Trumpenomics for Dummies

Understanding the economics of MAGA.

If you find yourself confused by our president’s economic policy this might help.

The policy starts with a promise to Make America Great Again. Don’t underestimate the importance of “Again” in this. We were great in the day in which thousands of miners dug coal-many dying in the process-to send to the steel mills that now have among the highest costs in the world and are not competitive. Those were the days, my friend, we thought they’d never end. But they did. Of course, as those industries declined new ones sprang up, many in Silicon Valley, with brain replacing brawn as the basis of American economic prosperity. Never mind: the goal of policy now is to restore the pollution-spewing industries of days gone by, and use the antitrust laws to bring down Amazon and other 21st century industries. Then, and only then, will America be great again.

To restore our greatness we have to protect our 19th and 20th century industries from the trade practices of those countries that threaten our national security: Canada and Mexico, their troops poised on our borders; Great Britain, increasing our trade deficit by luring American tourists to a royal wedding, where they splurge on memorial mugs; France, trying to wreck the Wisconsin economy and balloon our trade deficit by exporting camembert to U.S. shores.

No need to worry too much about Russia, where firm leadership is attempting to copy America and Make Russia Great Again by expanding its backyard to include a bit of turf heisted from its neighbors. Putin should be re-admitted to the G-7 in recognition of Russia’s export accomplishments, among them rare poisons otherwise unavailable in world markets. Yes, that is inconsistent with our sanctioning of all of Putin’s buddies, but consistency is for wimps who feel bound by yesterday’s tweets.

To accomplish all of this we need to raise tariffs on imports of all sorts. That would boost the prices Americans pay for imported cars and all the stuff that uses steel and aluminum, and reduce competitive pressures on cars made here, allowing our car companies to raise their prices. That will make auto company shareholder richer, at the expense of the Joe the Plumber, who will pay more for his next pickup truck. But, hey, no world is perfect, and we have to live with the costs of reinstating the trade policies that were so successful in maintaining the economic prosperity of the good old 1920s.

Then there is tax policy. To Make America Great Again we have to cut taxes. The best way to make that possible is to cut costs, reform entitlements, and then reduce taxes. But that takes months, and complicated negotiations with Congress. There is no chapter in The Art of the Deal to explain how to negotiate with congressmen whom the president doesn’t pay and can’t fire, so that route to tax cuts is a non-starter. Instead, cut taxes and let the deficits (which Trump promised to reduce) shoot up. Economists say that the tax cuts cannot generate enough new revenue to pay for themselves, but there is nothing in the presidential tweet library to support their argument.

The tax cuts will give consumers more money to spend on, er, German cars, French cheeses, Burberry raincoats, and other imports, adding to the trade deficit. So we will have to raise tariffs again to get our trade into balance. Of course, other countries will raise tariffs on our goods, cutting into our exports, raising our trade deficits. But those are the sort of long-run problems that can be handled when they eventually appear, after November 2020 if Trump’s luck holds. Senator Daniel Patrick Moynihan was right when he wrote some 60 years ago, “The powers of mind include that of minimal understanding of what is inescapably ahead.”

The most important thing is to increase the rate of economic growth. The tax cuts should do that for a while-at least until the next presidential elections. But the demand they create is imposed on an economy that already has more job openings than job seekers and is hitting supply-side constraints that are making it difficult for many of our firms to expand. That means more rapid inflation, which pushes up interest rates, that slow the economy. Get it? If not, perhaps poor Larry Kudlow, a nice man and a free trader who is assuming the posture of a pretzel when explaining Trump policy to television audiences, can help you. “Sad” to borrow from a Trump tweet. As Robert Bolt’s Sir Thomas More might have said, “It profits a man nothing to give his soul for the whole world . . . but for a White House pass?”

In the mid-1920s, the great economist John Maynard Keynes commented on the economic policies of the governor of the Bank of England, policies that resulted in an over-valued pound and a weakened economy: “He avoids calling things by their right name; and he hopes-this is his best chance-that something will turn up.”

This might reduce your concern about your inability to understand our country’s economic policy. Such understanding will have to wait the publication of Trump’s Economic Policy For Dummies.