President Donald Trump's Policies and Economic Plan
Republican Donald John Trump is the 45th president of the United States, defeating Democratic nominee Hillary Clinton on Nov. 8, 2016. His first term is from 2017 to 2021. In the 2020 election, he will run against Democrat Joe Biden. 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 June 1, 2017, Trump announced the U.S. withdrawal from the Paris Climate Agreement. The 195 signatories had pledged to cut their greenhouse-gas emissions to a level that's 26% to 28% below 2005 levels by 2025. They agreed to reduce emissions to zero by 2100, and committed $3 billion to the poorer countries who 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 to 2 degrees Celsius above pre-industrial levels. A 2018 study found that temperatures above that level would pass a tipping point. For example, the Arctic tundra would thaw, releasing 45,000 years' worth of trapped greenhouse gases. It would create catastrophic warming of 5 degrees Celsius or more, and increase sea levels by 200 feet.
The United States is responsible for 20% of the world's greenhouse gas emissions. The other signatories can't 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 agreement. 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 Trump's action would give foreign competitors an edge in clean energy industries. U.S. companies will lose government support and subsidies in these industries.
It will take four years to withdraw formally, making it an issue in the 2020 presidential election.
Trump also promised to eliminate the Climate Action Plan and the Waters of U.S. rule. He pledged to allow more drilling on federal lands of shale oil and natural gas.
On Oct. 9, 2017, the Trump Administration announced it would repeal the Clean Power Plan. The repeal would withdraw Obama-era limits 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 Aug. 2, 2018, the Trump Administration announced it would allow automakers to keep fuel efficiency standards at 36.9 miles per gallon. It rescinds the Obama Administration's deal with automakers to increase to 54 miles per gallon by 2025. It would also revoke states' rights to set their own more-stringent standards. It would increase U.S. oil consumption, increasing greenhouse gas emissions.
On Sept. 10, 2018, the administration planned to allow oil drillers to emit more methane into the atmosphere. It also began opening up more federal land to oil drillers. But a federal judge blocked the auction because the administration did not take into account the impact on climate change.
In March 2019, House Democrats drafted a bill to require the United States to honor its commitment to the Paris Climate Agreement. The bill passed the House a few weeks later, but the Republican-controlled Senate has yet to take up the bill.
Smart Trade, Not Stupid Trade
Trump's trade policies promote mercantilism. He uses protectionism to defend U.S. industries from foreign competition. His goal is to reduce the U.S. trade deficit. In theory, the wealthier companies then generate higher taxes to fund military growth.
On September 2, 2017, Trump instructed aides to withdraw from the U.S. trade agreement with South Korea. He wants the country to import more U.S. goods.
On January 23, 2017, Trump signed an order to withdraw from further negotiations on the Trans-Pacific Partnership. He promised to replace it with a series of bilateral agreements. As a result, Japan and the European Union announced their own trade deal. On July 6, 2017, they agreed to increase Japanese auto exports to the EU and European food exports to Japan.
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% tariff.
On January 22, 2018, Trump imposed tariffs and quotas on imported solar panels and washing machines. On March 1, 2018, he announced a 25% tariff on steel imports and a 10% tariff on aluminum. Steel users, like automakers, will see higher costs, which they likely will pass onto consumers. The stock market fell, as analysts correctly forecast that Trump's actions might start a trade war.
On April 3, 2018, Trump announced 25% tariffs on $50 billion in Chinese imported electronics, aerospace, and machinery. The administration wants China to stop requiring U.S. companies to transfer their proprietary technology to Chinese firms in order gain access to their market. China retaliated hours later, announcing 25% tariffs on $50 billion of U.S. exports to China.
On April 6, 2018, Trump announced tariffs on $100 billion more of Chinese imports. Four days later, China said that trade negotiations had broken down. The United States demanded that China stop subsidizing the 10 industries prioritized in its "Made in China 2025" plan. Later that day, Chinese President Xi Jinping said he would reduce tariffs on imported vehicles. Although it allowed Trump to save face, it wouldn't affect trade very much. Most automakers find it is cheaper to build in China, regardless of tariffs.
On May 15, 2018, China agreed to remove tariffs on U.S. pork imports, and allow Qualcomm to acquire NXP. In exchange, the United States will remove tariffs on Chinese telecom company ZTE. Many countries see Trump's removal of tariffs on ZTE as a weakness they could exploit.
In the midst of all of this back-and-forth with China, Trump announced on May 8, 2018, that he would withdraw the United States from the Iran nuclear deal.
