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

Donald Trump (2017 - 2021) is the 45th president of the United States. His 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

First 100 Days

On January 30, 2017, President Trump signed an executive order reducing regulations. The order required any federal agency that proposes a new regulation must identify two existing ones to eliminate.

On Inauguration Day, White House Chief of Staff Reince Priebus prepared a memo to all agencies halting any new regulations. (Source: "Trump Signs Executive Order To 'Ease The Burdens Of Obamacare,'" NPR.com, January 20, 2017.)

On January 27, 2017, Trump signed an order banning residents from seven countries from entering the United States. Those countries are Iraq, Syria, Iran, Libya, Somalia, Sudan and Yemen. The ban is in effect for 90 days. During that time, the Secretary of Homeland Security will determine which countries do not supply enough information in their visa applications. 

Trump also banned all refugees for four months. Homeland Security would review the application process to prevent exploitation by terrorists. Trump banned Syrian refugees indefinitely. (Source: " Trump's Latest Executive Order: Banning People From Seven Countries," CNN, January 28, 2017.)

The American Civil Liberties Union and others promptly filed lawsuits on behalf of clients affected by the ban.

On February 3, federal judge James Robart blocked the ban in response to one of the lawsuits. The Department of Homeland Security suspended the ban's enforcement on February 5. (Source: "Trump Administration Appealing Seattle Judge's Halt of the Refugee Travel Ban," The Seattle Times, February 4, 2017.

 

On January 25, 2017, Trump signed an executive order to build a wall along the  2,000 mile Mexican border.The wall would include fencing where appropriate. He estimates the cost at $10 billion to $20 billion. That's the same as the budget for either the Justice Department or NASA. Trump's order redirects current funds to cover the cost.  (Source: "Trump Asking Congress, Not Mexico, to Pay for Border Wall," CNN Politics, January 6, 2017.)

Trump's Homeland Security Secretary John Kelly said the wall wouldn't work unless border agents patrolled it. He said the best way to stop drug smugglers was drying it up at the source. He partnered with Peru and other countries when He led the U.S. Southern Command. (Source: "Homeland Security Secretary Has Said Border Wall Alone Will Not Work," The New York Times, January 25, 2017. 

He promised to force Mexico to pay for the wall. If it refused, he threatened to change a rule under the USA Patriot Act, an antiterrorism law. The change would confiscate Western Union money transfers to Mexico from immigrants here illegally.

The Mexican central bank reported that $25 billion was sent from abroad. There are no exact figures on how much of that is from U.S. immigrants. (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.)

Trump's other orders require stronger vetting for immigrants from the Middle East and Africa. He would also withhold federal funds from "sanctuary cities." That's if they don't turn over criminals in America illegally. He would also add 5,000 border agents. (Source: "Trump Readies Plan to Build Border Wall," The Wall Street Journal, January 25, 2017. "Trump Moves to Act on Border Wall, Crack Down on Immigration," Bloomberg, January 25, 2017.)

On January 24, Trump signed an order allowing construction of the Keystone XL and Dakota Access pipelines. They'd ship high-grade Canadian crude oil to refineries in the Gulf region. Oil companies plan to ship that oil to Latin America. This reduction of domestic supply will raise U.S. oil and gas prices. (Source: "Why the Keystone Pipeline Will Raise U.S. Oil Prices," Zero Hedge, January 24, 2017.)

On his first Monday in office, Trump signed an order to withdraw from further negotiations on the Trans-Pacific Partnership. He would replace it with a series of bilateral agreements. He promised to negotiate harder to protect American jobs. (Source: "Trump to Withdraw from TPP," CNN Politics, January 23, 2017.)

He signed an order to renegotiate the North American Free Trade Agreement (NAFTA). He will assign the negotiations to his team of incoming appointees. They include Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer. It also includes the head of the new White House Trade Council, Peter Navarro. (Source: "Trump Orders Imminent to Renegotiate NAFTA, Back Out of TPP," CNN Politico, January 23, 2017.)

Here's What Happens If Trump Dumps NAFTA.

Trump ordered a five-year ban on administration officials becoming lobbyists. (Obama also proposed this ban during his 2008 campaign.) Trump promised a lifetime ban for any executive lobbying on behalf of another country. 

On January 20, 2017, President Trump signed an executive order to "ease the burden" of Obamacare. It directs federal agencies to do what they can within the existing law to lift the Affordable Care Act's mandates. For more, see Trump's Health Care Agenda.

He signed an order to remove a discount on Federal Housing Administration mortgages for low-income homebuyers. The FHA said it planned lower mortgage costs to offset higher interest rates. (Source: "FHA Mortgage Premium Cuts Helping Low-income Homebuyers Canceled by President Trump," CBS News, January 20, 2017.)

On November 22, 2016, Trump promised to make three additional Executive Orders. First, cancel restrictions on shale oil, clean coal and other energy production. Second, ask the Defense Department to develop a plan to protect the nation's infrastructure from cyber-attacks. Third, ask the Labor Department to identify any abuse of the nation's visa program.

Here is the rest of Trump's economic plan, and how it impacts you. 

"5-Part Tax Plan"

Eliminate the marriage penalty, the Alternative Minimum Tax, and the inheritance tax. Quadruple the standard deduction. Add a child care deduction. It would allow parents to deduct the average cost of child care expenses. (Source: "An America First Economic Plan," Donald J. Trump. "Donald Trump Just Made Major Changes to His Tax Plan," CNBC, August 8, 2016.)

