What a Trump victory would mean for the US economy

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NEW YORK – The US presidential election in November is critical for many reasons. At stake is not just the survival of American democracy, but also sound stewardship of the economy, with far-reaching implications for the rest of the world.

American voters face a choice not only between different policies, but between different policy objectives. While Vice President Kamala Harris, the Democratic nominee, has yet to detail her economic agenda fully, she likely would preserve the central tenets of President Joe Biden’s program, which include strong policies to maintain competition, preserve the environment (including reducing greenhouse-gas emissions), reduce the cost of living, maintain growth, enhance national economic sovereignty and resilience, and mitigate inequality.

By contrast, her opponent, former President Donald Trump, has no interest in creating a more just, robust, and sustainable economy. Instead, the Republican ticket is offering a blank check to coal and oil companies and cozying up to billionaires like Elon Musk and Peter Thiel. It is a recipe for making the US economy weaker, less competitive, and less equal.

Moreover, while sound economic stewardship requires setting goals and designing policies to achieve them, the ability to respond to shocks and seize new opportunities is no less important. We already have a sense of how each candidate would perform in this regard. Trump failed miserably in responding to the COVID-19 pandemic during his previous administration, resulting in more than a million deaths. At a time when the United States was desperately in need of leadership, he suggested that people should inject bleach.

Responding to unprecedented events requires difficult judgment calls based on the best science. In Harris, the US has someone who would be thoughtful and pragmatic in weighing the trade-offs and devising balanced solutions. In Trump, we have an impulsive narcissist who thrives on chaos and rejects scientific expertise.

Consider his response to the challenge posed by China: a proposal to introduce blanket tariffs of 60% or more. As any serious economist could have told him, this would increase prices – not just for the goods imported directly from China, but also for the innumerable other goods containing Chinese inputs. Thus, lower- and middle-income Americans would bear the brunt of the cost. As inflation rises and the US Federal Reserve is forced to raise interest rates, the economy would be hit by the triple whammy of slowing growth, rising inflation, and higher unemployment.

Making matters worse, Trump has adopted the extreme position of threatening the Fed’s independence (which is not surprising, considering his committed efforts to undermine the independence of the judiciary and the civil service). Another Trump presidency thus would introduce a persistent source of economic uncertainty, depressing investment and growth, and almost certainly increasing inflation expectations.

Trump’s proposed tax policies are equally fraught. Recall the 2017 tax cut for corporations and billionaires, which failed to stimulate additional investment and merely encouraged share buybacks. Although Republicans have never seen a tax cut for the rich that they didn’t love, a few at least recognized that the policy would increase budget deficits, and therefore added a sunset clause, which begins to take effect in 2025. But Trump, ignoring the evidence that “trickle-down” tax cuts don’t work and don’t pay for themselves, wants to renew and then deepen the 2017 cut in ways that would add trillions of dollars to the national debt.

While populist demagogues like Trump do not care about deficits, investors in the US and abroad should be worried. Ballooning deficits from non-productivity-enhancing spending would further add to inflation expectations, undercut economic performance, and exacerbate inequality.

Equally, repealing the Biden administration’s signature Inflation Reduction Act would not only be bad for the environment and US competitiveness in critical sectors vital for the country’s future; it also would eliminate provisions that have lowered the cost of pharmaceuticals, thus increasing the cost of living.

Trump (and the business-oriented judges he appointed) also wants to roll back the Biden-Harris administration’s strong competition policies, which – again – would increase inequality and weaken economic performance by enshrining market power and stifling innovation. And he would scrap initiatives to increase access to higher education through better designed income-contingent student loans, ultimately diminishing investment in the sector that the US most needs to meet the challenges of a twenty-first-century innovative economy.

This brings us to the features of Trump’s agenda that are most troubling for America’s long-term economic success. First, another Trump administration would slash funding for basic science and technology, the source of America’s competitive advantage and rising living standards over the past 200 years. (It should go without saying that the country’s economic strength does not lie in casinos, golf courses, or gaudy hotels.)

During his previous term, Trump proposed major cuts to science and technology almost every year, but non-extremist congressional Republicans blocked these budget reductions. This time, however, would be different, because the Republican Party has become Trump’s personal cult. Worse, the party has declared a jihad against US universities, including leading institutions that advance the frontiers of knowledge, attract the best talent from around the world, and sustain the country’s competitive advantage.

Even worse, Trump is committed to undermining the rule of law, both domestically and internationally. Trump’s long track record of refusing to pay vendors and contractors speaks to his character: he is a bully who will use whatever power he has to rob whoever he can. But it becomes an even bigger problem when he openly supports violent insurrectionists. The rule of law is not just something which we should treasure for itself: it is critical for a well-functioning economy and democracy.

Heading into the fall of 2024, it is impossible to know what shocks the economy will face in the next four years. But this much is clear: the economy of 2028 will be much stronger, more equal, and more resilient if Harris gets elected.

Joseph E. Stiglitz, a former chief economist of the World Bank and former chair of the US President’s Council of Economic Advisers, is University Professor at Columbia University, a Nobel laureate in economics, and the author, most recently, of The Road to Freedom: Economics and the Good Society (W. W. Norton & Company, Allen Lane, 2024).