Repeal and Replace Obamacare
The Trump administration has weakened Obamacare even without repealing and replacing it. The Tax Cuts and Jobs Act repeals the Affordable Care Act's tax penalties for those who don't get insurance. On January 11, 2018, it allowed states to impose work requirements on Medicaid recipients. It shortened the enrollment period and closed the federal exchanges during peak times during enrollment.
Trump stopped reimbursing insurance companies for costs they incurred helping low-income customers. As a result of Trump's threat, many companies forced states to allow premium increases in exchange for remaining on the exchanges for 2018.
Reduce the Debt
Trump promised to reduce the national debt by eliminating waste in federal spending. He emphasized cost containment in his book, "The Art of the Deal." But in practice, the national debt has exploded under his administration, going from just under $20 trillion in January 2017 to more than $24 trillion by April 2020.
Trump said that cutting taxes will increase growth enough to offset the loss of revenue, an economic theory popular with conservatives known as "supply-side economics" (and derisively referred to by critics as "trickle-down economics"). The 2017 Tax Cuts and Jobs Act cut income taxes and lowered the corporate tax rate to 21%. But Trump's tax cuts will cost the government by increasing the debt. Even the lynchpin of this theory, the Laffer curve, requires that tax rates be in the prohibitive zone (above 50%) to work.
Trump promised to grow the economy by 6% annually to increase tax revenues, but economists worry this would be too fast for healthy economic growth. The concern is that such a fast rate of growth would create inflation, a boom-bust cycle, and then a crash. His tax plan forecasts a more modest 3% growth rate.
Trump said he could continue to "borrow knowing that if the economy crashed, you could make a deal. The U.S. will never default because you can print the money." Economists warn that this is a dangerous sentiment as taking this approach could result in a major financial crisis. Excessive printing of money would send the dollar into a collapse, which would send the entire world into another Great Depression. Interest rates would rise as creditors lost faith in U.S. Treasurys.
Send Illegal Immigrants Back
Trump's immigration policies focus on blocking illegal immigration, and raising new barriers for legal immigration. He promised to deport the two to three 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," which are cities that refuse to cooperate with federal authorities in enforcing federal immigration laws.
A crucial part of Trump's plan is to build a wall along the 2,000-mile U.S. border with Mexico. He estimated the cost at between $10 and $20 billion. But Congress did not include funding in the Fiscal Year 2017 budget, and only added $1.6 billion to the FY 2018 budget, with House Democrats arguing that Trump had not lived up to his promise that he would force Mexico to pay for the wall. Trump threatened to change a rule under the USA Patriot Act that would confiscate Western Union money transfers to Mexico from immigrants who are in the U.S. illegally, but as of 2020 he has not convinced Mexico to fund the wall.
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 hundreds of thousands of foreign workers to fill many Silicon Valley jobs. In 2014, 65% of all these visas were for computer-related jobs. If the H-1B visa program were threatened, experts worry these companies could lose market share and valuable employees.
Cut the Red Tape
During 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 U.S. Chamber of Commerce reported the Trump administration had issued 29 deregulatory executive actions. Federal agencies promptly issued 100 more directives. Congress introduced 50 pieces of legislation, and 14 Obama regulations were repealed. That includes a Consumer Finance Protection Bureau regulation that allowed consumers to sue credit card companies. The administration also made significant efforts to rescind Clean Air Act and Clean Water Act rules.
In many small ways, Trump has chipped away at regulations without involving Congress. For example, the Labor Department delayed a fiduciary rule to July 1, 2019, that would allow financial planners not to have to keep their customers' interest first when offering certain exempt financial products.
In 2018, President Trump signed the Economic Growth, Regulatory Relief, and Consumer Protection Act. It eased regulations on banks with assets from $100 billion to $250 billion. The act weakened the Dodd-Frank Wall Street Reform and Consumer Protect Act of 2010.
The rollback means the Fed can't designate these banks as too big to fail. They also no longer have to hold as much in assets to protect against a cash crunch, and may not be subject to the Fed's "stress tests." In addition, these smaller banks no longer have to comply with the Volcker Rule. Now banks with less than $10 billion in assets can, once again, use depositors' funds for risky investments.
The National Association of Manufacturers said that industry regulations cost the economy $2 trillion a year. Its studies show that U.S. manufacturing costs are 20% higher than in other countries. Trump hopes reducing regulations will help bring back some American jobs.
Cut Government Spending
Trump promised to cut waste, and has reduced the number of federal employees with a hiring freeze and promised budget reductions. Many appointed positions remain unfilled.
On the other hand, Trump increased FY 2018 budget to $4.094 trillion. Three years later, the proposed FY 2021 budget had ballooned to $4.8 trillion.
