How Donald Trump Will Fix The Economy

Trump has a coherent plan for the economy.  If you missed it then you must not have been paying attention.  And if you think his plan is to gut Social Security and Medicare, then you’re just making stuff up.  Trump will certainly preserve government benefits to the elderly, disabled and the poor – to do otherwise would be political suicide.  In fact, Trump is going to increase government spending to levels not seen since Franklin D. Roosevelt’s New Deal.  But he’s also going to drastically lower taxes on the rich.  How is this possible? Do continue, dear reader, and prepare to have your mind blown.

According to Trump top advisor Steve Bannon, an infrastructure plan is in the works that will distribute in excess of one trillion dollars of government money into the pockets of America’s currently unemployed working class. Says Bannon, “With negative interest rates throughout the world, it’s the greatest opportunity to rebuild everything.  Shipyards, ironworks, get them all jacked up … It’s as exciting as the 1930’s.”  In the words of the president-elect himself, “We’re going to rebuild our infrastructure … and we will put millions of our people to work as we rebuild it.  We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, and hospitals.” Anybody who wants a job will have a good paying job during this period of rebuilding.

Both the housing market and the service industry will boom from the collateral effects of this economic infusion of government money.  But infrastructure is not the only source of new jobs planned by the incoming administration.  Trump is also going to rejuvenate labor in the American manufacturing industry through a combination of protective tariffs on foreign imports and generous tax incentives to American manufacturers. By punishing companies who use foreign labor and rewarding the use of American labor, the President is going to not only stem the tide of jobs rushing overseas, he is going to spur the creation of new factory jobs.  In other words, the old rust-belt is getting some fresh grease and a new paint job.

But the nagging questions linger: Who will pay for all this government spending, especially with Trump’s promised tax cuts?  Won’t protectionism cause a trade war which will lead to economic collapse? Won’t government spending coupled with tax cuts result in dollar-destroying inflation?  The answer to the second two questions is an emphatic NO –  the American economy will decidedly NOT collapse.  America has the strongest economy in the world and is thus well positioned to throw its weight around with import tariffs.  America has the golden consumer base – every country in the world will do whatever it takes to continue selling their products to Americans, even if that means tariffs will be levied on these countries’ products.  Foreign producers will not risk access to the greatest market in the world by imposing retaliatory tariffs.  It’s much more likely that countries like China will simply build factories in America to avoid the tariffs, in the process creating even more American jobs.  Foreign countries will suck it up, take the hit to their GDP, and go along to get along.

Likewise, the strength of the American economy will strongly mitigate against hyperinflation.  History is certainly rife with instances when government money-printing caused hyperinflation and economic disaster, but every single instance of hyperinflation occurred when the subject country had a weak economy to begin with.  For instance, hyperinflation occurred in the Weimar republic on the heels of Germany’s devastating loss in WW1. The German economy was indisputably crippled by allied sanctions, so the hyperinflationary effects of money-printing under the Weimar Republic cannot be reasonably used to predict the effects of money printing in the most powerful economy of all time – the USA. Hyperinflation also often occurs after violent revolution decimates a capitalist economy – see USSR, China, North Korea, etc. etc..  These economies also bear no comparison to America’s. But what happens when tax revenue is less than government spending in the most powerful country on earth? All indicators point to economic growth.  When Obama bailed out the auto and bank industry, he did so with billions of dollars of unfunded government money. And it did the exact opposite of collapsing our economy – government spending saved it, along with 1.5 million jobs. 

But even if under normal circumstances a tax/expenditure deficit would lead to inflation, it will not happen under the extraordinary circumstance of a President Trump.  Paper money derives its value chiefly from consumer confidence. Historically, confidence in paper currency was bolstered by its being backed by precious assets such as gold. However, modern Keynesian economics have amply demonstrated that currency need not be backed by Gold or Silver for consumers to believe in its value. Because currency derives its value from consumer confidence, the primary reason currency inflates is because of loss of consumer confidence in its value.  Therefore, it is theoretically possible that the value of currency can be maintained simply by skillfully persuading the people that the currency has value.  Of course, such a feat would require an enormous talent for persuasion.  Lucky for the American people, Donald Trump might be the most persuasive individual alive today.  Evidence of Trump’s powers of persuasion have been well documented in preeminent American hypnotist Scott Adams’s coverage of the recent election.  If inflation were to become a threat, it is likely that Trump will be able to maintain confidence in the value of the US Dollar simply through the well attenuated persuasion techniques Trump has mastered over a lifetime of salesmanship.

But inflation is a moot point because America will be collecting massive amounts of revenue – just not domestically.  One of Trump’s campaign promises is to start charging a defense tax on foreign countries who benefit from American military bases.  Sure, it serves our national interests to have bases in Saudi Arabia, Poland, South Korea, and a hundred other nations.  But for these countries our support is a matter of life or death.  If we remove our bases, we would lose a little control over the world.  But the host countries would open themselves to invasion and enslavement.  Therefore, when we start charging the fair price for our defensive services the host countries will certainly pay.  Around half of all US government expenditure goes to military spending.  When the foreign countries we protect begin to foot that bill, America will be free to spend those trillions of dollars on infrastructure, job creation, and social welfare.  This is the new economy our president intends to create and all Americans will share a piece of the prosperity pie under President Trump’s economic plan.

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s