Simplify tax preparation by reducing the current seven tax brackets to three. Create the following tax schedule:

Current Income Tax Rate
 
Trump's Tax Plan Income Levels for Those Filing As:
IncomeCap GainsSingleMarried-Joint
10%-15%12%0%$0-$37,500$0 - $75,000
25%-28%25%15%$37,500 - $112,500 $75,000 - $225,000
28%-39.6%33%20%$112,500 +$225,000 +

Lower the maximum small business and corporate tax rate from 38 percent to 15 percent.  Get corporations to bring money back into the United States. Most corporations use loopholes that allow them to pay just 15 percent already. Almost half pay no taxes at all since they pass the cost to their shareholders. A lower corporate tax rate would increase profits but might not create jobs. That's because supply-side economics doesn't work at today's relatively low tax rates. (Source: "Donald Trump Tax Reform," OnTheIssues.org.)

“Taxes for the rich would go up somewhat.” “If I increase it on the wealthy, they're still going to pay less than they pay now.” Trump gave conflicting statements on how his tax plan will affect high-income taxpayers (the top 20 percent). But his plan would give high-income taxpayers a 9.5 percent cut in their tax rate. (Source: "Donald Trump Tries to Clean Up Economic Comments," CNN, May 10, 2016.)

Offset the tax cuts by eliminating loopholes.  Trump hasn't been specific about this either. The Tax Policy Center says his plan would add almost $1 trillion a year to the national debt. That's because capital gains tax cuts stimulate investment more than economic growth. Low-income taxpayers spend a large proportion of their income, boosting gross domestic product. Trump only gives the middle class a 4.9 percent increase in after-tax income. (Source: "An Analysis of Donald Trump's Tax Plan," Tax Policy Center, December 22, 2015. "Indecent Disclosure," The Economist, January 2, 2015.)

End tax deferral on the $5 trillion in corporate cash held abroad. Allow a one-time repatriation that will be taxed 10 percent. Eliminate loopholes available to the very rich and corporations, such as the exemption on life insurance interest. Steepen the curve of the Personal Exemption Phase-Out and the Pease Limitation on itemized deductions. Phase in a cap on business interest expenses. (Source: CNBC Interview, March 10, 2016. "Tax Reform," DonaldJTrump.com.)

Eliminate the "carried interest" deduction.  This deduction allows managers of hedge funds and private equity funds to be taxed at the capital gains tax rate (15 percent) instead of the income tax rate (39.6 percent). (Source: "Hedge Fund Managers Are Getting Away With Murder," Fortune, August 24, 2015.)

To find out how this plan will affect you, see Trump's Tax Plan.

"Cut Government Spending"

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 also said he might appoint 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.)

Cut defense spending. Trump also said "3 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 sequester. U.S. military spending is almost $800 billion a year. It's larger than any other government expenditure except Social Security at $967 billion. It's bigger than the deficit of $503 billion. It's greater than those of the next 10 largest government expenditures combined. It's four times more than China's military budget of $216 billion. It's almost 10 times bigger than Russia's budget of just $84.5 billion. According to the Center for International Policy, Trump's defense budget could be $90 billion more than Obama's most recent budget request. (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 posttraumatic 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.)

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

Reduce the deficit by cutting waste. Trump would have to cut $500 billion in waste to eliminate the current budget deficit. That's a 12 percent reduction in the $4.147 trillion budget he will inherit from President Obama. As any business owner knows, a 12 percent cut could be doable but painful. For more, see 5 Myths About Cutting Government Spending.

Eliminate the Department of Education and the Environmental Protection Administration. That might save $69.4 billion, although Trump may reprogram the funds for state block grants. Defunding the EPA would only save $8.3 billion. It begs the question of who would enforce the existing laws.

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 $1.565 trillion, or 38 percent of total spending. For more, see Mandatory Budget

Repeal and Replace Obamacare

Allow health insurance companies to operate across states lines. Remove the mandate to buy insurance. Allow tax deductions for health insurance premiums and health savings accounts. Expand Medicaid to all states by making it a block grant program. Allow consumers to purchase drugs overseas. Congressional Republicans are developing a plan that includes most of these strategies. They will need Democratic support to pass it.

Offer a universal “market-based” plan that would provide a range of choices similar to the Federal Employees Health Benefits Program. The universal health care 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.) 

"Smart Trade, Not Stupid Trade"

Do a better job of negotiating trade agreements. China taxes our exports, but we don't tax its exports. This is true to some extent. China requires American companies to set up factories to hire and train local workers before they can sell to its market. It would be easy for the United States to do the same thing. See more about China's economy.

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.)

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.

"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.

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.

Spend $1 trillion to rebuild U.S. infrastructure. That's $100 billion a year for ten years to repair America's aging roads, bridges and airports. That's more than Obama's Economic Stimulus Plan, which spent $261 billion in four years on shovel-ready projects. 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.)  

"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"

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?

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

"Send Illegal Immigrants Back"

Open a door for legal immigrants.  Deport the 2 - 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."

The Department of Homeland Security reported in 2013 that there were 1.9 million "removable criminal aliens" in the country. That included both legal and illegal immigrants. That's fewer than the 2.4 million deportations during the Obama administration. In 2015, 91 percent of deported immigrants had criminal records. Trump promises to do this "immediately." As Mexico's economy improves, it's begun gaining immigrants itself. Since 2000, more Americans have immigrated to Mexico than the reverse. (Source: "Trump Plans to Immediately Deport Two Million to Three Million Undocumented Immigrants," The Washington Post, November 14, 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.)

America First Energy Plan

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. He claims this would raise wages by $30 billion over seven years. (Source: "America First Energy Plan," WhiteHouse.gov.)

Trump's plan could aggravate global warming and 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.

How does Trump's economic plan compare to Hillary Clinton's economic plan?

Other Presidents' Economic Policies

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