Trump Adopts Reaganomics
Economist Robert Pollin and journalist Doug Henwood discuss the return to classical republican economics outlined by Trump
SHARMINI PERIES, TRNN: It’s the Real News Network. I’m Sharmini Peries coming to you from Baltimore.
Speaking at the Detroit Club on Monday, laying out his economic plan, the Republican presidential nominee Donald Trump said he would impose a temporary moratorium on new federal regulations. He would reduce individual and corporate taxes and establish greater childcare expense writeoff. He carried out a scathing attack of Democrats’ trade deals such as NAFTA and TPP, not mentioning the fact that both parties have been involved in some of the negotiations and promoting of these trade deals, and he attacked much of the energy policies that are in place right now.
Let’s have a look at some of what he had to say.
Joining me now to analyze this is economist Robert Pollin and journalist Doug Henwood. Doug Henwood is a founder and editor of the Left Business Observer, and Henwood is also a contributing editor for the Nation, and does a weekly program on WBAI Radio, New York’s Pacifica outlet. And Robert Pollin is a distinguished professor of economics and co-director of the Political Economy Research Institute known as PERI at the University of Massachusetts Amherst. He’s the author of several books, including Greening the Global Economy. I thank you both for joining me today.
ROBERT POLLIN AND DOUG HENWOOD: Thanks for having us.
PERIES: Bob, let me begin with you, your initial take on Trump’s speech and what were the key points he had to make, and what should we be concerned about.
POLLIN: Well, I think there were four areas that Trump highlighted in his speech, and if we want to focus on the substance as opposed to the fact that Trump is a raving maniac, personally, the four areas of substance, I think, as you noted, are, number one, tax cuts, across the board tax cuts. Number two, reducing regulation. Number three is what he calls energy reform; that is, opposition to any kind of climate policies, and number four, trade policy, and he’s against to all the trade deals we’ve made and the forthcoming Trans-Pacific Partnership. Those are the four areas.
And in my view, the regulations and tax cuts are things that we’ve been hearing for 35 years. Over and over and over again the problem is too much regulation. Taxes are too high, so we keep cutting regulation. We can cut cutting taxes, and we don’t see any positive result.
In the energy area I think his position is calamitous. I mean, if we take climate science at all seriously, that means that we have to actually dramatically increase regulations and investment in the green economy. Trump wants to eliminate that altogether.
In the fourth area of trade, on substance I don’t like what Trump says, but I agree with the notion that NAFTA, Trans-Pacific Partnership, these deals were sold to people as something that would benefit U.S. workers, and for that matter workers in other countries. That never worked, that never happened. That was any kind of textbook analysis of a trade deal would show that. And orthodox economists in both mainstream of both the Democratic and the Republican Party all supported these trade deals. And Trump is at least hitting on something that is true: working people in this country and elsewhere were lied to about the fake benefits of these trade deals. So we do need to re-think trade policy, just not the way Trump is envisioning.
PERIES: And Doug, let me get your initial reaction to this speech, and then let’s dig into the trade deals.
HENWOOD: Well you know, I think what Bob said is all correct. I would say that the first three legs of this four-legged monstrosity are classic Republican economics. We’ve been hearing this stuff for years. Tax cuts and deregulation go back to the Reagan years. It actually goes back to the late Carter years, if you want to be bipartisan about it. The energy stuff, as Sarah Palin memorably said, drill, baby, drill. This is really no different from that.
But yeah, there is a difference on the trade stuff, which makes this politically interesting. That in many ways the first three portions of this economic package are really classic Republican economics. So Trump is mending his fences to some degree with the Republican orthodoxy. But the trade is, of course, anything but. The trade position is contrary to all bipartisan orthodoxy of the last several decades. They’re all very pro-free trade, and I think free trade has been misleading.
