“Hey, it’s the ECONOMISTS, stupid!”

Just find me ONE economist who has declared bankruptcy SIX TIMES!

SO I GUESS IF TRUMP WINS? IT’LL BE A REAL ... um .... LOVEFEST? ... Every day for the next four years will be January 6th, I suppose, but in a surreal way. Nothing will make any sense. We Trumpublicans can dress up and terrorize anybody, just for fun, and say and do and believe anything we want! Nobody can stop us! This new crowd is really a bit scary. So I guess this means we’re no longer in the Age of Aquarius? (CNN video framegrab)

NOT THAT IT REALLY MATTERS EITHER WAY, OF COURSE, BUT I’VE FINALLY REALIZED I SHOULD HAVE PUT OUT THIS (for me, very short) ARTICLE MONTHS BEFORE, INSTEAD OF THE MORNING OF, ELECTION DAY.

But I’m sitting here, watching election news on TV and listening to prospective “undecideds” explaining why they think they’ll be voting for Donald Trump —  because, “after all, him being a successful businessman, he’ll know how to handle the economy!” — at which point, I hear my brain, using its outside voice, screaming inside my skull:

“WAIT!! WHAT?!?  LET ME OUT OF HERE!!  I CAN’T TAKE ANY MORE OF THIS!!!”

What tends to jangle me on hearing this sort of thing is that, for some reason, the ECONOMY seems to be on the VERY TOP of everyone’s list of concerns in this election, and if so, you’d think EVERYONE would have done just a BIT more digging into the matter, such as reading this recent piece in the Boston Globe:

[Bolding is mine]

For anyone even casually aware of Donald Trump’s history, it’s bizarre to hear supporters cite his business record as a big reason for backing him in this year’s presidential election. ... One common theme: He is a successful businessman, “a fantastic businessman,” in one supporter’s estimation. ...

Although government service requires very different skills than the private sector, it’s easy to understand the surface-level attraction of a hard-nosed CEO as president: If you can succeed in the hurly-burly of the business world, you can probably impose your will on the baroque bedlam of Washington.

The misplaced notion that Trump is a business whiz is mostly attributable to his 14 years playing a gimlet-eyed boss on “The Apprentice.” But that was unreality TV.

That link goes to a New York Times article about the show that focuses on the fiction of his being a successful mogul, when, in fact, it claims, the show itself  “was for years his most reliable source of income” — adding, “(which he would then largely sink into unprofitable businesses).”

Also, to hear Trump talk, you’d think he’s a self-made billionaire? More from the Globe:

Let’s start at the beginning. Trump’s oft-repeated assertion that he built his business empire with little help beyond a $1 million loan from his father is pure myth, solipsistic sophistry on stilts. In reality, he was a nepo baby who was given a vast fortune and lost eye-popping amounts. ...

Second, as we now know from his leaked tax returns, Trump’s claimed business losses were so large — $1.17 billion from 1985 to 1994 — that they allowed him to avoid paying any income taxes in 10 of the 15 years prior to his winning the presidency in 2016. That, it hardly needs be said, is not an index of business success.

Further, he took various of his businesses into bankruptcy six times.

And yes, you may also have heard stories over the years that, had only Trump just invested his inheritance in an S&P Index fund and left it alone rather than all his fussing around with his businesses, he’d be much richer today? Forbes’s Dan Alexander disputed the old story back in 10/8/2021, but still pointed out that it was true by that year, after COVID, when his actual worth was said to be about $2.5B — that it would have had $2.94B,  had he just let it grow on its own.

But whatever.

Still, while that’s all about just Trump, the real issue goes beyond him alone. The bigger question is, are (hypothetically) successful business leaders also successful economists?

As economist Paul Krugman explained it here in 2014, so often we hear

... the belief that if you want to fix an ailing economy, you should turn to people who have been successful in business, like leaders of major corporations, entrepreneurs and wealthy investors. After all, doesn’t their success with money mean that they know how the economy really works?

Actually, no.

In fact, business leaders often give remarkably bad economic advice, especially in troubled times. ...

The Federal Reserve and the Bank of England have navigated their way through a once-in-three-generations economic crisis under the leadership of former college professors — Ben Bernanke, Janet Yellen and Mervyn King — who, among other things, had the courage to defy all those tycoons demanding that they stop printing money. ...

Why not listen to the tycoons?

The answer, to quote the title of a paper I published many years ago, is that a country is not a company. ...

