The second in a series of articles examining major issues facing President-elect Donald Trump following his inauguration.
President-elect Donald Trump rode to victory on a wave of discontent in working-class America, where voters were buoyed by his promises to return their manufacturing jobs.
“I said that I will be the greatest jobs producer that God ever created,” he reminded reporters Wednesday at Trump Tower. “I’m going to work very hard on that. We need certain amounts of other things, including a little bit of luck, but I think we’re going to do a real good job.”
His vision to restore the country to global economic dominance also included proposals for deep income and corporate tax cuts, reworked trade agreements, rolled-back regulation and massive infrastructure investment.
These plans led after his election to a “Trump bump” in the stock markets, but experts say the longer-term effects — and the final manifestations of his policies after they go through Congress — can’t be predicted until his roadmap is known in greater detail.
“There’s going to be a high level of uncertainty, and you can already feel it,” said Mark Zandi, chief economist at Moody’s Analytics. “It will matter more as days turn into weeks and weeks turn into months. I expect a lot of volatility.”
Trump inherits an economy in far better shape than the one President Barack Obama took on. The country is at close to full employment and wages are ticking up, but several economists acknowledge some blue-collar industries haven’t felt the effects.
“The economy was in such a deep hole that it took the full eight years of the Obama administration to dig out,” Zandi said. “Part of the population has been in the hole so long, they can’t see out of it and therefore, they voted for Trump.”
The president-elect already has notched some symbolic wins in saving jobs, most prominently persuading a Carrier furnace plant in Indiana to keep 800 that had been bound for Mexico.
But the carrot was $7 million in tax breaks and a $16 million investment that the parent company’s chief executive told CNN will be spent on automation — threatening the very jobs saved. In addition, Carrier still sent another 700 jobs from another Indiana plant to Mexico.
Some analysts say Trump’s promise to revive traditional manufacturing jobs is an empty one amid technological innovations, and China’s and India’s cemented places in the global economy.
“Trump cannot re-create the well-paying manufacturing jobs of past decades; he can only push for advanced manufacturing, which requires higher skill sets and employs fewer people,” Joseph Stiglitz, a Nobel laureate professor at Columbia University, wrote earlier this month in an essay on the Project Syndicate opinion website.
Peter Navarro, head of Trump’s new White House National Trade Council, and Wilbur Ross, his nominee for commerce secretary, have rejected the idea that automation will cost jobs.
Technologically advanced countries such as Japan and Germany have strong manufacturing sectors, and the United States can compete with lower taxes and deregulation, they said in a September analysis of Trump’s economic plan. But, like the left-leaning Stiglitz, they stressed that beyond cheap products, manufacturing now is in fields such as aerospace and pharmaceuticals.
Trump also seeks to sink $1 trillion into transportation, water, telecommunications and energy infrastructure, creating jobs and stimulating the economy in the process.
The proposal has potential for bipartisan compromise.
Its scope earned early support from Senate Minority Leader Chuck Schumer (D-N.Y.), who simultaneously worried that a package composed of too many tax breaks would “sacrifice our principles.”
Establishment Republicans such as House Speaker Paul Ryan of Wisconsin will resist massive spending, but the Trump team’s pitch of a “deficit-neutral” approach financed by public-private partnerships and tax credits may lure crucial GOP backing.
Trump’s pick for transportation secretary, Elaine Chao, during her confirmation hearing last Wednesday said the country should “unleash the potential for private investment,” but also conceded to Sen. Corey Booker (D-N.J.) that the infrastructure plan likely also will include some direct federal spending.
Among the president-elect’s more fleshed-out policy proposals is his blueprint to cut income and corporate taxes.
“This is a working and middle-class tax relief proposal,” he told the Economic Club of New York last September in Manhattan.
But most economists agree the plan is more weighted toward the wealthy.
The nonpartisan Tax Policy Center found that on average all households would see tax cuts, but the highest-income ones would see the largest cuts in terms of dollars and percentage.
The average tax bill this year would fall by $2,940, but the top 0.1 percent of the population — with incomes over $3.7 million — would receive an average cut of $1.1 million, the group said.
Trump’s plan would reduce the top corporate tax rate to 15 percent from 35 percent to provide an incentive for domestic investment.
Like his infrastructure proposal, the funding mechanisms behind Trump’s tax policies — whether and how much they add to the deficit — will make the difference in how Congress receives them and what iterations are passed.
The nonpartisan Tax Foundation estimated that the plan will cost between $2.6 trillion and $5.9 trillion.
The plan has some similarities to the one laid out by Ryan. Both would collapse the number of tax brackets to three from seven with rates of 12 percent, 25 percent and 33 percent. The income ranges at which the rates apply are different.
As he stumped through working-class swaths of the country, Trump blamed the flight of domestic manufacturing jobs on what he said were bad trade deals by inept leaders.
He said he would renegotiate the North American Free Trade Agreement, abandon the Trans-Pacific Partnership and tack a 35 percent tariff on imports from Mexico. He has called out by name on Twitter some of the companies ready to send jobs offshore.
James Pethokoukis, a columnist at the conservative American Enterprise Institute, said Carrier and comparable deals will help the middle-class Americans who work in those companies or sectors, but noted globalization has helped middle-class Americans who “like buying less expensive goods at Walmart” or work at companies that rely on imports.
“You’re sort of picking winners and losers,” he said. “He may try to help one group but end up hurting another.”
Gary Clyde Hufbauer, a senior fellow at the nonpartisan Peterson Institute for International Economics, said that despite his campaign rhetoric, Trump is unlikely to risk legislative goodwill and start a trade war amid priorities such as repealing Obamacare and enacting his tax and infrastructure plan.
“Congress doesn’t just want him to run off and be the lone ranger,” Hufbauer said of reworked or scrapped trade deals. “If you don’t have congressional assent, you generate a lot of resentment from the Democrats as well as the Republicans.”