Trump's Economic Illiteracy on Display in Address to Congress
The president takes a reckless stance on free trade, entitlements, and debt reduction.
Gage SkidmoreMany agree that Donald Trump came across as presidential during last night's speech to a joint session of Congress. He even came across as somewhat coherent. But if being presidential and coherent means raking up more debt, being a nationalist protectionist who believes in destructive "Made in America" and import-bashing policies, and railing against immigrants as if they were responsible for all of the crimes and welfare spending in the country, then it's hard to see any value whatsoever in being presidential and coherent.
I appreciate that the new president didn't spend a significant amount of time blaming his predecessor. Yes, Trump did mention our debt doubling as a share of GDP in the last eight years and he also said that this was the slowest recovery ever, but his complaints do not compare to those of Barack Obama, who was still blaming George W. Bush eight years into the job.
Trump also continued to be solid in his calls for regulatory overhaul. He wants to cut regulations and lift the horrible burden on our lives and companies imposed by an out-of-control regulatory state. That's great. He also made some noise about cutting taxes, and in particular about the dangerously high corporate income tax rates. I will also give him credit for not endorsing the misguided House Republican plan to adopt a border adjustment tax that would tax imports while exempting exports. That plan would give, yet again, a leg up for companies like Boeing and General Electric while hammering consumers. However, last night we also had to sit through the president's misleading rants about other countries' tax codes creating a disadvantage for our exporting companies while Trump never once acknowledged that if there is a disadvantage it actually comes from our own government taxing U.S. companies on a worldwide basis—which is something most of our competitors do not do.
I am going to let others address the anti-immigration stance of the president. However, I would be remiss if I didn't mention that it is heartbreaking to see how misguided today's Republicans are about the alleged harms caused by immigration. I realize that in today's America my own chances of getting into the country and working in this great nation as an H-1B holder would be very slim. However, my true heartache comes for those who entered this country illegally but have stayed to make better lives for themselves and their families. There are millions of upstanding citizens who are undocumented due to a lack of process to make low-skilled workers legal, thereby preventing them from being able to fully contribute to making America great and productive. To the nannies who watch our children, the cleaning ladies who keep our houses neat, the gardeners who mow our lawns, or the farmhands who pick our vegetables and fruits, I say, some of us know and appreciate your value. It is hard to accept that you now live in fear of being sent away from the country you have called home for many years.
As for the federal budget, on the campaign trail Trump promised that he would not touch the most expansive and insolvent entitlement programs, which just happen to be the biggest drivers of our future debt. Yet Trump also promised that he would address the unsustainable level of our debt. Ultimately, Trump will only be able to keep one of those two promises, and it won't be the one about reducing the debt.
That is unfortunate because the gross U.S. debt is almost $20 trillion. The public portion of that debt, the money that the government owes to foreign and domestic investors, has reached $14.4 trillion and is growing fast due to the explosion of entitlement programs—the same programs that Trump has irresponsibly promised not to touch.
Last year, spending on Medicare, Social Security, Medicaid, and net interest paid on the debt increased significantly. Together, they totaled $2.1 trillion and made up 56.6 percent of the budget. Medicare and Social Security spending was $1.6 trillion of the total. But this is just the beginning.
Now, we could look at Trump's promise not to touch these programs in a more cynical way. Could it be that when he promises not to reform Social Security and Medicare, he is actually promising massive cuts to Social Security down the road? As you may know, in 2035, when the Social Security Trust Funds runs out of assets, benefits will be cut across the board by roughly 25 percent. According to CBO projections, in 2035 the public debt will be $41 trillion, or 110 percent of GDP, while the deficit will be well above $2.6 trillion, or 7 percent of GDP. Meanwhile, spending will stand at almost $10 trillion, or 26 percent of GDP. In other words, the notion that Congress will be able to avoid the cuts one way or another is pure wishful thinking.
Is the president that sneaky? I doubt it. I think he is just fiscally irresponsible. Indeed, if Trump's spending priorities are any indication, the debt is only headed higher. To get a sense of those priorities, here's a list of either explicit or implicit areas in which Trump intends to increase spending according to last night's speech:
- It sure sounds like Trump intends to reinvigorate the federal government's failed war on drugs. That portends a larger federal anti-drug budget. Taxpayer dollars will be lost; and tragically many more lives will be lost to the drug war, too.
- Trump lamented the loss of trillions of taxpayer dollars in Middle Eastern wars, but then he said he will send "Congress a budget that rebuilds the military, eliminates the Defense sequester, and calls for one of the largest increases in national defense spending in American history." The president appears unable to understand that big military budgets beget more wars, which beget bigger military budgets, and on and on it goes.
- Trump promised to spend more money on veterans. It would have been nice to hear him offer specific reforms for the Department of Veterans Affairs (see Cato's Michael Cannon for some good suggestions) but Trump instead fell back on the typical politician's promise to simply spend more money.
- Trump reiterated his intention to "invest" a trillion dollars in the nation's allegedly "crumbling infrastructure," which I'm sure were reassuring words for the various special interests involved in the transportation and construction lobbies. Trump says it will be "financed through both public and private capital," but it's the "public" part that most excites the spenders in Congress. It's also worth noting that Trump explicitly stated that the effort will be "guided by" his so-called Buy American and Hire American principles. Translation: It is going to cost taxpayers a lot more money.
- The president said "my administration wants to work with members in both parties to make childcare accessible and affordable, to help ensure new parents have paid family leave, to invest in women's health, and to promote clean air and clear water, and to rebuild our military and our infrastructure." This is what you call pandering to the pink hat crowd.
