Donald Trump's Economic Plan

How Is President Trump 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 successfully negotiated "the biggest deal of my life" with those voters who felt they had lost the American Dream

"Send Illegal Immigrants Back"

Open a door for legal immigrants. Deport the 2 million to 3 million immigrants in the United States illegally who have criminal records. Ensure that open jobs are offered to American workers first. End "sanctuary cities."

On August 2, 2017, Trump endorsed a Senate bill that curbs legal immigration. It would prioritize green cards to applicants who were financially self-sufficient, highly skilled, and spoke English. It would deny green cards to adult children and extended relatives of current green card holders. The administration said it would help Americans get higher paying jobs. First, it would halve the number of immigrants that compete for those positions. Second, it would stop wage compression by restricting immigration to those who qualify for higher paid positions.

On June 22, 2017, Trump asked Congress to pass a law barring immigrants from receiving welfare for the first five years in the country. But that would take away the authority of states who currently decide who is eligible for assistance programs. Trump promised to enforce regulations that deny immigration status to those who might become "public charges." (Source: "President Calls for Barring Immigrants from Welfare for Five Years," Fox News, June 22, 2017.)

On March 6, 2017, Trump signed an executive order banning visas for citizens from six countries. They are Syria, Iran, Libya, Somalia, Sudan and Yemen. The ban doesn't apply to lawful permanent residents and existing visa holders.  It caps the total number of refugees at 50,000 instead of 110,000. On June 26, the Supreme Court ruled that Trump's ban travel ban is lawful except for two instances.

The ban doesn't apply if travelers are visiting friends, jobs or family in the United States. It also doesn't apply to students in a U.S. university. (Sources: "Supreme Court Allows Limited Version of Trump's Travel Ban," The Washington Post, June 26, 2017. "Trump's Latest Executive Order: Banning People From Seven Countries," CNN, January 28, 2017.)

On January 25, Trump signed an order to build a wall along the 2,000 mile U.S. border with Mexico. He estimated the cost at $10 billion to $20 billion. Congress did not include the funding in the FY 2017 budget. Trump promised to force Mexico to pay for the wall. It refused. He threatened to change a rule under the USA Patriot Act. He would confiscate Western Union money transfers to Mexico from immigrants here illegally. (Source: "Standing Up for Our Law Enforcement Community," WhiteHouse.gov, January 21, 2017. " Trump Reveals How He Would Force Mexico to Pay for Border Wall," The Washington Post, April 5, 2016.)

CEOs in Silicon Valley worry that Trump 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 is threatened, these companies could lose market share and valuable employees.

(Source: "Donald Trump's Anti-immigration Stance Threatens the Heart of American Innovation," The Verge, November 11, 2016. "If Donald Trump Was President, Here's What Would Happen to the U.S. Economy," The Street, March 3, 2016.)

"Repeal and Replace Obamacare"

On July 29, 2017, Trump threatened to stop reimbursing insurance companies for costs they incur helping low-income customers.  Insurance companies will raise premiums by 20 percent if Trump stops the payments. Many more will leave the exchanges. They must decide on their 2018 plans by September 2017. (Source: "How to Repair the Health Care Law," The New York Times, July 29, 2017.)

He was warning Congress what would happen if it didn't reform the Affordable Care Act of 2010. On July 28, the Senate voted against its last proposed replacement plan.

In response, the Senate Health, Education, Labor and Pensions Committee said it would draft a bipartisan bill to fix Obamacare. He urged the president to continued funding long enough for the committee to develop a bipartisan solution. 

Trump is also weakening the ACA without legislative action. For example, he directed the Internal Revenue Service to allow people to slide by if they don't get insurance. For more, see Donald Trump on Health Care

Trump made some promises on the campaign trail that are not included in the AHCA. He promised to:

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

At one point Trump suggested a universal “market-based” plan 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. (Source: "Healthcare Reform," DonaldJTrump.com. "Donald Trump Health Care," OnTheIssues.org. "Donald Trump Hates Obamacare," July 31, 2015.) 

