Thursday, February 25, 2016
Trump's Plans: a proposal for destruction
The progressive, Kasich, seems senile to me. Ben Carson remains a good and thoughtful man who cannot debate. Cruz (my admitted favorite) and Rubio both speak well and make sense. Trump -- belligerent fascist. I hope everyone pounds him and humiliates him. He strikes me as a bully who must never be trusted with power. But Trump's proposed policies are also contradictory and impossible. Here's an example of why.
Trump proposes massive tariffs. Trump insists we have a positive trade balance, which he sees as America's loss. Never mind that this view of a trade balance is a basic and long-discredited fallacy, it is also completely incompatible with other portions of his proposed policies.
Trump's proposed tax cuts reduce federal revenues. Trump also refuses to cut entitlements and refuses serious budget cuts; his fiscal plan would increase deficits. There's no question about this. So... who is going to finance these deficits?
Currently the government budget deficit is financed by the net inflow of foreign capital, that is, by foreign purchases of U.S. government debt instruments. In the international balance of trade, the trade deficit is balanced by the inflow of foreign capital, which is being used to finance the federal budget deficit. If the U.S. runs a trade surplus, then there's a capital outflow. That's basic accounting. So...
Which is it, Donald? If we run a trade surplus, we have a capital outflow, so who will finance the budget deficit? Answer: Americans, which will result in higher interest rates, crowding out of private investment, and growing interest payments. This is a program for economic catastrophe -- low growth on a long run basis and a sovereign debt crisis.
There's another issue here. Trump's proposal for tariffs violates WTO. The obvious result would be retaliatory tariffs and a general trade war of the world against the U.S. This would further damage the U.S. economy and further shut off America's access to foreign capital.
Donald Trump's know-nothing nationalism would be an economic disaster for the U.S. and for the world.
Maya, I agree. I believe nothing Trump says. Everything he says is an offer in what he perceives as a bargaining game, and he says anything he thinks will win for him, knowing there's no way he can ever be held to it. He's not an entrepreneur, he's a con man. This is his greatest con ever.
Thanks to both of you for your comments.