A few days after Trump’s election victory in 2016, Russian-American Journalist Masha Gessen’s 2016 published a neawly presicent article in the New York Review of Books. It contains warnings to america about the person just elected as president,. Gessen clearly considered Trump as a would-be autocrat and issued a series of advice to deal with the situation: the first rule read:
“Rule #1: Believe the autocrat
He means what he says. Whenever you find yourself thinking, or hear others claiming, that he is exaggerating, that is our inate tendency to reach for a rationalization. This will happen often: humans seem to have evolved to practice denial when confronted publicly with the unacceptable. Back in the 1930s, The New York Times assured its readers that Hitler’s anti-Semitism was all posture.”
On further background, several conservative organisations such as the Heritage Foundation and Centre for Renewing America have put serious work into ensuring that a “Trump 2” Presidency has a clear program (dismantling the administrative state), a plan to systematically remove approximately 55,000 career civil servants (up from 4,000 today) and replace them by political appointees. These appointees play crucial roles across various federal agencies and departments, shaping policies, implementing programs, and ensuring effective governance. The conservative think tanks consider these individuals as being the single biggest obstacle to a complete overhaul of the federal government.
The same organisations are also collating lists of candidates up to cabinet level. Many conservatives/populists consider that Trump’s first presidency was not as effective as it could have been, and that was mainly due to determined resistance from cabinet-level members. They want a Trump 2 administration to “hit the ground running”.
Listening to Trump himself, he has so far only paid passing attention to this project. But he has some often repeated policy priorities:
1) Introduction of a tariff of 10% on all products sold into the USA, except from China, where a 60% tariff will be instated.
2) Mass deportation of illegal immigrants. Sharply reducing access to legal immigration.
3) Reducing income taxes for corporations and wealthier individuals taxes
4) Undermining the independence of the Federal Reserve
The Tariffs
The introduction of a 10% general tariff on imports into the USA and a 60% tariff specifically for imports originating from China would have significant implications for both the U.S. economy and the global economy.
Impacts on the US Economy:
- Tariffs increase the cost of imported goods. As a result, U.S. consumers would face higher prices for products ranging from electronics to clothing.
- Businesses that rely on imported inputs would experience higher costs, leading to reduced production. This, in turn, could dampen investment and economic growth.
- Reduced production and higher input costs could lead to lower wages for workers and decreased profits for businesses.
- A stronger dollar (due to tariffs) might offset some price increases for U.S. consumers but make it harder for exporters to sell goods abroad.
- The Tax Foundation estimates that a 10% tariff on all imports would eliminate 505,000 full-time equivalent jobsin the U.S. economy1.
- An across-the-board tariff could jeopardize the existing global trade system, affecting U.S. exports and potentially leading to retaliation from other countries.
Global Economy:
- If the U.S. imposes tariffs, other countries may respond with their own tariffs on U.S. exports. This tit-for-tat retaliation could escalate tensions and disrupt international trade.
- The Tax Foundation estimates that if the rest of the world responds in kind, it would result in $200 billion of new taxes for foreign governments. This could further reduce U.S. GDP by 4%and eliminate 322,000 full-time equivalent jobs1.
- Tariffs can disrupt global supply chains, affecting the flow of goods and services across borders.
- Heightened trade tensions could create uncertainty, impacting investor confidence and global economic stability.
2) Mass deportation of illegal immigrants. Sharply reducing the access to legal immigration.
A “mass deportation” of undocumented immigrants and a de facto moratorium on legal immigration would have significant ramifications for the U.S. economy, labour market, salaries, and inflationary pressures.
Labour Market:
Mass deportations would disrupt the labour market by removing a substantial number of workers. Sectors such as agriculture, construction, and hospitality heavily rely on immigrant labour, both documented and undocumented. Certain industries might face skill shortages due to the sudden departure of workers. Employers would struggle to find replacements, affecting productivity. With fewer workers, wages in affected sectors could rise. However, this would depend on the elasticity of labour supply and the specific industry. Vacant positions left by deported workers might remain unfilled, leading to inefficiencies and reduced economic output.
Salaries:
Wages could increase in some sectors due to labour scarcity, benefiting native workers. However, other industries might experience wage stagnation if they rely heavily on immigrant labour.
High-skilled jobs might see wage growth, while low-skilled jobs could face downward pressure if employers seek cost savings.
Inflationary Pressures:
Deportations would disrupt supply chains, potentially leading to higher production costs. If businesses pass these costs to consumers, it could contribute to inflation.
Immigrants play a role in housing demand. Reduced immigration could slow housing market growth, affecting prices and rental rates.
If wages rise due to labour scarcity, consumers might have more disposable income, potentially boosting spending and inflation.
Long-Term Implications:
A moratorium on legal immigration could hinder economic growth. Immigrants contribute to innovation, entrepreneurship, and overall productivity.
The U.S. population would age faster without immigration, affecting workforce dynamics and social programs.
Immigrants contribute to tax revenue. Reduced immigration could strain public finances.
Poverty and Social Costs:
Mixed-Status Households: Deporting undocumented residents from mixed-status households would significantly reduce median household income, plunging millions into poverty1.
Humanitarian Considerations: Deportation causes emotional distress, family separation, and economic hardship. It also stigmatizes those who return to their home countries.
In summary, a mass deportation and immigration moratorium would have multifaceted effects, impacting various facets of the U.S. economy and society. Decisions should be informed by rigorous analysis and compassion.