"America First" Energy Plan

On June 1, 2017, Trump announced the United States would withdraw from the Paris Climate Accord. Like the other 195 signatories, the United States had pledged to cut its greenhouse gas emissions 26 to 28 percent below 2005 levels by 2025. Countries also committed $3 billion in aid for poorer countries by 2020. 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. (Source: "Trump Will Withdraw U.S. From Paris Climate Agreement," New York Times, June 1, 2017.)

One of Trump's campaign promises was to eliminate the Climate Action Plan and the Waters of U.S. rule. Allow more drilling on federal lands of shale oil and natural gas. Revive the coal industry while remaining committed to clean coal technology. Trump claims this would raise wages by $30 billion over seven years. (Source: "America First Energy Plan," WhiteHouse.gov.)

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. But his plan would return gas prices to the lows they hit in 2016. For more, see U.S. Shale Oil Boom and Bust.

"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.

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.  For more, see 5 Myths About Cutting Government Spending

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 spending. For more, see Current Mandatory Budget

Trump said he would increase the Department of Defense budget by 10 percent. He budgeted $574.5 billion for the DoD. That's exactly 10 percent more than the $526.1 billion in the FY 2017 enacted budget. 

Make the U.S. military so strong that no one will mess with us. Get more equipment. Bomb ISIS and send troops to Syria. Cancel Iran nuclear deal. Use Russia as an ally in Syria. Engage in military force against terrorists' families. Approve waterboarding.  In a November 22 interview with the New York Times, 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: "Donald Trump on War & Peace,"  "Donald Trump on Homeland Security," OntheIssues.org. "Donald Trump and the Defense Budget," National Interest.org, December 30, 2015.)

Three percent of GNP for military spending is too low, it should be 6.5 percent. Add 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 sequesterU.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: "Making Our Military Strong Again," "America First Foreign Policy," WhiteHouse.gov, January 21, 2017.)

Reform the Veteran's Administration. 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. (Source: "Veteran's Administration Reforms," DonaldJTrump.com.)

On May 11, Trump fulfilled a campaign pledge to ask the Defense Department to develop a plan to protect the nation's infrastructure from cyber-attacks. He signed an executive order to review the federal government's online vulnerabilities and adopt upgraded security practices. (Source: "Trump Signs Long-Awaited Cyber Order, Launching Hacking Defense Review," Politico, May 11, 2017.)

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

"Smart Trade, Not Stupid Trade"

On January 23, 2017, Trump signed an order to withdraw from further negotiations on the Trans-Pacific Partnership. He would replace it with a series of bilateral agreements. (Source: "Trump to Withdraw from TPP," CNN Politics, January 23, 2017.)

Trump promised to do a better job of negotiating trade agreements. Hit Mexican imports with a 35 percent tariff. The United States imports $294.7 billion in manufactured products, fruits, vegetables, coffee and cotton from Mexico. This is almost as much as we import from China. Trump's tariffs would increase prices of the goods we import from Mexico. Tariffs would benefit U.S. oil companies by raising prices on imported Mexican oil. By law, President Trump could only raise tariffs by 15 percent for 150 days without Congressional approval. For more, see U.S. Imports by Year by Country. (Source: "Trump's Trade Policy Is a Big Loser," USNews, April 19, 2016. "So What Exactly Is Donald Trump's Economic Policy?" CNN Money.)

Trump advocates for a protectionism that does not work in today's globally integrated economy. Other countries would retaliate, reducing American exports. Prices would raise for American consumers. One reason for slow U.S. growth since the recession is that international trade hasn't rebounded. Tariffs and a trade war would only worsen that.

After meeting with Chinese President Xi Jinping on April 7, 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 China's currency is overvalued, not undervalued as Trump claims. For more, see Dollar to Yuan Conversion and History.

