The Trumponomics con game
looks at the pro-business agenda behind Donald Trump's economic plan.
DONALD TRUMP famously broke with Republican orthodoxy by criticizing free trade deals and promising to champion manufacturing workers, but the core of his economic policy is designed to benefit the billionaires and former generals who dominate his cabinet.
Trump may be able to rev up the U.S. economy through tax cuts and spending on infrastructure and defense. There may even be some reindustrialization of the U.S. economy based on a combination of corporate tax giveaways and political pressure--like the deal to save 800 jobs at a Carrier plant in Indiana.
An elite group around Trump, along with a section of the U.S. capitalist class and current and former Pentagon officials, has concluded that a revival of U.S. manufacturing is necessary for the maintenance of U.S. economic and political power.
But Trump's wider program of deregulation, privatization and cuts in government spending--including the repeal of Obamacare--will lower working-class living standards overall. Plus, any growth created by his policies is unlikely to reverse the long-term trends towards stagnation in the U.S. and global economy.
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WRITING ABOUT Trump's proposal for huge corporate and income tax cuts, Lawrence Summers, himself an architect of pro-business, neoliberal economic policy in the Clinton administration, wrote that Trump will "massively favor the top 1 percent of income earners, threaten an explosive rise in federal debt, complicate the tax code and do little if anything to spur growth."
This is Republican "voodoo economics" all over again. The wealthiest income-earners are likely to bank the estimated $215,000-a-year tax break they would receive--while middle-class and working-class people likelier to spend their share of any tax cuts would only receive about $2,000 a year under Trump's plan.
Trump's $1 trillion infrastructure plan is also underpowered. As Neil Loehlein pointed out at SocialistWorker.org, the amount needed just to rebuild existing U.S. infrastructure is more than three times that figure. And much of Trump's plan is built around tax breaks for private corporations, rather than government spending that could create jobs.
It's the kind of deal with guaranteed returns that Wall Street loves to finance--which is why it's no coincidence that former Goldman Sachs banker Steven Mnuchin is set to become Treasury Secretary, while the number-two Goldman executive, Gary Cohn, will leave the company to run Trump's National Economic Council.
In any event, a big stimulus centered on infrastructure is no guarantee of wider economic growth. The Japanese government's big spending on roads, bridges and more recently has not compensated for a failure of Japanese business to invest.
Protectionist measures that undo free-trade policies--a centerpiece of Trump's promises on the economy--might succeed in creating some industrial jobs at companies lured by tax breaks, lax regulations and anti-labor laws modeled on state-level "right to work" legislation imposed most recently in former union strongholds like Indiana, Michigan and Wisconsin.
But these jobs, if they ever materialize, would almost certainly not be the kind of decently paid ones that characterized the industrial Midwest 30 or 40 years ago.
Nevertheless, Trump's political advisers like Steve Bannon calculate that any job creation would yield political results for a Trump re-election campaign in 2020. As Bannon--former chief of the openly racist Breitbart News website--said in an interview:
Like [Andrew] Jackson's populism, we're going to build an entirely new political movement. It's everything related to jobs. The conservatives are going to go crazy. I'm the guy pushing a trillion-dollar infrastructure plan. With negative interest rates throughout the world, it's the greatest opportunity to rebuild everything. Shipyards, ironworks, get them all jacked up. We're just going to throw it up against the wall and see if it sticks. It will be as exciting as the 1930s, greater than the Reagan revolution--conservatives, plus populists, in an economic nationalist movement.
Of course, it's one thing for a demagogue like Bannon to spout off about "rebuilding everything" and quite another to imagine Wall Street or the Republican leadership in Congress going along with any such program.
This is essential to understand in any discussion of Trumponomics before Inauguration Day: The administration is filling up with figures who, on certain crucial points at least, disagree with each other, sometimes quite bitterly. Which faction wins out and on what terms is impossible to predict in advance.
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BREITBART'S MESSAGE about creating jobs and boosting manufacturing was part of the Trump campaign's appeal that won a substantial number of working-class votes in the industrial Midwest.
