The dangers of a Trump-Musk economy

As the crucial US presidential election approached, both Donald Trump and his acolytes uttered increasingly radical promises about what they would do in power. But those promises – for example, those related to fiscal policy – ​​will inevitably be broken during his second time in the White House. It is mathematically impossible to cut taxes for corporations and billionaires, sustain basic defense and Social Security programs, and lower the deficit, all at the same time.

Some of Trump’s most implausible campaign promises came from Elon Musk, who says he knows how to cut back 2 trillion dollars of the federal budget. That’s saying a lot for someone whose companies rely so much on government contracts and bailouts (without the loan of 465 million dollars received from the Obama administration, Tesla could very well have gone bankrupt).

Musk’s statements reveal ignorance in both economic and political matters. Their proposals represented a cut of about a third of government spending – eight times more than what, according to esteem the General Accountability Office (the government’s internal control body), constitutes waste or fraud. Among other things, the United States would have to cut all “discretionary” spending on defense, health, education, and the Treasury and Commerce Departments, as well as slash Social Security, Medicare, and other well-established and widely popular programs.

Such savage cuts mean Trump would have to persuade Congress to make major changes to these programs. But wait seated. Trump already had four years to dismantle the “administrative state” when he was president and he didn’t do it. Now he is making populist promises that would increase (not reduce) the deficit – more than 7.5 trillion dollars in the next ten years.

These traumatic cuts would have devastating effects on the US economy and society. Slash and burn policies end up failing. In the same way that US Treasury Secretary Andrew Mellon’s cuts strategy during Herbert Hoover’s presidency contributed to the Great Depression, austerity policies in the United Kingdom under 14 years of Conservative government have led to a decade and stagnation average.

But the contrast between the economic programs of Trump and Kamala Harris could not be greater. He program Harris sought to reduce the cost of living – drawing on provisions of the Inflation Reduction Act (IRA) to reduce drug and energy costs – and sought to make housing more affordable, while tariffs on Trump (a tax on imported products) would end up making the price of imported products more expensive for Americans, especially low- and middle-income households.

Even before the pandemic, life expectancy in the United States – already the lowest among advanced economies – was falling during Trump’s first presidency. with his aim to repeal the Affordable Care Act and the IRA provision that reduces prescription drug prices, the new Trump administration could aggravate the situation.

Likewise, the United States heads the list of advanced economies in terms of inequality and Trump’s tax cuts for the rich may widen the gap even further.

In addition to the health and inequality crisis, climate change is costing Americans dearly in terms of lives and property damage. Trump has come approaching to fossil fuel magnates for campaign contributions, promising to cut pollution regulations in return. Not only would it cause the United States to fall behind many other countries in the transition to a clean energy economy, it would also make the United States an international energy pariah.

These are some of the many reasons why 23 Nobel Prize-winning American economists recently signed a open letter in support of Harris. It’s hard to get two economists to agree on anything, but we concluded that, “overall, Harris’s economic program would have improved health, investment, sustainability, resilience, employment opportunities and the fairness of our country, and could have been superior to Donald Trump’s economic agenda.”

Many Americans, understandably, have preferred to forget all the chaos (and excess deaths from COVID-19) that prevailed during the Trump presidency. Given Trump’s clear intention to seek retaliation against what he calls “enemies within” and with the Republican Party becoming nothing more than a cult of personality, there is little doubt that his second presidency will be tougher than his first.

While the economic strength of the United States rests on the pillars of science and technology, Trump has proposedrepeatedly, massive cuts to federal research spending, which would be devastating to progress in basic science and have a domino effect on many key economic sectors. In his first term, even the Republicans understood the recklessness of his proposals in this area and voted against. But today the party’s servility toward Trump casts doubt on whether it can be repeated this time.

Unfortunately, not even Elon Musk – whose companies depend on basic science done by others – has fully considered what Trump would mean for his bottom line. Short-term greed – an obsession with tax cuts and lighter regulation – has seduced many captains of industry and finance to join the Trump team. Trump offers them a profitable crony capitalism, a kind of capitalism that, although it works well for Musk and other billionaires, will not be good for the rest. Harris’ program sought an economy that surpassed crony capitalism and shared the benefits of growth more equitably.

Copyright: Project Syndicate, 2024.
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