Donald Trump’s economic policies are so bad that they would produce the longest U.S. recession since the Great Depression, a report from economists at Moody’s Analytics found last week.
Assume, as the economists did, that Trump could implement his key economic policies -- tax cuts skewed heavily to the one percent, mass deportation of illegal immigrants, and huge tariffs on imports from China and Mexico -- during his first two years as president.
The result: the U.S. will go into recession at the start of 2018 and not emerge until 2020. Instead of 6 million new jobs being created, 3.4 million Americans would lose their jobs. Gross domestic product will fall by 2.4 percent. That’s a longer, though less severe, downturn than the Great Recession (which officially began in December 2007 and ended in June 2009).
The Moody's economists summed up their warning:
Even allowing for some variability in the accuracy of the economic modeling and underlying assumptions that drive the analysis, four basic conclusions regarding the impact of Mr. Trump’s economic proposals can be reached: 1) they will result in a less global U.S. economy; 2) they will lead to larger government deficits and more debt; 3) they will largely benefit very high-income households; and 4) they will result in a weaker U.S. economy, with fewer jobs and higher unemployment.
To reach that conclusion, the economists took Trump’s stated policies and plugged them into their model for the U.S. economy. They noted that their model is similar to the ones used by the Federal Reserve and the Congressional Budget Office.
Of course, as The New York Times' Neil Irwin points out, forecasting with precision is very hard, and so the Moody's report is more useful to understand the broad economic trends that would be at work in a Trump presidency. Those trends are really bad.
First, Trump's huge tax cuts, of which one-third would go to the top one percent, would fail to durably stimulate the economy, and the U.S. national debt would balloon. Debt is not necessarily bad. It can, in fact, be a good thing when it's paying for investments that help grow the economy. But Trump's tax cutting binge wouldn't do that. It would instead send debt to record levels for no greater long-term purpose than to tilt the tax code even further in the favor of the rich.
Second, Trump's vow to get tough on trade -- by, for instance, putting a 45 percent tariff on Chinese imports -- would raise consumer prices 3 percent. American businesses would be left struggling to find alternative sources of goods, while China raised its own tariffs in response. Not a good scene at all.
Third, there's the presumptive GOP nominee's pledge to deport all 11 million undocumented immigrants. Undocumented workers, Moody's points out, make up 5 percent of the U.S. workforce. So Trump's plan is the equivalent of ripping all the workers in North and South Carolina, and then some more, out of the economy, and telling yourself this will have no ripple effects on businesses or local communities.
Trump's campaign hit back in a statement last week by pointing out that the lead author of the Moody's report, Mark Zandi, is a Democrat and a donor to Hillary Clinton. That's true, but it's no substantive response to the economists' predictions. The attack also failed to mention that Zandi served as an economic advisor to 2008 GOP presidential nominee John McCain.
Trump economic adviser Peter Navarro was more on point in a CNN interview. The University of California, Irvine, professor said that the candidate's policies wouldn't cause a recession because tax cuts mean growth and American workers would fill the (often poorly paid) jobs left vacant by deported immigrants.
Trump won't start a trade war with China, Navarro said, because China won't even fight back. When that nation realizes it "no longer [has] a weak leader in the White House, China ceases its unfair trade practices," Navarro said.
Or as Trump put it last year, "We will have so much winning if I get elected that you may get bored with the winning."
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