Trump’s economic plan short on details
GOP nominee tells supporters he’s ready to ‘jump-start America’
Donald Trump on Monday offered more of his economic vision, but with few particulars.
Trump did tweak the dramatic tax cuts he proposed months ago. He still wants to compress the current seven personal income tax brackets to three. But the rates have been raised to 12%, 25% and 33%, from 10%, 20% and 25%.
The change appears partly aimed at critics that say the overhaul will increase the U.S. deficit by $9.5 trillion over 10 years. But Trump also proposed a new tax credit for child care expenses that could offset any savings, says Mark Zandi, chief economist of Moody’s analytics.
Trump reiterated his plan to slash the current 35% corporate tax rate to 15% and chop taxes for small businesses — which mostly pay personal tax rates — to 15% as well, transforming the country from the highest-taxed nation to among the lowest. That should prompt more multinational companies to locate in the U.S. Zandi estimates all the cuts would juice the economy initially, spurring growth of 3.7% in 2017, compared to 3% under current law.
“I want to jump-start America,” he said in a speech on his economic plan at the Detroit Economic Club.
Trump did little to explain how the tax reductions would be offset other than suggesting less taxed consumers and businesses will spend and invest more, creating a more vibrant economy.
For Trump’s plan to work, substantial spending cuts likely will be necessary, and the billionaire made no mention of that. As a result, both Moody’s and Oxford project the plan would trigger massive deficits and sharply higher interest rates that lead to a recession.
On trade, Trump wants to brand China a currency manipulator, stop the country from stealing U.S. intellectual property and force its government to no longer subsidize its exports. Previously, Trump has said he would slap China with 45% tariffs if the country doesn’t change its practices as part of an effort to close the trade gap.
Tariffs on other countries’ imports likely will cause them to retaliate with hefty duties on U.S. products, hammering U.S. exports and shrinking the economy. It’s unlikely that low-level manufacturing jobs in sectors such as apparel that have shifted overseas will come streaming back while the country’s trade policy remains uncertain, Zandi says. More likely is that the jobs will move to other low-wage countries such as Vietnam.
Trump said he will release more details in coming weeks.