It has been a busy first few weeks for President Donald Trump. As the executive orders have been rolled out and the tweets published, controversy has ignited over much of what Trump says and does. Overshadowed by the infamous immigration ban have been his economic policies. These should not go unnoticed because they will have a far greater impact on the average American than any immigration plan. Trump’s early economic approach includes some great ideas, but unfortunately, not without a few bad ones to match.
The first executive order that Trump signed targets The Patient Protection and Affordable Care Act (Obamacare) and minimizes the economic burden that it places on Americans. Considering that the act of repealing Obamacare will take quite some time, this executive order is aimed to alleviate its deleterious effects temporarily by loosening the obligation of government agencies to uphold certain provisions.
Obamacare has forced thousands of Americans to purchase lousy healthcare and has punished them where it hurts — their pockets — when they have refused to comply. It has also restricted thousands of small businesses from growing since they are wary of exceeding the 50-employee mark, the point at which companies would be responsible for providing healthcare for their employees. It is reassuring to see that Trump is committed to nullifying a program that has had such disastrous effects on both the individual and the overall economy.
Another refreshing step taken by the Trump administration has been its promise to lower taxes at both the individual and corporate levels. The appeal of lower taxes at the individual level should require little explanation, but some may still denounce it due to it resulting in less tax revenue. Trump has answered such criticism by promising to cut superfluous government spending in the departments of commerce, energy and transportation. Such cuts are estimated to reduce spending by $10.5 trillion over the next 10 years. In a time where the federal deficit nears the height of $20 trillion, such actions should be welcomed.
The corporate tax cut may be less obviously positive, particularly for those who view corporations and their high-earning CEOs as nefarious actors. But in reality, corporations employ millions of people, distribute economic gains among their many stockholders and provide some of our favorite products and services. Abating the harsh tax burden and regulations on corporations would be beneficial for both consumers and the economy in general by freeing up more funds for corporations to willingly invest back into the U.S. economy.
Having granted praise where it ought to be given, we can now transition to Trump’s major economic flaws — the most prominent being his stance on tariffs. Trump wants to put the United States first. In order to do so, he vows to bring massive levels of production back to the United States by incentivizing companies to produce here through tariffs.
This all-American approach may sound good, but it simply does not work. Tariffs are taxes on imports and have been used historically by the United States during periods of high unemployment to embolden struggling industries. But tariffs cripple free trade (an inherent, constructive quality of capitalism) and reduce the efficiency of all countries involved — consequently lowering the standard of living and raising unemployment.
In some cases, other countries will even retaliate because of such restrictions. This is best shown by the passage of the Smoot-Hawley Tariff Act in the United States in 1930, which raised U.S. tariffs to record-high levels. As noted by economist Thomas Sowell of the Hoover Institution at Stanford University in his book, “Basic Economics: A Citizen’s Guide to the Economy,” “the unemployment rate in the United States was 6 percent in June 1930 when the Smoot-Hawley tariffs were passed — down from its peak of 9 percent in December 1929. A year later, unemployment was 15 percent, and a year after that it was 26 percent.”
So rather than being a viable, long-term remedy for economic downturns, tariffs are more of a temporary resolution taken by politicians to provide immediate relief for particular industries, thus gaining the political and financial support of corporations or labor unions in that industry.
Trump’s discussion of tariffs has mostly surrounded our southern neighbor, Mexico, to whom Trump has threatened to issue many tariffs in order to pay for his promised border wall. This is quite foolish. Instituting such an action would disrupt the stable relations that we have had with Mexico for many years and hurt the U.S. economy for all the reasons mentioned above. If Trump is so keen on fulfilling this promise, the United States should just pay for the wall itself. It would cost around $15 billion, which is actually not a lot despite how much it seems. Constructing such a border wall is a perfectly valid idea, but sacrificing relationships with nearby allies and economic productivity to do so is simply not worth it.
As the rest of Trump’s first 100 days unfold (and the rest of his presidency, for that matter), we should remain alert and attentive to the long-term ramifications that his economic policies will have. To do so, we must first be intellectually honest. Far too many people portray every action that Trump takes as being the most evil act ever, even when he makes good decisions.
Instead, we should praise him when he does well and condemn him when he does poorly so that the bad things he does are actually taken seriously, rather than with the levity of which people have grown accustomed to. Through such honest discourse, we can narrow the lines of division and apply an objective lens in judging how Trump decides to craft the country for the next four years.
Brian Deinstadt is a junior double-majoring in political science and English.