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 and cut the Energy Department budget by $2.2 billion. But cutting these small departments won't do much to reduce government spending.
Trump also 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% self-funded. These two programs cost $1.587 trillion, or 39% of total federal spending.
Be the Greatest Job-Producing President
Trump has said he would like to create more jobs than any other president in U.S. history, but he would have to create more than 18.6 million jobs to take that title, which is how many jobs President Bill Clinton created in the 1990s. To create the most jobs percentage-wise, Trump would have to beat President Franklin D. Roosevelt, who increased jobs by 21.5% during his tenure. Trump would have to create at least 32.7 million jobs to beat FDR's record.
Specifically, Trump has indicated three specific policies that he argues would boost job creation.
Policy No. 1: Spend $1 Trillion to Rebuild U.S. Infrastructure
In January 2018, the administration released its infrastructure plan. It provided details lacking in the June 8, 2017, "Rebuild America" plan. That plan outlined $200 billion in spending over 10 years to leverage $800 billion in business spending, and would reduce permit process time by eight years. It would create one million apprentices in two years. However, critics argue the plan is not realistic.
Trump's plan aims to boost growth, claiming that construction is the most efficient use of federal dollars to create jobs. A study found that each $1 billion spent on public works creates 19,795 jobs. That's better than defense spending, which created 8,555 for the same cost.
Policy No. 2: Eliminate Outsourcing and Bring Back Jobs
The United States lost 34% 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. Trump has said that he wants to punish companies that outsource and bring back jobs that have gone to Asia and Mexico.
Policy No. 3: Don't Raise the Minimum Wage
The U.S. minimum wage has been $7.25 an hour since 2009, despite the fact that inflation has risen 19% in the decade since. Many states with higher costs-of-living mandated higher wages. Ireland, the United Kingdom, Australia, and six European Union countries have a higher minimum wage than the United States. However, the Trump Administration argues that a lower minimum wage makes U.S. businesses more competitive.
Make the U.S. Military so Strong No One Will Mess With Us
Trump promised to increase the Department of Defense budget by 10%. He added that 3% of gross national product (GNP) for military spending is too low, and should be 6.5% instead. The FY 2020 budget authorized $738 billion in national security spending, far above the $606 billion in the FY 2017 budget.
Trump made other specific DoD promises:
- Get more equipment
- Bomb the Islamic State group and send troops to Syria, and use Russia as an ally in Syria
- Add more U.S. Navy ships and expand the Air Force
- Develop a state-of-the-art missile system to defend from Iran and North Korea.
- End the defense sequester
At first, Trump approved of waterboarding. However, he later said he no longer supports waterboarding. He said he based his change of heart on a conversation with retired Marine Corps Gen. James Mattis.
On May 11, 2017, 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.
Trump promised to reform the Department of Veteran's Affairs. He said he would increase funding for battle-related mental and chronic illness. On January 9, 2018, Trump signed an executive order that expands mental health care for veterans returning to private life. Then-Veterans Affairs Secretary David Shulkin said suicide among veterans was top priority, as 20 veterans take their own lives each day.
Trump also promised many specific changes to the VA:
- Give veterans vouchers to use either with the VA or their doctor, in the hopes that competition would give the VA an incentive to improve service
- Provide transitional benefits, such as business loans, job training, and placement services to help veterans find employment
- 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
Trump's Criticism of the Yuan
After meeting with Chinese President Xi Jinping on April 7, 2017, Trump dropped the claim that China was a currency manipulator. He had said that China artificially undervalued its currency, the yuan, by 15-40%. Part of China's cost advantage is its cheaper standard of living that allows lower wages, and the yuan has a fixed exchange rate that's pegged to the dollar. In 2000, the yuan was undervalued by 30%, but much 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% between 2000 and 2013.
Second, the dollar strengthened by 25% in 2014, taking the Chinese yuan with it. As a result, 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, contradicting Trump's claims that the yuan is undervalued.
Trump Drops Health Care Promises
Trump made some health care promises on the campaign trail that have been dropped. 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.
Other Presidents' Economic Policies
- Barack Obama (2009–2017)
- George W. Bush (2001–2009)
- Bill Clinton (1993–2001)
- Ronald Reagan (1981–1989)
- Jimmy Carter (1977–1981)
- Richard M. Nixon (1969–1974)
- Lyndon B. Johnson (1963–1969)
- John F. Kennedy (1961–1963)
- Harry Truman (1945–1953)
- Franklin D. Roosevelt (1933–1945)
- Herbert Hoover (1929–1933)
- Woodrow Wilson (1913–1921)
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