How do you suppose a Republican presidential candidate goes about “making America great again”? Well, if we use history as a guide, they implement policies that make America great for the very connected and rich, on the backs of the working class and working poor.
The Moody’s Analytics report on the Republican 2016 presumptive presidential nominee Donald Trump’s policies, including policies on taxes, government spending, immigration, and international trade, isn’t pretty. Employment would be reduced by 3.5 million jobs and a heavy recession would hit the nation. The economy will “weaken significantly” under Trump’s policies.
The report states:
Mr. Trump’s economic proposals will result in a more isolated U.S. economy. Cross-border trade and immigration will be significantly diminished, and with less trade and immigration, foreign direct investment will also be reduced. While globalization has created winners and losers in the U.S. economy in recent decades, it contributes substantially to the ongoing growth of the U.S. economy. Pulling back from globalization, as Mr. Trump is proposing, will thus diminish the nation’s growth prospects.
Mr. Trump’s economic proposals will also result in larger federal government deficits and a heavier debt load. His personal and corporate tax cuts are massive and his proposals to expand spending on veterans and the military are significant. Given his stated opposition to changing entitlement programs such as Social Security and Medicare, this mix of much lower tax revenues and few cuts in spending can only be financed by substantially more government borrowing.
Driven largely by these factors, the economy will be significantly weaker if Mr. Trump’s economic proposals are adopted. Under the scenario in which all his stated policies become law in the manner proposed, the economy suffers a lengthy recession and is smaller at the end of his four-year term than when he took office (see Chart). By the end of his presidency, there are close to 3.5 million fewer jobs and the unemployment rate rises to as high as 7%, compared with below 5% today. During Mr. Trump’s presidency, the average American household’s after-inflation income will stagnate, and stock prices and real house values will decline.
Under the scenarios in which Congress significantly waters down his policy proposals, the economy will not suffer as much, but would still be diminished compared with what it would have been with no change in economic policies.
Those who would benefit most from Mr. Trump’s economic proposals are high-income households. Everyone receives a tax cut under his proposals, but the bulk of the cuts would go to those at the very top of the income distribution, and the job losses resulting from his other policies would likely hit lower- and middle-income households the hardest. The decline in wealth caused by weaker stock prices and housing values