Earth to Trump: Reaganomics failed. But even for this man, who rarely shows any interest in evidence, his speech before the Detroit Economic Club on Monday was disappointing and even dismaying. He spread fairy dust over the audience, promising big tax cuts to the wealthy and easy solutions to complex problems, all the while citing the “Reagan revolution” as his model.
I was waiting eagerly for Trump to outline the details of his economic plan. The man who liked to scare people about America’s $19 trillion in debt was about to tell us how his promise of huge income tax cuts—estimated, before paring back some, at $10 trillion over 10 years—could generate enough economic growth and rising tax revenues to keep the deficit from exploding.
But Trump didn’t bother. He proposed cutting the nation’s seven tax brackets to three, and he now said the top bracket would follow Paul Ryan’s proposal and be cut only to 33 percent, not Trump’s original proposed 25 percent, as if this were reasonable. He said he wanted to reduce business taxes sharply, ending the incentive to move overseas, and do away with the estate tax (which he, like other Republicans, called the “death tax”), though it affects almost no one in America because taxes start on estates of roughly $5.5 million.
He gave us no details about the expected growth rate of the economy and the ability to maintain a reasonable deficit. Rather, Trump said with a straight face that he would roll out the details in coming weeks. Moreover, he’s promised not to cut Social Security or Medicare and has said he’ll spend much more than Hillary Clinton’s proposed $300 billion on infrastructure. Even Trump’s one moment of social awareness for the conditions of working women—a promise to make childcare expenses deductible—lacked sufficient details. This proposal, too, may mostly help the better off.
In fact, Trump devoted most of his speech—targeted to voters in Michigan, Pennsylvania, and Ohio—to antediluvian ideas about bringing back an industrial age of big steel, big oil, and big auto so archaic that you may have thought you were watching a newsreel from the 1920s, if it hadn’t been in color. It was a world with no climate change, basically no international competition, and no Internet. How will we get back to the future of America’s first industrial age, Mr. Trump? The details will be forthcoming.
What the economy needs right now is some serious Keynesian deficit spending to pump demand back up to where it belongs. So Trump is moving in the right direction, although in the wrong way. America doesn’t need major tax cuts—especially not for the wealthy. It needs serious public investment in infrastructure and education, social programs to meet contemporary needs, and more help to the poor through job creation, housing subsidies, and, in my view, outright cash payments. This can be accomplished in the near term through deficit financing.