These trade agreements, so-called trade agreements, are more about investment. They’re more about the freedom of corporations to operate abroad and move capital freely around. And it’s not what we would think of as country A being very efficient at producing something and exporting it to country B, and country B exporting to country A what it’s efficient at producing, and both sides gain. This isn’t really what that’s about. This is about the ability for corporations to invest in low-wage havens and do what they please, and moving goods around with minimal labor protections.
Trump is denouncing trade deals as the source of an awful lot of economic misery. I think it’s the source of some economic misery in the U.S., but the problem is much, much larger than trade. But it fits in with his xenophobia to be able to blame our economic woes, which are homegrown, on foreigners.
PERIES: Bob, you critiqued the energy–or sorry, the trade policies as well as the energy policies. But here when he’s critiquing NAFTA and TPP, both are going to be not so good when it comes to the energy sector. Outline for us a little bit more of what he said and how his perspective, while there’s some substance to it, as you said, might still be problematic.
POLLIN: Well, I don’t really know what he actually thinks. I don’t know that Donald Trump seriously holds to any position at all. I think he has hit a nerve. He’s hit on something that’s true, that orthodox economists, my professional colleagues, and the leadership of the Democrats and the Republicans for generations have preached the virtues of free trade.
And not just the virtues–you know, Doug is correct. These trade deals are really about benefiting corporations, but that’s not how they were sold. If we go back to Bill Clinton, who picked up the NAFTA proposal, which started with Reagan, was carried forward by George Bush I, but Clinton is the one that solidified it and got it passed. If the Democrats had been opposed to it under Clinton it wouldn’t have passed.
Okay, so Clinton sold it as something that’s going to be great for workers. Well, that isn’t true. You know, but this is not to say that trade is bad. Germany runs a trade surplus. Germany is a trade behemoth. Their average wages for manufacturing workers is 30 percent higher than those in the United States today. So the notion that we have to cut taxes, cut regulations, the only way we can compete, is false. And Germany runs an economy with very aggressive industrial policy to promote their manufacturing sector. That’s the kind of trade policy that we really need to think about.
Trump has never–I’ve never heard anything like that. All he does is say that trade is bad, we’re going to build a wall, and Mexicans are rapists. So that’s hardly a serious proposal.
PERIES: And Doug, you were implying that this is somewhat of a return to the Republican orthodoxy in terms of economic policy when it comes to the trade conversation. Give us a bit more of what you meant by that.
HENWOOD: I just want to put a footnote first to what Bob said. You know, a lot of free trade economists, orthodox economists, will concede that there will be losers when you open up markets to trade, open up, lift important restrictions. And that those losers should be compensated. So if we’re going to have all these economic gains from trade we’re going to have some leftover cash, and we could actually, you know, help out the people who are displaced by it. But everyone else forgets that part. I remember interviewing [Jagdish Bhagwati], big free trade economist, who actually has endorsed that in principle. But I pressed upon it in practice, it’s all missing.
So when I talk about compensating people who are displaced, who lose their jobs, whose communities get destroyed when plants close, they all forget about that part of trade orthodoxy. But what I said was that the first three points, emphasizing the tax cuts and deregulation, and also I think Trump also wants to pretty much eliminate the estate tax and very dramatically reduce corporate taxes, these are all, you know, Republican dreams and have been for quite a while. And the tax cuts, tax breaks would be very skewed to the upper brackets. Enormous cuts for very rich people. The kinds of people who are on Trump’s advisory board.
But his position on trade and his protectionism, you really have to go back to, I don’t know, the 1930s or something like that to find that kind of hostility to trade in a major party. So this is a departure. This is something new for a Republican candidate for president, except maybe Pat Buchanan over the last several decades being so opposed to trade. And so opposed to immigration, as well. That’s what’s new about Trump, and it’s very ugly for the most part.
PERIES: And the implications this kind of proposal related to tax cuts could have on the economy, I mean, he’s talking about reducing taxes, individual taxes as well as corporate taxes. Corporate taxes from the current 35-15 percent. And we know many corporations don’t even pay that 35 percent. But what would 15 percent mean?
