Trump Insiders Battle Over Future Course of American Economic Policy


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Trump and Pence
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Donald Trump’s campaign was propelled to victory by strong support across the Midwest Rust Belt, with millions of mostly white working and middle class voters turning out to support him. While conservative views over immigration and perhaps even sexism played a role in drumming up support, the biggest single factor was probably Trump’s promise to restore the American economy to its former industrial glory.

Trump promised harsh tariffs for Chinese imports, and to force China to allow its currency to free float. Many believe that China is manipulating its currency, keeping it artificially depressed so that Chinese exports are cheap. Trump has also promised to renegotiate the NAFTA trade deal, and to slap taxes and other penalties on any American firms that attempt to outsource American jobs.

Was this all campaign bluster, or do these stump promises actually represent the economic policies Trump intends to pursue once he’s in office? Most likely, the course of Trump’s economic policies will be charted out over the coming weeks, with two opposing camps representing antithetical views battling for ideological supremacy.

Insiders are reporting that two camps have emerged within the evolving Trump administration. One camp is being headed by Vice President Pence, and adheres to standard Republican orthodoxy: low taxes, free trade, and business-friendly policies. The other camp is made up of advisors who want to adhere to Trump’s campaign promises: a rollback of trade deals & punishing companies who outsource jobs.

Most likely, one of these camps will end up with a dominant voice when the new administration assumes office in January. Which one? For now, we’ll have to wait to see who Trump selects for key policy positions.

The Pro-Trade Carrot Crowd

Vice President Mike Pence could potentially emerge as the most powerful Vice President in history as Donald Trump has already handed him immense amounts of control. Pence is in charge of the transition team, and is expected to handle much of the day-to-day responsibilities of being President.

As far as economics goes, Pence adopts a relatively orthodox Republican view, believing that to spur growth companies should be offered incentives, such as low taxes and grants. This “supply side” economic view doesn’t necessarily seek to erect trade barriers, but instead to offer businesses positive incentives and is in stark contrast to many of the statements Trump made while on the campaign trail.

Some of Trump’s proposed policies do adhere to the standard Republican platform, however. For example, Trump has argued for lowering corporate taxes to 15%. Currently, the top corporate tax rate in the United States weighs in at just under 39%. As far as published rates go, corporate taxes in the United States are the third highest in the world, trailing only Puerto Rico and the United Arab Emirates. However, the immensely complex Federal tax system features numerous loopholes. In practice, many major companies pay less than 20%, although small businesses are often stuck paying higher taxes.

Tax reform is on the menu, and if Pence and his allies win out, it will likely be a centerpiece of Trump’s agenda. However, there’s no guarantee that Pence and orthodox Republicans will dominate the administration. Trump rode into office on a populist wave, promising to turn back globalization and to restore the former glory of the Rust Belt through tariffs and other measures, and he the President may not be so quick to abandon his supporters.

Anti Globalization Proponents Not Going Down Quietly

Years from now, when historians look back and analyze how Donald Trump managed to defeat the Clinton campaign machine, they’ll almost certainly note his dismantling of the supposed “blue wall”. Wisconsin, Michigan, and Pennsylvania were supposed to stop an insurgent Trump campaign. Instead, middle and working class Americans, particularly those with paler skin, revolted and the supposed “fire wall” turned out to be the hammer and nails for Clinton’s coffin.

In hindsight, this outcome shouldn’t be so surprising. Clinton always came off as an elitist, and she made few efforts to reach out to middle America beyond perfunctory words. Through the whole campaign she was dogged by elitism, calling half of Trump’s supporters “deplorables”, admitting that she hadn’t driven a car for decades, and raking in huge checks from Wall Street in exchange for short speeches.

Clinton was also one of the chief architects of the Trans-Pacific Partnership, the very type of trade deal that Trump and many of his supporters have blamed for the gutting of Main Street. While Clinton tried to distance herself from the trade deal, she lacked conviction and her track record, as well as would-be administration insiders, suggested that she’d support the deal once in office.

Trump, on the other hand, railed against the TPP and NAFTA while on the campaign trail. But will Trump maintain his anti-trade perspectives now that he’s in office? Almost certainly, Trump’s stance will soften, but numerous insiders on his transition team are calling for a roll back of NAFTA and other trade deals.

Trump likely won’t back out of NAFTA completely, but instead could seek more favorable terms and concessions. Reducing the trade deficit with Mexico and other lower wage countries was perhaps the single biggest promise Trump made, and the one that lured in the most working class votes. The TPP also appears to be dead in the water, for now, with Congress refusing to push the deal through at the last second.

If the anti-trade Trump camp does win out, the global economy and American trade policy could be due for a major shakeup. Campaign promises could quickly become policy realities, especially with Republicans in control of the Senate and Congress, and with public sentiments turning sour in regards to trade deals.

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