Donald Trump's Economic Plan

How President Trump Is Changing the Economy

Donald Trump
Republican president-elect Donald Trump gives a thumbs up to the crowd during his acceptance speech at his election night event at the New York Hilton Midtown in the early morning hours of November 9, 2016 in New York City. Photo by Chip Somodevilla/Getty Images

Republican Donald Trump is the 45th president of the United States. His first term is from 2017 to 2021. Trump's economic plan focuses on "making America great again." He negotiated "the biggest deal of my life" with those voters who felt they had lost the American Dream. Trump's policies follow economic nationalism.

"America First" Energy Plan

On October 9, 2017, the Trump administration announced it would .

The repeal would on carbon emissions at U.S. power plants. That was part of Trump's campaign promise to revive the coal industry while remaining committed to clean coal technology. Trump claimed this would raise wages by $30 billion over seven years. 

On June 1, 2017, . The 195 signatories pledged to cut their greenhouse gas emissions 26 to 28 percent below 2005 levels by 2025. They committed $3 billion for poorer countries. They are most likely to suffer damage from rising sea levels and other consequences of climate change.

The accord's goal is to keep global warming from worsening another 2 degrees Celsius above preindustrial levels. Many experts consider that the tipping point. Beyond that, and the consequences of climate change become unstoppable.

The United States is responsible for 20 percent of the world's carbon emissions.

It would be difficult for the other signatories to reach the accord's goal without U.S. participation.

Trump said he wanted to negotiate a better deal, but leaders from Germany, France and Italy said the accord is non-negotiable. China and India joined the other leaders in stating they remain committed to the accord.

 Some have argued that America's withdrawal from a leadership position creates a vacuum that China will readily fill.

Business leaders from Tesla, General Electric and Goldman Sachs said this will give foreign competitors an edge in clean energy industries. That's because U.S. companies will lose government support and subsidies in these industries.

It will take four years to formally withdraw. That means it will become an issue in the next presidential election. 

Trump also promised to and the Waters of U.S. rule. He pledged to allow more drilling on federal lands of shale oil and natural gas.  

Fulfillment of Trump's campaign promises would aggravate climate change. This is also not the right time to add to the U.S. oil supply. Many shale oil companies have gone out of business since 2014, when prices fell to a 13-year low. Prices have since rebounded but would fall again if Trump expands supply. His plan would return gas prices to the lows they hit in 2016. That's good for consumers, but bad for Trump's job creation record.

"Send Illegal Immigrants Back"

Trump's immigration policies focus on blocking illegal immigration. He promised to deport the 2 million to 3 million immigrants in the United States illegally who have criminal records.

On October 8, 2017, he asked Congress to withhold federal funds from "sanctuary cities." 

A is to build a wall along the 2,000 mile U.S. border with Mexico. He estimated the cost at $10 billion to $20 billion. But Congress did not include the funding in the FY 2017 budget. That's because . It refused. He threatened to change a rule under the USA Patriot Act. That would confiscate Western Union money transfers to Mexico from immigrants here illegally

Trump wants to ensure that open jobs are offered to American workers first. CEOs in Silicon Valley worry that he might restrict the H-1B visa program. It allows 315,000 foreign workers to fill many Silicon Valley jobs. In 2014, 65 percent of all these visas were for computer-related jobs.

If the H-1B visa program were threatened, . 

"Smart Trade, Not Stupid Trade"

On August 16, 2017, the Trump administration began renegotiating NAFTA with Canada and Mexico. The North American Free Trade Agreement is the world's largest trade agreement. Trump had threatened to withdraw from NAFTA and hit Mexican imports with a 35 percent tariff.  Instead, the negotiators hope to finish by March 2018.

On January 23, 2017,  from further negotiations on the Trans-Pacific Partnership. He promised to replace it with a series of bilateral agreements. As a result, . On July 6, 2017, they agreed to increase Japanese autos to the EU and European food to Japan. They expect to complete negotiations in a few months. Then it must be ratified by both sides.

On September 2, 2017, Trump instructed aides to . He wants the country to import more U.S. goods. At the same time, he is escalating tensions with North Korea. That threatens South Korea with a reignition of the Korean War.

Trump advocates for a protectionism that doesn't work. Other countries would retaliate. That would reduce U.S. exports and increase prices on imports. Countries like China would increase trade with former U.S. trade partners.  International trade hasn't rebounded since the recession. Tariffs and a trade war would only worsen that. That's why even the National Association of Manufacturing wants to expand, not end, free trade agreements.

"Cut the Red Tape"

In Trump's first 100 days, he asked federal departments for a list of wasteful regulations to be eliminated. He also canceled all prior executive orders. The  the Trump administration has issued 29 deregulatory executive actions. Federal agencies promptly issued 100 more directives. Congress introduced 50 pieces of legislation. It also repealed 14 Obama regulations. That includes a Consumer Finance Protection Bureau regulation that allowed consumers to sue credit card companies. The most critical are efforts to .