Impose countervailing duties on all imports from China. 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. For more, see U.S. Trade With China.  (Source: "U.S.-China Trade Reform," DonaldJTrump.com.)

"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. For more, see Job Creation by President.

Spend $1 trillion to rebuild U.S. infrastructure. On June 8, 2017, Trump's administration released the "Rebuild America" 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. Trump's plan needs to specify how it would leverage private spending. It also must pass Congress. (Sources: "President Trump’s Plan to Rebuild America’s Infrastructure," White House, June 8, 2017.  "Trump's Infrastructure Plan," The Washington Post, June 8, 2017.)

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. For more, see Four Best Real-World Ways to Create Jobs. (Source: "Trump's $500 Billion Infrastructure Promise Creates Metals Rally," Bloomberg, November 9, 2016.)  

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. For more, see 3 Ways to Fix IT Outsourcing.

Keep the U.S. minimum wage where it is so U.S. companies can compete. The dollar rose 25 percent since 2014. This rise makes U.S. workers 25 percent more expensive than those in India, Mexico and other countries whose currencies have fallen. Since China's currency is fixed to the dollar, its labor costs have also gone up 25 percent. Although this situation is temporary, it is still a bigger drag on U.S. competitiveness than raising the minimum wage would be. The U.S. minimum wage is $7.25 an hour, although many states with higher cost-of-living have mandated a higher wage. Ireland, the UK, Australia and six European Union countries have a higher minimum wage than the United States. For more, see Minimum Wage Pros and Cons.

The U.S. jobs report is not a real number. The actual unemployment rate is 18 percent, not 5 percent.  The rate isn’t close to 18 percent, whether you look at the standard measurement or the “real” unemployment rate. The real unemployment rate includes those who are marginally attached or discouraged and part-time workers who would prefer full-time jobs. As of February 2016, that rate was 9.9 percent. The widely-reported, standard rate was 4.9 percent. The worst real unemployment rate was 16.7 percent in January 2010, when the widely-reported rate was 9.8 percent. The real unemployment rate tends to be double the widely-reported current unemployment rate

Ask federal departments for a list of wasteful regulations to be eliminated. Cancel all prior executive orders. The National Association of Manufacturers said that industry regulations cost $180 billion a year. Its studies show that U.S. manufacturing costs are 20 percent higher than other countries'. (NAM wants to expand, not end, free trade agreements.) Trump named Steve Mnuchin to be his U.S. Treasury Secretary. He promised to loosen Dodd-Frank regulations that prevent banks from lending to small businesses.  He said the Volcker Rule is too complicated. (Source: "Parts of Dodd-Frank Will Be Rolled Back Under Trump," CNBC, November 30, 2016.)

Find out Can Trump Bring Back American Jobs?

"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. For more, see What Is the Ideal Growth Rate?

Trump intends to do that despite cutting taxes. He 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.  For details, see Trump's Tax Plan.

On February 3, 2017, Trump signed an executive order asking the U.S. Treasury Department to revise the Dodd-Frank Wall Street Reform Act. Many Republicans feel that Dodd-Frank regulations have been slowing economic growth. The order signaled agencies to ease up on enforcing those regulations. 

Reduce the debt by eliminating waste and redundancy in federal spending. Trump demonstrated this in his campaign by using Twitter instead of expensive PR campaign. His emphasis on finding ways to contain the costs is one of his strategies outlined in his book The Art of the Deal. (Source: "Donald Trump's Campaign Blueprint: His Own Book," The Wall Street Journal, Monica Langley, March 2, 2016.)

"Borrow knowing that if the economy crashed, you could make a deal. U.S. will never default because you can print the money." These are the most dangerous statements Trump has uttered. 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. Treasuries. That would create a recession. (Source: "U.S. Will Never Default Because You Print the Money," CNN, May 10, 2016. "Donald Trump's Economic Plans Would Destroy the Economy," The Atlantic, May 8, 2016.)

See how Trump's Debt Reduction Plan Instead Adds $5.3 Trillion

 

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