Intimately connected to employment was the issue of trade, especially with China. U.S. factory jobs were being lost, Trump said, because China keeps the value of its currency, the yuan, artificially low. Trump also blamed industrial job loss on NAFTA, the U.S. free trade deal with Canada and Mexico.
But it's worth remembering that the 2012 Republican presidential nominee Mitt Romney also declared that, if elected, he would label China a "currency manipulator" and get tough on trade.
Barack Obama made similar promises when first running for president in 2008--and even spoke about renegotiating NAFTA, although an Obama adviser privately told Canadian officials that Obama had no intention of actually doing so. It was just a campaign promise meant to be broken.
Trump, however, is likely to try to take some action against China. Although he himself has benefitted from sourcing Trump-branded material in China and other low-wage countries, the incoming president speaks for a faction in Corporate America and the national security apparatus that is demanding more policies to check China's rise as both an economic and military power.
This approach isn't entirely new. The Obama administration's "pivot to Asia" was intended to hem in China's rising power by strengthening U.S. military alliances in the region and negotiating the Trans-Pacific Partnership (TPP) trade deal, which excluded China.
From the standpoint of Corporate America, the TPP offered big gains by further enabling the offshoring of jobs whenever that would reduce costs, while safeguarding intellectual property and patents and entrenching their control over data and privacy to ensure the flow of profits back to the U.S.
Opposition to the TPP came initially from organized labor and the left, and the Bernie Sanders presidential campaign reflected their attitudes. The left objected both to the secret negotiations process, but also the NAFTA-style free hand that the deal would give to transnational companies.
On the right, the Trump campaign also spotlighted criticisms of the TPP, in part to cynically tap into popular anger against trade deals perceived to cost jobs, but also because he and his circle concluded the deal wouldn't address the fundamental problems for the U.S. created by China's growing industrial clout. In Trump's eyes, the U.S. would gain more from negotiating trade deals with individual countries rather than getting tied down in multilateral deals like the TPP.
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TRUMP'S SLOGAN "Make America Great Again" was shorthand for an economic nationalist program that's still taking shape.
But the big question is whether--and if so, how--a Bannon-type jobs program based on borrowing and economic nationalism can coexist with the mainstream Republican agenda of Congress and the investment bankers and capitalists who will occupy key strategic positions in the Trump administration.
Consider Trump's choice for Commerce Secretary, Wilbur Ross, the figure who is supposedly the most economic nationalist member of Trump's cabinet. Ross even gained the support of unions when he purchased bankrupt textile and steel companies in the early 2000s.
But in his takeover of the old LTV Steel, Ross made money by using bankruptcy proceedings to wipe out retiree pensions while slashing steelworkers' jobs. Ross' company quietly dismantled an entire steel mill in Cleveland and shipped it to...China! Ross then sold his U.S. steel holdings to Luxembourg-based ArcelorMittal for $4.5 billion.
If Ross' record is any guide to what Trump's make-America-great economic program will look like, it will be about the creation of low-wage jobs in poorly regulated industries.
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WHATEVER TRUMP ends up proposing will have to get through a Republican Congress that is bent on shredding what remains of the always-weak U.S. welfare state.
House Speaker Paul Ryan has long wanted to repeal Obamacare, introduce market "reforms" into Medicare and Medicaid, and privatize Social Security. The Tea Party faction in the House and the business interests that bankroll them will want all that and more.
Trump has already signaled that he'll be responsive to at least some of those demands. Thus, he named South Carolina Rep. Mick Mulvaney, co-founder of the House Freedom Caucus, as head of the Office of Management and Budget.
If Ryan and Congressional Republicans have their way, they'll not only slash spending on social programs, but also privatize or dismantle the government departments and agencies that administered them.
Thus, Trump appointed Betsy DeVos as Secretary of Education based on her record of successfully lobbying for and bankrolling the privatization of public education in Michigan, resulting in a string of dysfunctional charter schools in Detroit and across the state.
While not, strictly speaking, part of Trump's economic plan, his education policy will reward school privatizers, restrict funding to traditional public schools and launch a new round of attacks on teachers and their unions.
Given the contradictory proposals and rival factions around the Trump White House, it is impossible to predict what will actually make it into policy. But it's already clear that Trumponomics will bring more misery to working people.