On February 3, 2017, Trump signed an executive order asking the U.S. Treasury Department to revise the Dodd-Frank Wall Street Reform Act. The order signaled agencies to ease up on enforcing those regulations.  It may change the Volcker Rule and allow banks to invest depositors' funds in derivatives. It may say some banks are no longer "too big to fail." Many Republicans feel that Dodd-Frank regulations have been slowing economic growth. 

The  to July 1, 2019. It may allow some financial products, such as annuities and IRA rollovers, to be exempt. Financial planners would not have to keep their customers' interest first in those products. In these small ways, without involving Congress.

The said that industry regulations cost the economy $2 trillion a year. Its studies show that U.S. manufacturing costs are 20 percent higher than in other countries. Reducing regulations would help Trump bring back some American jobs.

"Repeal and Replace Obamacare"

On July 29, 2017,  for costs they incur helping low-income customers. Insurance companies would raise premiums by 20 percent if Trump stopped the payments. As a result of Trump's threat, many companies forced states to allow premium increases in order to remain on the exchanges for 2018. 

Trump was warning Congress what he would do if it didn't replace the Affordable Care Act of 2010.  The Senate could not get the votes to pass any of the three bills it drafted in 2017. Meanwhile, the Trump administration has weakened Obamacare . For example, it doesn't impose tax penalties for those who don't get insurance. it shortened the enrollment period, and allowed closures of the federal exchanges. 

"Cut Government Spending" 

Trump promised to cut waste. Instead, he budgeted $4.094 trillion in federal spending in the FY 2018 budget. That's more than $4.037 trillion budgeted for FY 2017. Instead of cutting spending, he plans to reduce the deficit by bringing in more revenue. The administration estimates it will receive $3.654 trillion, more than the $3.460 trillion estimated for FY 2017.

That creates a $440 billion deficit. That lives up to Trump's promise to reduce the deficit. The FY 2017 budget enacted by Congress estimated a $577 billion deficit. That can't all be blamed on Obama, even though it was his last budget. Congress ignored Obama's budget and Trump's budget amendment. It created a budget that added $38.8 billion to Obama's original budget proposal. Congress' enacted budget was also $4 billion more than Trump's budget amendment.

Trump promised to eliminate the Department of Education and the Environmental Protection Administration. Instead, Trump cut funding for the Education Department by $10.4 billion. He cut the Energy Department budget by $2.2 billion. But cutting these small department won't do much to reduce government spending

Trump promised to keep existing Medicare and Social Security benefits intact. These benefits were created by prior Acts of Congress and cannot be changed by a president. Social Security is self-funded until 2035. Medicare is only 53 percent self-funded. These two programs cost $1.587 trillion, or 39 percent of total federal spending

Trump said he would increase the Department of Defense budget by 10 percent. Three percent of GNP for military spending is too low, it should be 6.5 percent. Trump budgeted $574.5 billion for the DoD. That's exactly 10 percent more than the $526.1 billion in the FY 2017 enacted budget. U.S. military spending, including Homeland Security and the VA, was $812 billion in FY 2017. It's more than any other government expenditure except Social Security at $967 billion. It's difficult to cut the deficit while adding to defense. (Source: "," "," WhiteHouse.gov, January 21, 2017.)

In addition to increasing defense spending, Trump said he would make the U.S. military so strong that no one will mess with us. Get more equipment. Bomb ISIS and send troops to Syria. Use Russia as an ally in Syria. Engage in military force against terrorists' families. Add to U.S. Navy ships and the Air Force. Develop a state-of-the-art missile system to defend from Iran and North Korea. End the Defense sequesterApprove waterboarding.  In a November 22 , Trump said he no longer supports waterboarding. He based his change of heart on a conversation with retired Marine Corps General James Mattis.  He appointed his son-in-law, Jared Kushner, as a special envoy to broker peace between the Israelis and Palestinians. (Source: ","  "," OntheIssues.org. "" National Interest.org, December 30, 2015.)

Cancel Iran nuclear dealOn October 13, 2017, the Trump administration announced  with the nuclear deal. That gives Congress 60 days to decide whether to impose sanctions.

. Give veterans vouchers to use either with the VA or their doctor. That competition would give the VA an incentive to improve service. The VA would provide transitional benefits, such as business loans, job training and placement services, to help veterans find employment. Increase funding for battle-related mental and chronic illness. Add OBGYN and other women's health services to every VA hospital. Fire corrupt VA executives. Change the culture of the VA to reduce inefficiencies. These programs would work and are necessary. The VA budget ($75.1 billion) is only 10 percent of total military spending. Many vets with postraumatic stress disorder don't receive the care they need. As a result, 10 percent of the homeless population are veterans who suffer from PTSD or other war-related injuries. 

On May 11, 2017, Trump fulfilled a campaign pledge to ask the Defense Department to develop a plan to . He signed an executive order to review the federal government's online vulnerabilities and adopt upgraded security practices. 

