Can Trump Bring Back American Jobs?
Donald Trump promised to be the greatest job-producing president in U.S. history. During his 2016 campaign, he pledged to create 25 million jobs in the next 10 years. If he did it in eight years, that would beat the current record-holder, President Bill Clinton, who created 18.6 million jobs during his two terms.
To create those jobs, Trump promised to boost economic growth to 4% per year. He pledged to create strong, well-paying jobs, not just low-wage service positions. His plan includes an "America-First" trade policy, tax cuts, rebuilding infrastructure and more. Let's look at the details of his policies and how they've worked during his first term.
COVID-19 and the Economy
In his first three years, before the COVID-19 pandemic caused major economic disruption, Trump created 6.5 million jobs. That's a 4.2% increase over the 152.2 million people working at the end of Obama's term. However, the coronavirus pandemic has offset these gains significantly.
The long-term economic effects of the pandemic remain to be seen, but its initial impact has been felt in record job losses. Between February and April 2020, more than 25.3 million Americans filed for unemployment. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed by Trump and Congress in March 2020, seeks to curb these losses through several forms of assistance to businesses, including:
- Employee retention credits of 50% on up to $10,000 in wages for each employee
- Payroll tax credits and deferrals
- Loans to cover payroll costs
Even with these relief efforts, economists expect the labor market to continue struggling, so it's possible Trump may make further policy adjustments.
"America First" Trade Policy
Trump's trade policy is based on economic nationalism. He supports tariffs, duties, and other forms of protectionism to give domestic industries a competitive advantage. It does this in a few primary ways.
End Outsourcing and Bring Jobs Back From Overseas
America lost 31.4% of its manufacturing jobs between 2000 and 2011. These were well-paying, steady jobs. On average, manufacturing jobs pay $29.11 per hour.
U.S. companies outsourced many of these jobs to save money. But robotics, artificial intelligence, and bio-engineering also made some jobs obsolete, so ending outsourcing may not bring back all the jobs that were lost. It's possible that government-sponsored training for these specialties might create more jobs for U.S. workers than a trade war.
Increase U.S. Competitiveness Against China
Trump plans to take action to reduce China's use of subsidies, which undercut U.S. prices. He would prosecute these trade cases against China at the World Trade Organization. If China persists, then he would impose countervailing duties on all imports from China. He would also identify where China has stolen intellectual property from U.S. companies and bring these trade disputes to the WTO. But China could retaliate against U.S. subsidies for oil, agriculture, and ethanol.
Trump's initial trade agreement with China, signed in January 2020, addresses some of these issues but does not deal with Chinese subsidies.
Trump pulled out of the Trans-Pacific Partnership, saying it would force U.S. workers to compete with lower-paid Vietnamese workers, thus sending more jobs overseas. On the other hand, the TPP was formed to help the United States strengthen its ties with Asian countries that are struggling to compete with China. Without the TPP, proponents argue, these countries will rely more on China and less on the United States, making America less competitive.
Strengthen U.S. Competitiveness Against Mexico
Trump has many initiatives that involve Mexico. His first target was to renegotiate the North American Free Trade Agreement, which he did in 2018. The goal was to bring back some U.S. manufacturing jobs that are now sent across the border. It would also put other companies out of business without the low-cost labor that Mexico provides.
If Mexico had refused to revisit NAFTA, then Trump threatened a 35% tariff on its imports. Mexico wouldn't risk losing nearly $350 billion in exports to the United States. If the tariff were imposed, it could create jobs for U.S. producers of these imports. That would include manufactured products, oil, and agriculture. On the other hand, U.S. consumers would face imported goods that were 35% more expensive.
Trump successfully renegotiated some of these terms in 2018. The new treaty, now called the U.S.-Mexico-Canada Agreement (USMCA), was officially ratified by all three parties in early 2020.
Had Trump dumped NAFTA, the resultant higher tariffs would have increase prices for imports from Mexico on such goods as oil, fruits, and manufactured goods almost overnight. Meanwhile, the volume of U.S. agricultural exports to Mexico would have fallen drastically as Mexico would have raised its tariffs in retaliation. On the other hand, low-cost factories set up by U.S. companies in Mexico could close and return to America.
Trump's firm stance on immigration is also part of his Mexico policy. Trump promised to erect a wall on the Mexican border and force Mexico to pay for it. At the same time, he has increase efforts to deport undocumented workers. By reducing the number of low-wage illegal employees, Trump hopes to increase the number of jobs available to Americans. But these are not the well-paying jobs he promised. In many cases, farmers and other businesses cannot find enough legal workers to fill these jobs. Many of them worry they will go bankrupt if Trump closes the border.
Reduce Corporate and Investment Taxes
The United States has one of the highest corporate tax rates in the world, which many argue forces companies to move their operations and jobs overseas. Trump's tax plan seeks to address this by lowering the corporate tax rate from 38% to 21%. This change may not be as dramatic as it sounds, though. After deductions, the effective corporate tax rate was already around 18% before the cuts.
Many economists argue that a more cost-effective method would be to cut business payroll taxes and target any stimulus to small businesses, which produce 65% of all new jobs. In their view, anything that would increase the circulation of money in the economy would have more lasting effects.
Spend $1 Trillion to Rebuild U.S. Infrastructure
Trump promised to spend at least $1 trillion over 10 years to repair America's aging roads, bridges, and airports. If Trump got his way, it would be more than Obama's Economic Stimulus Plan, which spent $105 billion on shovel-ready projects.
Infrastructure investment has been shown to be one of the most efficient ways to use federal dollars to create jobs. A study by the Center on Globalization, Governance & Competitiveness at Duke University found that $1 billion dollars o federal investment in infrastructure creates 21,761 jobs.
If Trump and Congress can come to an agreement about infrastructure spending, it could bring a large number of jobs back. So far, though, they have had trouble agreeing on long-term spending plans in this area.
In his first 100 days, Trump declared a moratorium on expanding federal regulations, saying that for every new regulation, two existing ones would need to be removed. He asked federal agencies to identify regulations on businesses that cost jobs so they can be repealed.
For example, Trump wanted to dismantle the Dodd-Frank Wall Street Reform Act, which brought heavier regulations to U.S. banks. He said the Dodd-Frank regulations may actually encourage banks to take risks and rely on government bailouts.
Trump and Congress came to an agreement on some modifications to Dodd-Frank in 2018, but nothing near the wholesale repeal the president wanted.
How It Affects You
Trump's expansionary fiscal policy has created U.S. jobs in the short run, but the question is whether that prosperity will last. In the long run, these policies could cost jobs. The growth Trump is planning is higher than a realistic growth rate of 2% to 3%. That kind of a boom often leads to a bust, and we're seeing the beginnings of that bust as the pandemic unfolds.
The National Association of Manufacturers (NAM) agrees with Trump's plan to lower U.S. manufacturing costs, which are significantly higher than in other countries. It would also like to see him reduce regulations that cost manufacturing companies nearly twice what companies in other industries pay to comply with regulations. On the other hand, NAM disagrees with Trump's plan to end free trade agreements. Other countries have promised to raise tariffs in return. That reduces American exports to those countries, which could slow U.S. growth and lead to increased prices for American consumers.
Experts also debate how effective tax cuts are at inducing economic growth. Tax cuts are often considered an expensive way to create jobs. Historically, tax cuts haven't created enough new jobs to finance themselves, so the verdict is still out on whether Trump's 2017 tax cuts will ultimately help the economy.
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