One thing is certain: This is not the party of Ronald Reagan anymore. Republicans have gone so far off the rails that they not only gave standing ovations to calls for more government infrastructure spending, they applauded demands for blatantly protectionist policies. The GOP has apparently forgotten the fact that for decades it stood for free trade and pretended to want to reduce the debt.
According to a tweet sent by House Speaker Paul Ryan this morning, "Last night POTUS delivered a bold optimistic message to the America people." No Mr. Speaker, he didn't.
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his complaints do not compare to those of Barack Obama, who was still blaming George W. Bush eight years into the job.
Obama inherited a real mess - -8.9% GDP, 750,000 jobs losses per month, $1.2 trillion deficit, etc - Trump is inheriting a sound economy near full employment therefore has no one to "blame".
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why are you here?
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Why are any of us, my good chum?
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Who the fuck are you? I've been here at least 8 years and donate to Reason.
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....why?
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I read the articles. I am probably more in political sync with the writers than the TEAM RED! zealots here.
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talk about your bona fides!!!
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and donate to Reason
[citation needed]
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But squelched on a bet.
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buttplugs gotta buttplug
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Full employment, lol
/ looks at labor force participation rate
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Yeah, all those Boomers who retired early are really suffering.
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only if you don't count those permanently out of the workforce, entitlements and unfunded mandates, then it's not such a rosy picture...
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Well, the long term debt problem would have been solved by Simpson-Bowles but Congress fucked that up. Both sides are equally to blame too.
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I would say that being "presidential" implies being a nationalist.
It's interesting that one of these is considered an insult but not the other. So we hate nation-states now, yet aristocracy is still admired independently of that. I guess because you-know-who never acted very presidential.
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I would say that being "presidential" implies being a nationalist.
I don't. I would say that being "presidential" means that you are faithful to America's ideals.
To me a nationalist says "America, right or wrong". But I would expect a "presidential" president to say "when America contravenes its ideals, I will side with the higher ideals rather than with America".
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"now"?
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It's funny, Trump's speech more or less could have been given by Bill Clinton in the 90s. Shows how far left the parties have gone
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Clinton is a free trader at least. And I recall some slashing of military costs back then.
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We had big military spending increases under Reagan and, excluding Grenada and the tragedy in Lebanon, all that "beget" was the peaceful destruction of the USSR and Eastern European Communism.
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Who were on the verge of failure anyway.
Why build up now? ISIS is nowhere on the scale of a Soviet Union.
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Different situations SIV. The military build-up in the 80's forced the Soviets, who were already on very shaky economic grounds, to attempt to compete. And when their economy collapsed, so did their hold on the rest of eastern Europe who were largely hostile to the Soviets to begin with.
How will more military spending beat ISIS...and whoever replaces them?
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How will more military spending beat ISIS
According to Trump Republicans just calling them "radical Islamic terrorists" will scare the daylights out of them and cause them to surrender.
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Oh but the Feelz I got from his speech. The Feelz...
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Why does someone as smart at de Rugy talk about the SS trust fund containing "assets"?
She says: "As you may know, in 2035, when the Social Security Trust Funds runs out of assets, benefits will be cut... "
But the trust funds contain bonds which are debt the government owes to itself. They are counted as part of the national debt. How can they be assets? That's like saying my net worth is increased by a home equity loan.
When a bond is "cashed in" what happens? Where does the actual liquidity come from? I can think of three things: (1) Taxes are raised to obtain the money. (2) Spending on other programs is reduced and savings applied to payment. (3) New debt is created elsewhere. Of course, it's #3 because the government goes into more debt every year, thus number 2 has no meaning.
This seems like the naked emperor of SS. Everybody sees the clothes, even de Rugy.
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Because a US Treasury is an asset to the holder and a liability to the taxpayer.
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As you may know, in 2035, when the Social Security Trust Funds runs out of assets
Just in time for Gen X to take it in the shorts, naturally.
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40 million people out of work who are neither retired nor in school, and we are supposed to believe that illegal immigration is helping them?
I'm sick and tired of the "jobs Americans just won't do" argument when really it's "jobs Americans won't do for $4/hour that we let corporations get away with paying because no one enforces immigration law". I understand that the $4/hour ag worker helps to lower costs at the supermarket but these same immigrants are working awful shitty jobs at borderline slave wages whilst using the welfare system at a net cost to taxpayers. Defending businesses who depend on illegal slave labor to turn a profit at the expense of the American worker and tax payer is a stupid argument.
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You don't know what you're talking about. American citizens will NOT pick produce for minimum wage. This I know first hand from a Colorado apple farmer. He's tried everything to hire (and keep) Americans or immigrants with a work visa...and the only one's who will do the work are illegals. And the price he's paid per bushel doesn't allow him to pay better. Once his workforce is deported and no longer available, the ONLY solution for all of us to pay more for his produce to subsidize wages. That...or for economic conditions to deteriorate so far that picking produce is worth minimum wage.
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Labor protectionism for the win!
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I forgot the obvious #4: the fed creates new money to buy new bonds. That way, to do #3, you don't even have to go out and ask someone for a real loan.
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Shit I meant this to be in response to my own post above.
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David Stockman: Trump Will Create a Debt Crisis Like Never Before
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But Obama running up more debt in 8 years than all of the his predecessors combined, was just no big deal.
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I am going to let others address the anti-immigration stance of the president.
And then proceed to rant about the "anti-immigration stance" of Trump and those evul repubs.
The GOP has apparently forgotten the fact that for decades it stood for free trade and pretended to want to reduce the debt.
They never stood for free trade or low debt. They were founded as, have been, and remain the party of mercantilsm (ie high tariffs, federal spending on "internal improvements", generally protectionist economic policy). There was a time when Democrats were the party of free trade. There was even a war fought over this distinction between the parties. But Team Blue was co-opted by "Progressives", which are WAY worse on economics.