For example, even the biggest corporations sell only a small fraction of what they make to their own workers, whereas even very small countries mostly sell goods and services to themselves.

So think of what happens when a successful businessperson looks at a troubled economy and tries to apply the lessons of business experience. He or (rarely) she sees the troubled economy as something like a troubled company, which needs to cut costs and become competitive. To create jobs, the businessperson thinks, wages must come down, expenses must be reduced; in general, belts must be tightened. And surely gimmicks like deficit spending or printing more money can’t solve what must be a fundamental problem.

In reality, however, cutting wages and spending in a depressed economy just aggravates the real problem, which is inadequate demand. Deficit spending and aggressive money-printing, on the other hand, can help a lot.

In fact, in his 1996 “country/company” article, Krugman ended with this:

The next time you hear businesspeople propounding their views about the economy, ask yourself. Have they taken the time to study this subject? Have they read what the experts write?

If not, never mind how successful [or not] they have been in business. Ignore them, because they probably have no idea what they are talking about.

HAVING ESTABLISHED (I hope) THAT, WHILE BUSINESSMEN UNDERSTAND BUSINESS, ECONOMISTS ARE EXPERTS ON THE ECONOMY, THE QUESTION THEN IS ...

What do actual economists think about Trump’s ideas for the economy?

Donald Trump’s main idea is to continue the tariff wars from his first term, which Kamala Harris pointed out in their debate would raise prices. Here’s what Forbes said about that:

• Trump has proposed raising tariffs — or taxes on imported goods that the businesses importing them pay the U.S. government ... which he said in a speech ... would punish other countries that are “ripping us off and stealing our jobs.”

• While he has not yet committed to a single policy, the ex-president has typically proposed raising tariffs by 10%, or by 60% on goods imported from China, up from approximately 1% and 11% now, respectively ...

• Harris slammed Trump’s plan in a speech on Friday, saying it was “in effect, a national sales tax on everyday products and basic necessities” and declaring it a “Trump tax” on basic goods ...

• Most experts say tariffs raise prices for consumers: ... the right-leaning Tax Foundation found previous tariffs levied during Trump’s first term were paid by U.S. businesses and consumers.

• Goldman Sachs economists led by Ronnie Walker projected prices on consumer goods would go up ... and raise inflation rates for one year, noting that in addition to the price of imported goods going up, it’s also likely the price of domestic goods would increase, because U.S. manufacturers would “opportunistically” raise their prices to take advantage of having less competition in the marketplace.

• Economists also broadly believe Trump’s proposed tariff plan would hurt the U.S. economy, with an analysis by the nonpartisan think tank Peterson Institute for International Economics (PIIE) concluding the proposal would “[inflict] significant collateral damage on the US economy,” citing a range of factors including decreased consumer spending, increasing unemployment rates and worse economic growth.

• Moody’s projected Trump’s tariff plan would result in a reduction of 675,000 U.S. jobs and increase the unemployment rate by 0.4%, with Moody’s chief economist Mark Zandi telling CNN, “If Trump increases tariffs as he has proposed, the economy would likely suffer a recession soon thereafter.”

So there seems to be a consensus that those tariffs didn’t help us, but actually hurt us much more than they hurt, if at all, the countries he was trying to punish. This is from the libertarian Cato Institute in August:

President Donald Trump told the audience that “a tariff is a tax on a foreign country. A lot of people like to say it’s a tax on us. No, […] it’s a tax that doesn’t affect our country.” ...

Despite the former president’s claims to the contrary, however, there is overwhelming evidence that Americans bore the brunt of his tariffs—and would do so again if he is reelected ...

Estimates of the pain vary depending on what aspect of the Trump tariffs was studied, but it is clear that Americans faced significant losses from the tariffs (and inevitable foreign retaliation), including higher tax burdens and prices, loss in wages and employment, reduced consumption, decreased investment, a decline in exports ...

• “But if his tariffs were so bad,” I’m sure somebody out there is asking, “why didn’t Biden get rid of them?”

Good question! (Yeah, you’re no dummy, whoever the hell you are!) Forbes touches on that matter:

While Harris is now attacking Trump’s tariff proposal, the Biden administration has largely kept Trump-era tariffs in place, and announced some new tariffs against Chinese imports in May that affect $18 billion worth of goods, blaming “China’s unfair trade practices.” (Trump’s proposed blanket tariffs on China would affect more than $400 billion worth of imports.)

