The news is full of Trump's declared planning, and the commentators from everywhere are beside themselves with dire predictions. I am at sixes and sevens on whether to be overly concerned here. On one hand, I am well hunkered down being fully retired with a completely protected judicial pension. I am an observer, not a doer, and am no longer involved in anything that is going to be affected at all by Trump's shenanigans.
On the other hand, my household budget is still subject to the general economy, and if Trump carries out even a few of his main proposals, the resultant impact on the economy could be disastrous. The direst of the predictions are for runaway inflation coupled with a deep depression, but even if lesser results occur, it would still be more than just uncomfortable. Here are three examples:
First, Trump's plan to use import duties as revenue raising devices, imposing general tariffs of up to 20% on all imports, is going to result is a disaster if he cannot be talked out of it. Generally, tariffs are an administrative device and do not require congressional approval. The Trump administration could impose them at any time, unilaterally. It has been explained over and over that tariffs are not paid by the foreign entity manufacturing or selling the goods but are taxes paid by the consumers paying higher prices for the goods in the receiving country – meaning us in all of Trump's plans.
General import tariffs would hit the bottom of the economy the worst, with estimates of the increase in costs for at typical family in the bottom quartile exceeding $4,000 per year. The last time the U.S. imposed general import tariffs was in 1929, just ahead of the great depression. Most economists agree that the implementation of general import duties significantly contributed to the depth and length of the depression.
Trump's only reaction to these comments is to wink and nod, and then repeat without comment the entirety of his ill-conceived plans without change.
Second, Trump's plan for tax relief calls for significant tax cuts to those in the top earnings brackets and miniscule cuts for those in the lowest. If the government is going to step in, this plan is the exact reverse of what might be helpful. The idea that increasing the amount of earnings retained by the top will result in a "trickle down" to increase the earnings for those below has been demonstrated over and over to be a complete myth. In fact, increasing the amounts retained by those at the top tend to stay at the top, either in savings or reinvestment.
Wages of those below the top are not affected until other aspects of the economy influence the change – increased demand, increases in technology, and shortages in the labor force to meet requirements. Increases in wages are usually the last element to respond in an increasing economy. Lowering the taxes on the lowest categories has little impact because, in our graduated income tax scheme, the lowest categories already pay the least amount in taxes and benefit from what plans have been enacted for the relief of
the very lowest category among us. Further, lowering the tax rate when the existing level of government spending already exceeds income results in increased debt, thereby pushing the obligations on to future generations. In an overheated economy, when lowering the tax rates on the wealthy result in increasing the debt level, the expected result is not an increase in resources to the lower classes but rather an even greater increase in the levels or rates of inflation.
There is no indication that Trump understands the basic economics involved, and his cabinet picks in this area so far do not give any promise of being better at it than he is.
Finally, Trump's plan to round up all the undocumented aliens and return them to their country of origin is woefully incomplete. Nowhere does Trump explain how the economy will pay for the cost of rounding up, litigating and deporting the 11 million or so undocumented aliens in this country. Nor does he explain what to do with or care for the children of the undocumented aliens who are born in the U.S. and therefore are automatically citizens from birth. Finally, Trump has no answer of who will replace the deported immigrants at the menial jobs many of them currently occupy – jobs even the lower class of U.S. citizen considers to be beneath their level of income and achievement.
There is no argument that a problem exists in this area, but as every expert that has addressed the problem insists, the country must first fix the problem of processing immigrants into the country before, or at least at the same time as, taking on any wholesale program of deportation out.
To sum up, from the appointments made so far, it appears Trump will be surrounding himself with sycophants to him personally rather than seeking out executives with actual experience in the fields to be managed. There is not one person in the bunch named so far that give any indication that they might even understand the problems let alone take on the task of explaining to Trump the underlying issues discussed above.
Where are the answers going to come from? My head hurts. I think I will take a nap.