Beware of ‘Trumponomics’

National security featured prominently on the agenda in last night’s Republican presidential debate in Vegas. Hardly surprising as it is the first such debate since the attacks in Paris and San Bernadino and followed the closure of schools across Los Angeles yesterday.
Earlier in the day I told the press that Donald Trump, the frontrunner in the race to be Republican candidate, was disguising misguided policies that could potentially harm the U.S. and global economy, with sensible supply side reforms.

Trump’s economic plans seem somewhat unclear and the ins and outs of ‘Trumponomics’ are hard to fathom.

It is concerning that the most high-profile GOP candidate appears to be using sensible policies to mask the more ill-judged ones; ones that could threaten America’s and indeed the world’s economy – as I was quoted as saying in the International Business Times.

Trump has laid out forward-thinking supply side reforms with the aim of restructuring and simplifying the tax code in the U.S., which would, he says, mean the majority of Americans will end up paying less tax.

According to Trump’s plans, the highest marginal income rate would drop from nearly 40 per cent to 25 per cent, middle-income earners would pay 10 or 20 per cent, and anyone earning less than $25,000 a year would pay no income tax at all.  The marriage penalty, estate tax and alternative minimum tax would be eradicated, and companies would pay a maximum 15 per cent of their income to the government.

As you would expect, Trump’s policies to completely revamp the tax system are receiving populist support.

However, hiding away behind the headlines we find numerous misguided policies that could cost the U.S. and global economy dearly.

Looking at an example: Trump’s policy on immigration.  If this was imposed, the labour force would reduce and real GDP would drop, therefore both supply and demand would be affected.

For instance, the agriculture sector (which relies on cheap immigrant labour): Trump’s immigration policy would result in farming incomes plummeting and food would become more costly.

Nevertheless, whilst Donald Trump loves to show the world he is a hustler; and although he does have exceptional form in business, his political strategies are far from perfect.

Trump also intends to negotiate with China to try and stop the country from manipulating its currency – keeping it too low for U.S. manufacturers to compete.

The fatal flaw here is that when China’s currency is devalued, their goods subsequently become less expensive allowing Americans to buy them cheaper than if they were manufactured in the U.S.  Trump maintains that this policy would return jobs to the States, but in my view it is debatable whether this would be the case.  Opponents argue that the jobs in reference here are merely ‘jobs of yesterday’.

Additionally, Trump is seeking to impose tariffs on imported goods; up to a 35 per cent tax on non-U.S. car manufacturers for example.

Once again, although this policy may see more American jobs, there is a high probability this won’t happen and American consumers will simply end up paying more for products made outside of the U.S – which would damage the American economy, of course.

As such, although the supply side reforms may appear sensible on the outside, I would urge voters to be aware of the wolf in sheep’s clothing of ‘Trumponomics’.

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