Trump’s populist approach to the economy
Published 9:38 pm Friday, January 15, 2016
By Arie and Stephen Korving
With Donald Trump still leading in most of the Republican presidential polls, we were recently asked that what a Trump presidency would mean to the nation’s economy.
Here is how Trump is framing his appeal to the American electorate: The American dream is dead. Unfortunately, for many Americans, it is. In 1980, Jimmy Carter’s “malaise” was an aberration — a half-decade blip in three decades of post-war U.S. prosperity, a prosperity that had enabled Americans with high school educations to lead middle-class lives in three-bedroom homes on nice-sized lots in agreeable neighborhoods.
In 2015, for many Americans the new “malaise” is not a blip, but an actual reality that has squeezed them out of the middle class. They are not in the mood for clichéd platitudes about second American centuries. They want what’s left of their own lifespan to be better.
So what is Trump proposing to do about it? He has set up a web site that lists his policy positions.
- On China: Trump believes we have been making bad deals with China. The result has been that American companies have closed factories in the U.S. and opened them in China, resulting in the loss of millions of jobs.
Trump proposes ending China’s currency manipulation, ending intellectual property violations and putting an end to China’s export subsidies.
Whether this will end the drain of manufacturing jobs is open to debate. However, both Democrats and Republicans have been blasé about good-paying American jobs moving overseas, and Trump has made this issue one that resonates with many people who have given up looking for jobs.
- On taxes: Trump proposes an overhaul of the tax code so that single persons earning under $25,000, and couples jointly earning under $50,000, will not owe any income tax. For everyone else, there would be simpler taxes with four brackets — 0 percent, 10 percent, 20 percent and 25 percent — instead of the current seven.
This new tax code would eliminate the marriage penalty and the Alternative Minimum Tax, while providing the lowest tax rate since before World War II.
Corporations have been moving their headquarters to other countries, a practice referred to as “corporate inversion,” because American corporate taxes are among the highest in the world. Trump proposes a 15-percent corporate tax rate, which should cause American companies that do business overseas to bring their profits home.
Trump claims this would produce the same amount of revenue to the government, while, at the same time, eliminating the loopholes and deductions available to the very rich.
While Trump has been accused of speaking in generalities instead of coming up with detailed plans, he does have detailed plans for his goals, which can be found on his website. In the past, candidates have had their staffs prepare hundred-page position papers that no one ever reads and that no one expects to actually see should the candidate get into office. But position papers do give people an idea of a candidate’s priorities.
Trump’s focus on American jobs and lower taxes for everyone implies a belief in a free-market economy; one that grows at a faster pace than ours does currently.
Whether that can be accomplished without growing the national debt remains an issue for debate. However, we believe the best way to shrink the deficit and the debt is economic growth, which is the direction Trump proposes.
The economic priorities of a Trump presidency can be classified as “populist.” His focus is on returning the types of jobs the middle class, the high school graduate, once held in our country.
At the same time, he supports simplifying and cutting taxes for low- and medium-income families. This combination appeals to a large number of people who are feeling left out in an economy in which the middle class is shrinking.
If he is elected, there will be a change in the focus of the political establishment that determines economic policy.
Arie and Stephen Korving are financial advisors at Korving & Co. in Suffolk.