported by Reich. Their levels are too low but they can be forced up with the 60 vote requirement.



The abolition of Obamacare with a one-two year time postponement is brilliant. It forces both parties to come up with a good program or be destroyed in 2018. Mikulski, Harkins, and Schumer all said that Summers-Citibank-Obama made a terrible mistake in 2009 (with no health care until 2014, not in 2009-2010 when people were suffering and we needed demand) when the Democrats had the vote for a single payer sytem because they didn't want the stimulus-deficit.



The main reason to support Trump in 2016 was that his victory should open up the 2020 politics in a left-wing party that is with Eisenhower, if not Goldwater. But that means it must get over the crazy McCarthyism against the status quo Putin to shift the blame from its Goldwater activist nominee. Those like Stiglitz must start coming up with fresh tax ideas like Cruz and Ryan (both born in 1970, not the 1940s). Ryan, it should be remembered, voted for Bush's great prescription drug program although it expanded socialist Medicare unfunded.



My low-medium confidence feeling is that Trump is really serious about peeling off minorities who have been given only symbolic things by the Democrats--and doing it with economic policies.



My high confidence feeling is that for the first time since LBJ we have a President who really knows how to use power. The ethics vote in the House and the replacement of the Ohio Republican chairman are only a foretaste. Trump is perfectly capable of going into the Republican primaries in 2018 and campaigning against those who oppose him--and winning. He is going to transform the Republican Party, and the Democrats better adjust or their party is going to start losing its minority base as well as the whites and go the way of the Whigs.



But those like Stiglitz are very lucky. Instead of a status quo President who will never admit a mistake, they have a President who just might transform a party like FDR did and an opposition party that certainly reverse the extreme move well to the right Nixon made by Carter and Bill Clinton. (Warren was and is a Nixon-like Republican. Both parties need a Stiglitz with new ideas, not one who moans about the 1980s and the populism that he (and I) predicted.