HENWOOD: Well, it would be a big loss of revenue. He’s talking about–a lot of corporations have stashed trillions of dollars abroad, literally trillions of dollars abroad, which they refuse to repatriate unless they can get the tax on it eliminated. They basically have decided that they don’t want to pay taxes anymore, so they’ve come up with all these schemes, inversions, and I can’t remember the names they come up with, like the Irish sandwich or something like that. Ways of structuring flows of money around the world so they don’t really have to pay any taxes on them.
Trump says that has to end, to end all these inversion deals. But basically by eliminating the corporate tax. So how would you make up that revenue is a mystery. And you know, the individual tax cuts he’s proposing, as well as the childcare tax break, these would also be enormous revenue losses. He’s not talking about how he would make that up. So we’d either have to have enormous, enormous deficits–I’m not talking about healthy deficits that might be prudent to get a very sluggish economy going, but I’m thinking of structural, enormous deficits that are just really unsustainable, or we’d just have to have deep cuts in government services, one or the other. But he’s not really talking about that.
PERIES: And Bob, the tax cut sounds quite appealing to ordinary people, but the corporate tax cut–I mean, people can see through that what that might mean to their livelihood while, you know, I have to say that the child tax write-off also sounds very appealing, and this is, I guess, a takeoff from Ivana Trump’s speech at the convention.
POLLIN: Well, look. What Trump is saying is he’s trying to mix in some things that are appealing. This is also, as Doug said, this is standard Republican orthodoxy. You know, to throw everything–and for that matter, the Democrats–throw everything in. Including things that look appealing, are appealing, like a child tax credit, expanding it.
But what that is is a Trojan horse to get the enormous tax breaks for corporations through. So what the U.S. economy–if Trump were serious about reviving exports and manufacturing, number one would be to build up U.S. infrastructure, to establish very strong credit policies for U.S. manufacturers, similar to what happens now in Germany, and push that aggressively, and to build up regional infrastructures and to invest in the green economy, because that’s the future.
PERIES: What concerned you most about his energy policy?
POLLIN: It’s a total disaster, Sharmini. Look, either we take climate science seriously or we don’t. And Trump is basically saying, I’m not going to take it seriously, and we’re not going to do anything at all to stabilize the climate, to reduce emissions. Nothing.
So if Trump were actually elected president and his agenda were enacted it would just, you know, it would be absolutely calamitous, because we’re already way behind in terms of where we need to go with respect to a climate stabilization program. And Obama, for all the weaknesses, actually was at least pushing modestly in the right direction. And my guess is that Clinton would continue that more or less in the way Obama did. So that, I have to say, is a gigantic difference between the two of them.
PERIES: And of course, preferable to what Trump is proposing. Doug, let me give you the last word.
HENWOOD: Well, to be fair to Trump, he has proposed some kind of vague infrastructure program. I think he doubled Hillary’s $250 billion to $500. I think it’d be mostly like roads, so he’s not talking about anything like the kind of green economy that Bob was talking about.
And if we want to revive American manufacturing, I think Obama’s absolutely right, the infrastructure–but we can create all kinds of new industries based on clean technologies. We don’t even need major breakthroughs. We have these things. We can pull them off the shelves and develop them somewhat further. But we could create an enormous amount of good-paying jobs and just better income growth. At the same time we could really do a favor for life on earth. That seems like a–people love to talk about win-win situations, and this is one of the few times where I think this actually could be one.
But that’s certainly not what Trump is talking about, and Hillary has very weak versions of these things that are just fractions of what is necessary. So this is the American political landscape now, this crazy charlatan, and being posed by this pinnacle of orthodoxy. And that’s really not what we need, or what it seems a substantial portion of the American public wants.
PERIES: All right, Doug, Bob Pollin, I thank you both for joining us today.
HENWOOD AND POLLIN: Thank you.
PERIES: And thank you for joining us on the Real News Network.
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