Nextbigfuture is reviewing what are the detailed policies of those who will be shaping the future US and world economy.
Peter Navarro is a business professor at the University of California-Irvine; he holds a Ph.D. in economics from Harvard University. Wilbur Ross is an international private equity investor. Both are senior policy advisors to the Trump campaign.
They have a 31 page paper, Scoring the Trump Economic Plan: Trade, Regulatory, and Energy Policy Impacts.
NOTE- Barrons magazine Gene Epstein reviewed this plan and notes that it is unclear how much of this plan will be implemented as the Republican House and Senate may not agree to everything. Epstein hopes that less is done to harm foreign trade and that there is some recognition of the dangers of soaring Treasury Debt.
From the plan
Donald Trump’s economic plan proposes tax cuts, reduced regulation, lower energy costs, and eliminating America’s chronic trade deficit. Trump’s goal is to significantly increase America’s real GDP growth rate and thereby create millions of additional new jobs and trillions of dollars of additional income and tax revenues.
Hillary Clinton’s economic plan will inhibit growth. It proposes higher taxes, more regulation, and further restrictions on fossil fuels that will significantly raise energy and electricity costs. Clinton will also perpetuate trade policies and trade deals she has helped put in place that have led to chronic trade deficits and reduced economic growth.
In considering how to score these competing plans fiscally, it is important to note that the Trump plan generates positive and substantial tax revenue offsets from its synergistic suite of trade, regulatory, and energy policy reforms. Any analysis that scores the Trump tax cuts in isolation is incomplete and highly misleading.
Separately from this report, the non-partisan Tax Foundation has released its analysis of the Trump tax plan. It dynamically scores a $2.6 trillion reduction1 in revenues relative to the current tax policy baseline as of the end of a 10-year budgeting horizon. However, as is the typical practice within the modeling community, the Tax Foundation does not score other elements of the Trump economic plan that are growth-inducing and therefore revenue-generating.
This report fills this analytical gap. Specifically, we provide our own fully transparent scoring of the Trump economic plan in the areas of trade, regulatory, and energy policy reforms based on conservative assumptions. Along with tax reform, these areas represent the four main points of the Trump policy compass. Each works integratively and synergistically with the others and in conjunction with proposed spending cuts.
We believe it is essential that third parties view this analysis in conjunction with the Tax Foundation report. The tax cuts of the Trump plan have been criticized for significant reductions in Federal revenues. However, the Trump economic plan is much more than just about taxes.
As this report demonstrates, the overall plan is fiscally conservative and approaches revenue neutrality in the baseline Tax Foundation scenario.
The Trump plan also grows the economy much faster than Hillary Clinton’s plan to raise taxes, increase regulation, stifle our energy sector, and continue the trade deficit status quo
This total positive revenue offset of $2.374 trillion dollars approaches the $2.6 trillion of tax reductions calculated by the Tax Foundation. With proposed spending cuts, the overall Trump economic plan is revenue neutral.
Donald Trump’s tax proposals could spur more economic growth and more jobs … for awhile. But by 2024, that positive effect turns negative. His plan would slow growth created relative to what’s expected under today’s policies.
Its model estimates that Trump’s plan could add an additional 1.1% in 2018 relative to current law. But by 2024 that positive effect is erased and by 2027 it could lower GDP by 0.78%. By 2037, it could produce 4.6% less GDP than expected.
From Trump Plan
There Is Nothing Normal About The “New Normal”
From 1947 to 2001, the nominal US gross domestic product (GDP) grew at an annual, rate of 3.5% a year. However, from 2002 to today, that average has fallen to 1.9%.
This loss of 1.6% real GDP growth points annually represents a 45% reduction of the US growth rate from its historic, pre-2002 norm.
Just why did the US growth rate fall so dramatically? Many left-of-center economists – and the Obama Administration – have described this era of slower growth as the “new normal.” They blame this plunge at least in part on demographic shifts such as a declining labor force participation rate and the movement of “baby boomers” into retirement.
This view of America’s economic malaise is incomplete – and unnecessarily defeatist. It ignores the significant roles higher taxes and increased regulation have played in inhibiting US economic growth since the turn of the 21st century as well as our ability to fix the problems.
This new normal argument also ignores the self-inflicted negative impacts from poorly negotiated trade deals and the failure to enforce them.
Each additional point of real GDP growth translates into roughly 1.2 million jobs.10 When the US economy grows at a rate of only 1.9% annually instead of its historic norm of 3.5%, we create almost 2 million fewer jobs a year.
Excessive regulation is even more burdensome on the 28 million small businesses that have provided two-thirds of our post-recession job growth.
The Heritage Foundation and National Association of Manufacturers (NAM) have estimated regulatory costs to be in the range of $2 trillion annually – about 10% of our GDP. NAM finds that “small manufacturers face more than three times the burden of the average US business.” According to the Competitive Enterprise Institute, this “hidden tax” of regulation amounts to “nearly $15,000 per US household” annually.
The Trump Regulatory Reform Plan
We assume the Trump plan seeks to reduce the current regulatory burden by a minimum of 10% or $200 billion annually. It proposes a temporary pause on new regulations not compelled by Congress or public safety and a review of previous regulations to see which need to be scrapped. Each Federal agency will prepare a list of all of the regulations they impose on American business, and the least critical regulations to health and safety will receive priority consideration for repeal.
To attack those regulations that “inhibit hiring,” the Trump plan will target, among others: (1) The Environmental Protection Agency’s Clean Power Plan, which forces investment in renewable energy at the expense of coal and natural gas, thereby raising electricity rates; and (2) The Department of Interior’s moratorium on coal mining permits, which put tens of thousands of coal miners out of work.
Trump would also accelerate the approval process for the exportation of oil and natural gas, thereby helping to also reduce the trade deficit. Numerous other low-level rules that are individually insignificant but important in the aggregate will also be reviewed.
Note that the Trump regulatory reform plan will disproportionately – and quite intentionally – help the manufacturing sector. This is the economy’s most powerful sector for driving both economic growth and income gains. These income gains will, in turn, disproportionately benefit the nation’s blue collar workforce.
According to the National Association of Manufacturers (NAM), “for every one worker in manufacturing, there are another four employees hired elsewhere.” In addition, “for every $1.00 spent in manufacturing, another $1.81 is added to the economy” and this is “the highest multiplier effect of any economic sector.”
Trump Will End, Not Start, A Trade War
Those who suggest that Trump trade policies will ignite a trade war ignore the fact that we are already engaged in a trade war. It is a war in which the American government has surrendered before engaging. Unfair trade practices and policies of our competitors are overlooked or ignored. As a well-documented result, America has already lost tens of thousands of factories, millions of jobs, and trillions in wages and tax revenues. Donald Trump will simply put our government on the field in defense of American interests.
As a very practical matter, as Trump pursues a policy of more balanced trade, our major trading partners are far more likely to cooperate with an America resolute about balancing its trade than they are likely to provoke a trade war. This is true for one very simple reason: America’s major trading partners are far more dependent on American markets than America is on their markets.
Consider that roughly half of our trade deficit is with just six countries: Canada, China, Germany, Japan, Mexico and South Korea. If we look at the bilateral relationships of America with each of these countries, improvement in our trade balance is clearly achievable through some combination of increased exports and reduced imports, albeit after some tough, smart negotiations – an obvious Trump strength.