... Getting rid of tariffs has been a dicey political issue: The Washington Post noted in 2022 that while some in the Biden administration had encouraged cutting tariffs, including Treasury Secretary Janet Yellen, labor unions have also pressured President Joe Biden not to lift the tariffs, often to boost U.S. competitors. Rust Belt Sens. Bob Casey, D-Penn, and Sherrod Brown, D-Ohio, urged Biden to keep tariffs in place in a 2023 letter, arguing getting rid of them would “undermine American steel and aluminum producers.”

So there you have it. Yeah, some politics involved, but Biden’s puny $18b tariffs will be dwarfed by Trump’s dodgy $400b tariffs.

• But then, in fact, I googled the question, “do any economists defend Trump's tariff policy?”, and this is what I got back:

In a word? Nada!

I’m sure some economists may like Trump’s tariffs, but they sure don’t make themselves easy to find.

• So many voters say they remember the economy being strong during Trump, but was it better back then than under Biden so far?

Forbes said this about the GDP on November 1^st:

The country’s economic output grew strongly under both Biden and Trump, with real gross domestic product, which tracks the inflation-adjusted value of all goods and services produced by the U.S., expanding at an annualized rate of 2.7% during Trump’s first three years and 3.5% during Biden’s.

The Trump economy’s annualized growth rate of 1.4% over his full term is weaker, though that includes 2020’s COVID-19 shock, while Biden-led growth is concentrated in 2021 at 5.9%, slowing to 1.9% and 2.5% in 2022 and 2023. GDP growth has stayed strong in 2024, growing at 1.6%, 3% and 2.8% annual rates during the first three quarters of the year.

• But how about inflation? Trump says he’ll fix it.

I think he also said he’d build a wall and have Mexico pay for it, and he’d repeal and replace Obamacare. He also says he’ll end the wars in Ukraine and Israel, maybe in one day?

Back in July, according to CBS, Trump was saying this:

Former President Donald Trump is campaigning on a pledge to end the "inflation nightmare," vowing that if he wins a second term, he'll bring down prices "very quickly." And if that scenario came to pass, it would be cheered by the millions of Americans who say higher costs remain a major problem.

There's only one problem: Key policies that undergird so-called Trumponomics — a combination of tariffs, tax cuts and a crackdown on immigration — are likely to cause a flare-up in inflation, according to many Wall Street economists.

But there’s another problem with his promise to “bring down prices” at all, much less “very quickly”, based on a very common misunderstanding about inflation.

Inflation is not defined as “high prices”, for which the cure would be to bring them down — in our case, maybe to pre-COVID levels. The International Monetary Fund (IMF) defines inflation as “the rate of increase in prices over a given period of time.” When inflation is said to be down, that just means the rate of increase has slowed to a more reasonable rate of increase. Central banks around the world, including our Federal Reserve, hope for an average inflation rate of 2%, making it easier for them to control.

In fact, if Trump succeeds in bringing prices down, we will have something many say is worse than in-flation — that’s de-flation, in which prices constantly fall and consumers keep  putting off all purchases in anticipation that prices will be lower in a week or so, and so the economy just stops.

• What are the economic proposals of the two candidates?

Since I’m running out of time, rather than go into detail, I’ll just refer you to CNN’s article from last week that does that, but I will leave you with this little snippet from it:

One issue that hasn’t been high on the candidates’ priority lists is reducing the ever-growing national debt. Both Trump and Harris have rolled out pricey provisions without specifying how they would cover the cost.

Harris’ plan would boost the debt by nearly $4 trillion over the next decade, while Trump’s platform would cause it to spike by roughly $7.8 trillion, according to an updated report from the Committee for a Responsible Federal Budget.

Meanwhile, 23 US winners of the Nobel Prize for economics favor Harris’ agenda, calling it “vastly superior” to Trump’s platform in a recent letter.

BUT HERE’S THE THING:

Democracy as we know it is a worthy notion, but it probably shouldn’t make us think we are smart enough do the work of the experts.

AND ONE MORE THING?

“Populism” isn’t the same thing as democracy!

(Populism? “A political approach that strives to appeal to ordinary people who feel that their concerns are disregarded by established elite groups.” You can look that up.)

We Americans should continue to be the power in America, but that shouldn’t make us think we can throw the baby out with the bathwater. If economists think we should go light on tariffs, we should listen to them instead of to the amateurs who accidentally get themselves elected president.

And unlike Donald Trump, Kamala Harris is no amateur at this governing business; she’s been at it longer than Trump and knows where to turn for expertise when she needs it.

Tuesday, November 5, 2024

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