Trump’s economic plans would be godawful

In separate appearances this week before the Detroit Economic Club and the Economic Club of Chicago, Trump laid out a plethora of bad ideas, some of them familiar and a few of them brand new. Most of them would be counterproductive for the economy as a whole, and none of them are defensible conceptually or ethically at the micro level.

At both events, Trump spent most of the time defending his proposal to impose across-the-board tariffs of 10%-20% on all imported goods. The idea is so inane and has so thoroughly been pilloried by so many sources that we won’t linger on it here except to emphasize a few points. First, no matter how many times Trump says that the “other nation” or its businesses will pay the tariff, the claim is not even close to being factual, not even indirectly. Yes, foreign entities may suffer economically, but not a single foreign exporter would pay a single penny to the U.S. Treasury. By very definition, a tariff is paid by the importer. The money added to the Treasury would come exclusively from U.S. payers. Period, end of story.

Furthermore, Trump keeps claiming that the federal-debt-hiking effects of all his other budgetary extravagances would be more than covered by the revenues generated by the tariffs. Nonsense. Indeed, the tariff revenue would barely cover his three most prominent recent promises: exempting tips, overtime pay, and Social Security earnings from federal income taxes.

Taxes

The Tax Policy Center generously estimates the net “revenue” from the tariffs at $2.8 trillion over 10 years — other sources say less. But exempting tips from taxation would cost the Treasury $250 billion in a decade, exempting overtime would cost $680 billion, and exempting Social Security earnings would cost $1.6 trillion, not to mention vastly speeding up the insolvency of both that program and Medicare. That’s at least $2.53 trillion right there.

Trump’s newest proposal, unveiled at the Detroit Club on Oct. 10, would allow a tax deduction for car loan interest payments. In addition to subsidizing high-income people disproportionately, that would be another 10-year cost to the Treasury of $61 billion. (For those counting, those four items alone would negate $2.64 trillion of the tariffs’ $2.8 trillion revenue gain.)

Trump touted all four proposals in Detroit. None of them are logically defensible.

In addition to each of them adding to the federal debt, each would have deleterious macro- and micro-economic effects, plus add unfairness or other ethical problems to the system…. [The full column is here.]