Trump's Economic Illiteracy on Display in Address to Congress
The president takes a reckless stance on free trade, entitlements, and debt reduction.
Many agree that Donald Trump came across as presidential during last night's speech to a joint session of Congress. He even came across as somewhat coherent. But if being presidential and coherent means raking up more debt, being a nationalist protectionist who believes in destructive "Made in America" and import-bashing policies, and railing against immigrants as if they were responsible for all of the crimes and welfare spending in the country, then it's hard to see any value whatsoever in being presidential and coherent.
I appreciate that the new president didn't spend a significant amount of time blaming his predecessor. Yes, Trump did mention our debt doubling as a share of GDP in the last eight years and he also said that this was the slowest recovery ever, but his complaints do not compare to those of Barack Obama, who was still blaming George W. Bush eight years into the job.
Trump also continued to be solid in his calls for regulatory overhaul. He wants to cut regulations and lift the horrible burden on our lives and companies imposed by an out-of-control regulatory state. That's great. He also made some noise about cutting taxes, and in particular about the dangerously high corporate income tax rates. I will also give him credit for not endorsing the misguided House Republican plan to adopt a border adjustment tax that would tax imports while exempting exports. That plan would give, yet again, a leg up for companies like Boeing and General Electric while hammering consumers. However, last night we also had to sit through the president's misleading rants about other countries' tax codes creating a disadvantage for our exporting companies while Trump never once acknowledged that if there is a disadvantage it actually comes from our own government taxing U.S. companies on a worldwide basis—which is something most of our competitors do not do.
I am going to let others address the anti-immigration stance of the president. However, I would be remiss if I didn't mention that it is heartbreaking to see how misguided today's Republicans are about the alleged harms caused by immigration. I realize that in today's America my own chances of getting into the country and working in this great nation as an H-1B holder would be very slim. However, my true heartache comes for those who entered this country illegally but have stayed to make better lives for themselves and their families. There are millions of upstanding citizens who are undocumented due to a lack of process to make low-skilled workers legal, thereby preventing them from being able to fully contribute to making America great and productive. To the nannies who watch our children, the cleaning ladies who keep our houses neat, the gardeners who mow our lawns, or the farmhands who pick our vegetables and fruits, I say, some of us know and appreciate your value. It is hard to accept that you now live in fear of being sent away from the country you have called home for many years.
As for the federal budget, on the campaign trail Trump promised that he would not touch the most expansive and insolvent entitlement programs, which just happen to be the biggest drivers of our future debt. Yet Trump also promised that he would address the unsustainable level of our debt. Ultimately, Trump will only be able to keep one of those two promises, and it won't be the one about reducing the debt.
That is unfortunate because the gross U.S. debt is almost $20 trillion. The public portion of that debt, the money that the government owes to foreign and domestic investors, has reached $14.4 trillion and is growing fast due to the explosion of entitlement programs—the same programs that Trump has irresponsibly promised not to touch.
Last year, spending on Medicare, Social Security, Medicaid, and net interest paid on the debt increased significantly. Together, they totaled $2.1 trillion and made up 56.6 percent of the budget. Medicare and Social Security spending was $1.6 trillion of the total. But this is just the beginning.
Now, we could look at Trump's promise not to touch these programs in a more cynical way. Could it be that when he promises not to reform Social Security and Medicare, he is actually promising massive cuts to Social Security down the road? As you may know, in 2035, when the Social Security Trust Funds runs out of assets, benefits will be cut across the board by roughly 25 percent. According to CBO projections, in 2035 the public debt will be $41 trillion, or 110 percent of GDP, while the deficit will be well above $2.6 trillion, or 7 percent of GDP. Meanwhile, spending will stand at almost $10 trillion, or 26 percent of GDP. In other words, the notion that Congress will be able to avoid the cuts one way or another is pure wishful thinking.
Is the president that sneaky? I doubt it. I think he is just fiscally irresponsible. Indeed, if Trump's spending priorities are any indication, the debt is only headed higher. To get a sense of those priorities, here's a list of either explicit or implicit areas in which Trump intends to increase spending according to last night's speech:
- It sure sounds like Trump intends to reinvigorate the federal government's failed war on drugs. That portends a larger federal anti-drug budget. Taxpayer dollars will be lost; and tragically many more lives will be lost to the drug war, too.
- Trump lamented the loss of trillions of taxpayer dollars in Middle Eastern wars, but then he said he will send "Congress a budget that rebuilds the military, eliminates the Defense sequester, and calls for one of the largest increases in national defense spending in American history." The president appears unable to understand that big military budgets beget more wars, which beget bigger military budgets, and on and on it goes.
- Trump promised to spend more money on veterans. It would have been nice to hear him offer specific reforms for the Department of Veterans Affairs (see Cato's Michael Cannon for some good suggestions) but Trump instead fell back on the typical politician's promise to simply spend more money.
- Trump reiterated his intention to "invest" a trillion dollars in the nation's allegedly "crumbling infrastructure," which I'm sure were reassuring words for the various special interests involved in the transportation and construction lobbies. Trump says it will be "financed through both public and private capital," but it's the "public" part that most excites the spenders in Congress. It's also worth noting that Trump explicitly stated that the effort will be "guided by" his so-called Buy American and Hire American principles. Translation: It is going to cost taxpayers a lot more money.
- The president said "my administration wants to work with members in both parties to make childcare accessible and affordable, to help ensure new parents have paid family leave, to invest in women's health, and to promote clean air and clear water, and to rebuild our military and our infrastructure." This is what you call pandering to the pink hat crowd.
One thing is certain: This is not the party of Ronald Reagan anymore. Republicans have gone so far off the rails that they not only gave standing ovations to calls for more government infrastructure spending, they applauded demands for blatantly protectionist policies. The GOP has apparently forgotten the fact that for decades it stood for free trade and pretended to want to reduce the debt.
According to a tweet sent by House Speaker Paul Ryan this morning, "Last night POTUS delivered a bold optimistic message to the America people." No Mr. Speaker, he didn't.
