With so little time left until the U.S. presidential election, the tension between candidates, ideologies and policies has nearly peaked. Donald Trump’s policies hold the promise of “making America great again” by reinvigorating the economy through protectionist trade policies, ridding the country of those who take advantage of the system as well as tax cuts to the rich and corporations. Further study shows that a different outcome would result from Trump’s policy on domestic poverty.
According to many economic experts, Trump’s policy on domestic poverty would lead the nation into recession, most harshly affecting the poorest households. Trump’s policies would “significantly” weaken the country and drive the U.S. into a “lengthy recession,” according to a Moody’s Analytics report. An estimated 3.5 million jobs could be lost and the unemployment rate could increase from 5% to 7%. The average household would face a regressive consumption tax of $11,100 over five years.
Citing trade deficits with Mexico, China and Japan, Trump has continuously claimed that the U.S. has lost its dominance through weak trade agreements and outsourcing manufacturing jobs. To change this and promote domestic production, Trump plans to impose a 35% tariff on goods from Mexico and a 45% tariff on goods from China and Japan. While producers and the government would gain $43 billion and $65 billion, the total loss to the U.S. economy would be $170 billion, according to the National Foundation for American Policy. The average household would lose 4% of its income and for households making “the lowest 10[%] of income up to 18% of their (mean) after-tax income” would be lost.
According to the study, tariffs on imports from the three countries would not even protect U.S. workers from foreign competition, meaning the, “only logical alternative would be to impose a similar set of tariffs on all other countries that export to the United States.” This approach could cost households with the lowest 10% of income to lose a massive 53% of their income.
Trump also promised to deport the more than 11 million illegal immigrants in the U.S. Although he recently softened his immigration stance, many still idealize a future without illegal immigrants. The massive deportation, however, would shrink the economy by about 2%, from a $400-$600 billion GDP collapse, decrease the workforce by about seven million and cost millions of dollars to implement, not to mention the construction of a nearly 2,000-mile-long border wall. The economic slump would inevitably magnify the struggles of the poor as it caused consumer product prices to increase.
Last but not least, and perhaps most unclear to the public, are Trump’s tax plans. Although dubbed the “blue-collar billionaire,” Trump’s economic plan will give reduced tax rates to the wealthiest individuals, from 39.6% to 33% and corporations, from the proposed 25% to 15%. The new tax policy would increase government deficit by an estimated $10 trillion over the next decade, according to the Tax Policy Center, slashing the funds for social security, medicare, Medicaid and interest payments that already make up more than two-thirds of the annual budget. Yet Trump has offered few expenditure reduction proposals that would make up for the revenue loss, meaning that the millions of Americans who rely on these government benefits would likely suffer. Otherwise, spending on all other programs would need to be cut by 53% to meet the revenue loss, according to the Center on Budget and Policy Priorities.
In response to his tax plan critics, Trump has cited his belief in trickle-down economics, a theory that states that if the rich receive tax cuts, the money they save will be invested and eventually trickle down to the poor, invigorating the entire economy. The theory, however, has been repeatedly disproven. In 2012, the Tax Justice Network conducted a study that suggested between $21 and $32 trillion has been siphoned from the world economy by the rich and put into private, off-shore accounts. In 2015, the International Monetary Fund also filed a report showing that the trickle-down effect does not exist, as the rich continue to get richer.
As Election Day nears, it is important to consider the impact of both candidates’ policies on the economy and the poor in particular.
– Henry Gao