What could we have to look forward to, or dread, in economic policy if Donald Trump returns to the White House in 2025?
The challenge here is separating whatever might germinate in his brain or that of his advisers and which long-standing priorities of the Republican Party remain. We saw the difference between 2017 and 2020. In important cases, Trump deferred to then-Senate Majority Leader Mitch McConnell (R-Ky.) and the Republicans in Congress. He swallowed their prescriptions on judicial appointments, and he helped push through a bill to cut taxes, primarily benefiting the rich and corporations. But in other ways he left the reservation.
The most obvious deviation was his rhetoric about trade deficits, which I am convinced he could never define correctly. (In national income accounting, it’s the excess of imports over exports.) It may sound bad, though it isn’t necessarily.
In any case, we did get very real tariffs. The Trump rhetoric on trade was appealing to manufacturing workers clobbered by outsourcing. Even a progressive hero like Sen. Sherrod Brown (D-Ohio) ended up embracing Trump’s move to impose tariffs on steel. The Biden Administration itself has declined to reverse all of Trump’s tariffs from his first term.
Simply put, a tariff is a sales tax confined to imports. To say the Chinese “paid” the tariff is a non sequitur, like saying the supermarket pays the sales tax. That makes it more ridiculous for supporters of tariffs to complain about inflation. Like sales taxes, a tariff pushes up the gross prices that you as the consumer pay. The seller who collects the tax (the importer, or the supermarket) simply hands it over to the government.
The anti-China rhetoric has continued from the former president, even though we now have evidence of Trump’s businesses being on China’s payroll. A revival of the trade demagoguery under a President Trump 2.0 will impede trade and increase inflation. New tariffs will push prices up — not a great outcome for everyday working people.
Trump’s trade rhetoric does not sit well with historic Republican policies, nor with its current tribunes in the Koch network’s Club for Growth. But that is the old party. It’s a new day, and not a better one.
Another worrisome area is immigration. As supporters of employers, Republicans have tended to indulge immigration for the sake of recruiting cheap labor. Restricting immigration will make some employers unhappy. “Closing the border” could mean chaos, from the standpoint of routine commerce. The U.S. does quite a lot of business with Mexico.
But once again, it’s a new day. Racism-infected demonization of immigrants has become one of the GOP’s principal selling points. It may even have something to do with reported increases in Trump’s support from voters of color, especially men.
Another new thing will be promises to blow up the “administrative state.” I’m so old I remember President Ronald Reagan appointing Bill Bennett to be Secretary of Education. Bennett had promised to help terminate the Department of Education. Turned out he liked the job too much, and the DoE has endured.
Still, reports of Trump’s team organizing to flood the federal bureaucracy with toadies does not bode well for the enforcement of regulations. These characters may not work themselves out of jobs, but they are likely to lay down before business interests opposed to any sort of regulation in fields such as the environment, food safety, occupational health and safety, and worker rights, among many others.
One example where Trump might have done some good during his presidency but was thwarted by the Congress was in infrastructure. Trump thinks of himself as a builder, so he likes infrastructure. As in his New York real estate career, he thinks you can finance it with funny money. But his administration was too focused on other things to formulate a real plan, and the Koch-y Congress just blew it off.
A bit more obscure will be the fate of the humble U.S. Postal Service. Biden has apparently been too busy to dump Trump’s appointee, the toxic, corrupt Postmaster-General Louis DeJoy. Pressure to privatize the USPS will likely revive as Trump transforms its Board of Governors. The Federal Aviation Administration could face similar threats.
There remain many additional questions. What about Social Security and Medicare? We know the old Republican Party wanted to cut them down. Trump has danced around this. Obamacare would almost certainly be a goner, with Medicaid under dire threat. And we would likely also wave goodbye to Biden’s caps on certain prescription drugs (as meager as they may be).
We might see the future in the form of an expansion of Medicare Advantage, to the disadvantage of the rest of Medicare. This is a way of segregating beneficiaries by income, and letting the better-off and healthier suck resources out of the program for everybody else.
Reproductive rights is an issue that Republicans have figured out requires some caution. The right-wing extremists in Congress don’t care, but Trump is smarter than that. Reforms could come more in the fashion of death by a thousand cuts, rather than one sweeping, national ban. As a result, those seeking abortions in red states will likely have to travel for care. The Feds will not restrain the red states, who, after all, have achieved national political supremacy without the need for voters’ approval.
Otherwise, I would expect an erratic path for policy, which is what we observed in the first Trump term, except for continuous cruelty directed at immigrants, people of color, LGBTQI persons and women.
The potential for chaos renders predictions about the economy even less certain than usual. The impact of presidents on inflation, economic growth, and unemployment is typically exaggerated, depending on who is talking, and whether credit or blame is due.
Chaos makes for less investor and consumer confidence. That could impede economic growth. A big influence is always the Federal Reserve, which is outside a president’s fingertip control. Efforts to shrink the deficit will reduce employment, but I would be surprised by any heroics in this department from any Congress.
In staking out their own economic platform ahead of this year’s election, Democrats can point to some helpful industrial policies such as the Inflation Reduction Act, but these are not easy to explain, and Democrats are generally not very good at explaining anyway. There are constructive, progressive trade policies which have been pursued that support well-paying manufacturing jobs, but these aren’t easy to explain either.
In general, The Democrats have a lot to crow about with regard to the economy, which should help them in the coming elections, yet the role of the Biden administration’s policies shouldn’t be oversold. Progress in recent years is unambiguous, but progressives had plenty to say about the inadequacies of the U.S. economy in 2016 at the end of Obama’s second term. Medicare was not for all. Unemployment insurance was a mess. Inequality was very much with us. Gun ownership was out of control. The MAGA horde was gearing up. You can make your own list.
Today, structural inequities persist, the housing market is in trouble and we still haven’t built back better. These are all good cases for Biden and the Democrats to run on a clear plan of supporting working people and creating a more fair economy in the coming elections.
Presently all signs point to a good year for the economy, and bequeathing this to Trump at the end of 2024 will help him, just as Obama’s record when he left office helped boost Trump in 2017 and after. Yet trade war theatrics, domestic spending cuts, and saber-rattling, or worse, with respect to Iran would also likely dampen economic outcomes in 2025 and the years ahead, if the former president comes back into power.
If the most dire predictions of a second Trump term with regard to using the Department of Justice and law enforcement to target his political opponents are borne out, economic policy could end up being among the least of our worries.
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Max B. Sawicky is a retired economist and writer in Virginia. He is a Senior Research Fellow at the Center for Economic and Policy Research.