Update medical technology. That's already happened. It's one of the three largely unknown benefits of Obamacare.

"Be the Greatest Job-Producing President in U.S. History"

Trump would have to create more than 22.3 million jobs to take that title. That's how many jobs President Obama created from the depths of the recession in January 2010 to the end of his term. President Clinton increased jobs the most percentage-wise, at 19.6 percent. Trump would have to create at least 29.3 million jobs to beat Clinton’s record

"Spend $1 trillion to rebuild U.S. infrastructure." On June 8, 2017, Trump's administration released the "" plan. It would spend $200 billion over 10 years to leverage $800 billion in business spending. It would reduce permit process time by eight years. It would create 1 million apprentices in two years.  needs to specify how it would leverage private spending. It also must pass Congress. 

. Construction is the most efficient use of federal dollars to create jobs. A U Mass/Amherst study found that 1 billion dollars spent on public works created 19,795 jobs. That's better than defense spending, which created 8,555 for the same cost. 

"Create jobs by eliminating outsourcing and bringing jobs back from Japan, China and Mexico." Trump is correct about the problem. The U.S. lost 34 percent of its manufacturing jobs between 1998 and 2010. Many were outsourced by U.S. companies to save money. Others were eliminated by new technology, including robotics, artificial intelligence and bio-engineering.  Government-sponsored training for these specialties might create more jobs for U.S. workers than would Trump's trade war. 

"Keep the U.S. minimum wage where it is so U.S. companies can compete." The U.S. minimum wage is $7.25 an hour. Many states with higher costs-of-living mandated higher wages. Ireland, the UK, Australia and six European Union countries have a higher minimum wage than the United States.

"Reduce the Debt by Growing the Economy 6 Percent"

Trump promised to grow the economy by 6 percent annually to increase tax revenues. That would be too fast for healthy economic growth. It would create inflation, a boom-bust cycle, and then a crash. 

Trump said that cutting taxes will achieve that level of growth. Trump's tax plan will cut income taxes and lower the corporate tax rate to 20 percent. But it will increase the deficit by $1 trillion over 10 years. Trump believes in supply-side economics. It says that tax cuts will drive enough growth to make up for the lost tax revenue. But Arthur Laffer, the originator of that theory, says tax rates must be higher than they are today for the strategy to work.  

"Reduce the debt by eliminating waste and redundancy in federal spending." Trump demonstrated his cost-cutting ways in his  instead of an expensive PR campaign. His emphasis on finding ways to contain the costs is one of his strategies outlined in his book .  But his overall debt reduction plan instead adds $5.3 trillion to the nation's debt.

"Borrow knowing that if the economy crashed, you could make a deal. The ." These are the most . The first one is a blatant falsehood. If the economy collapsed, there would be no one to make a deal with. It would send the dollar into a collapse. That would send the entire world into another Great Depression.

Printing money would send the dollar back into decline. Interest rates would rise as creditors lost faith in U.S. Treasurys. That would create a recession.

Trump Discarded These Economic Policies

After meeting with Chinese President Xi Jinping on April 7, 2017, Trump reversed these following campaign promises.  

Label China a currency manipulator. Trump claims that China artificially undervalues its currency, the yuan, by 15 percent to 40 percent. Part of China's cost advantage is its cheaper standard of living that allows lower wages. Trump ignores that. He is incorrect to rail against the yuan's fixed exchange rate that's pegged to the dollar. In 2000, the yuan was undervalued by 30 percent. But a lot has changed since then.

First, former Treasury Secretary Hank Paulson convinced the People's Bank of China to increase the yuan's value against the dollar. It increased 2-3 percent between 2000 and 2013.

Second, the dollar has strengthened by 25 percent since 2014, taking the Chinese yuan with it. Now China's products cost that much more than its Southeast Asian competitors’. In August 2015, the PBOC tried letting the yuan/dollar exchange rate float in the free market. Right away, the yuan plummeted. If the yuan were undervalued, as Trump claims, it would have risen instead. Now, China's central bank is forced to take extreme steps to keep it propped up. That's why many economists now think yuan exchange rate to the dollar is overvalued, not undervalued as Trump claims. 

"." The United States imports $481.9 billion in consumer electronics, clothing and machinery from China. A lot of those "imports" are from U.S. corporations that send raw materials to China, and ship them back when they are completed. Trump's tariffs would reduce profits for these American firms and raise prices for American consumers. China might retaliate, raising its tariffs on imports from U.S. companies. 

Trump made some health care promises on the campaign trail that have been dropped. He promised to:

  • Allow health insurance companies to .
  • Expand Medicaid to all states by making it a block grant program.
  • Allow consumers to purchase drugs overseas.

At one point  similar to the Federal Employees Health Benefits Program. He has not mentioned it since being elected. The universal plan is what Obama proposed and Congress rejected. 

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