Which sectors are those most dependent on immigrants
Immigrants play a crucial role in various sectors of the U.S. economy, contributing to labor supply, entrepreneurship, and overall productivity. Here are some sectors that heavily rely on immigrant labour:
Agriculture and Farming:
Immigrants, including both documented and undocumented workers, make up a significant portion of the agricultural workforce. They perform tasks such as planting, harvesting, and tending to crops.
Hospitality and Food Services:
Restaurants, hotels, and food service establishments rely on immigrant labor for cooking, cleaning, and customer service. Immigrants contribute to the vibrant culinary scene in the U.S.
Construction:
Immigrant workers are prevalent in construction, performing jobs like carpentry, masonry, and electrical work. They contribute to building infrastructure, homes, and commercial properties.
Healthcare and Elderly Care:
Immigrants work as nurses, home health aides, and caregivers in hospitals, nursing homes, and private residences. They provide essential services to patients and the elderly.
Manufacturing and Industry:
Immigrant labour is found in factories and manufacturing plants, assembling products, operating machinery, and ensuring production efficiency.
Cleaning and Maintenance:
Immigrants play a vital role in building maintenance, janitorial services, and pest control. They keep offices, schools, and public spaces clean and functional.
Transportation and Logistics:
Immigrant truck drivers, delivery personnel, and warehouse workers contribute to the movement of goods across the country. They ensure supply chains remain operational.
Entrepreneurship and Small Businesses:
Immigrants often start businesses, creating job opportunities and stimulating local economies. They contribute to innovation and economic growth.
Landscaping and Gardening:
Immigrant workers maintain parks, gardens, and outdoor spaces.
Their labour enhances urban aesthetics and green spaces.
Textile and Garment Industry:
Historically, immigrants have been involved in textile factories, sewing, and garment production. Although this sector has changed over time, immigrant labour remains relevant.
In summary, immigrants are integral to the fabric of the U.S. economy, filling essential roles across diverse sectors.
3) Reducing income taxes for corporations and wealthier individuals
If Trump were to be reelected and continued with tax cuts and further growth of federal spending, it would have significant implications for the U.S. economy.
Tax Cuts:
Tax cuts can stimulate economic activity by leaving more money in the hands of individuals and businesses. Increased spending and investment could boost growth.
However, tax cuts also reduce government revenue, potentially leading to budget deficits unless accompanied by spending reductions or economic growth.
The impact of tax cuts varies across income groups. High-income earners tend to benefit more, while the middle class may see modest gains.
Federal Spending Growth:
Increased federal spending can fund critical infrastructure projects, creating jobs and enhancing productivity.
Expanding social programs (such as healthcare, education, and social security) can improve well-being but may strain the budget.
A sustained increase in federal spending without corresponding revenue growth could exacerbate budget deficits and contribute to the national debt.
Potential Outcomes:
If tax cuts spur investment and federal spending targets productive areas, economic growth could accelerate.
Excessive spending without corresponding revenue could lead to inflationary pressures.
Balancing tax cuts and spending growth is crucial for long-term debt sustainability.
Public opinion, congressional dynamics, and global economic conditions will shape policy outcomes.
Historical Context:
Ronald Reagan’s tax cuts in the 1980s led to economic growth but also contributed to deficits.
George W. Bush’s tax cuts and Barack Obama’s stimulus spending had varying effects on the economy. Trump’s tax cuts boosted investment but also added significantly to the national debt.
In summary, the impact of Trump’s policies would depend on their design, execution, and broader economic context. Balancing tax policy and federal spending remains a complex challenge.
4) Undermining the independence of the Federal Reserve
If Trump were to be reelected and began to undermine the independence of the Federal Reserve, it would have significant implications both nationally and internationally.
National Effects:
Undermining the Fed’s independence could create uncertainty about future monetary policy decisions. Investors and businesses rely on stable and predictable interest rates to make informed decisions.
Doubts about the Fed’s independence might lead to fluctuations in interest rates. Higher volatility could impact borrowing costs for households, businesses, and the government.
If the Fed’s independence is compromised, there could be pressure to keep interest rates artificially low, risking higher inflation. Central banks need independence to maintain price stability.
Investors might react negatively to any perceived interference with the Fed’s autonomy, affecting stock markets, bond yields, and overall economic sentiment.
International Effects:
The Fed’s independence is crucial for global investor confidence. Any erosion of independence could raise doubts about the U.S. commitment to sound monetary policy.
A perceived lack of Fed independence might weaken the U.S. dollar. Exchange rate fluctuations could impact trade balances and global financial stability.
If the Fed’s independence is compromised, other central banks might face similar pressures. This could disrupt coordinated global monetary policies.
Emerging economies often follow the Fed’s lead. Uncertainty about Fed independence could affect capital flows and exchange rates in these countries.
Cross-Over Effects with Rising Government Debt:
High government debt levels increase the risk of fiscal dominance, where monetary policy aligns with fiscal policy. If doubts about Fed independence coincide with rising debt, it could lead to accommodative monetary policy to facilitate debt financing.
A combination of rising debt and compromised Fed independence might lead to expansionary monetary policies (low interest rates) to manage debt costs. This could fuel inflation.
The interplay between debt levels and monetary policy becomes critical. If the Fed prioritizes debt management over price stability, it could impact long-term debt sustainability.
In summary, undermining the Fed’s independence could have far-reaching consequences, affecting financial markets, economic stability, and global confidence. Balancing fiscal and monetary policy is essential for sustainable growth.
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