Donald Trump’s economic plan proposes tax cuts, reduced regulation, lower energy costs, and eliminating America’s chronic trade deficit. Trump’s goal is to significantly increase America’s real GDP growth rate and thereby create millions of additional new jobs and trillions of dollars of additional income and tax revenues. Hillary Clinton’s economic plan will inhibit growth.Does Navarro have an actual model that supports these claims? I’m asking the econoblogosphere to check out this weird set of assertions lest I’m being unfair here. But this entire paper looks like some strange exercise in cutting and pasting that one might find from a high school student who did not know how to write an actual analysis. Let’s read on:
Separately from this report, the non-partisan Tax Foundation has released its analysis of the Trump tax plan. It dynamically scores a $2.6 trillion reduction1 in revenues relative to the current tax policy baseline as of the end of a 10-year budgeting horizon. However, as is the typical practice within the modeling community, the Tax Foundation does not score other elements of the Trump economic plan that are growth-inducing and therefore revenue-generating. This report fills this analytical gap. Specifically, we provide our own fully transparent scoring of the Trump economic plan in the areas of trade, regulatory, and energy policy reforms based on conservative assumptions. Along with tax reform, these areas represent the four main points of the Trump policy compass. Each works integratively and synergistically with the others and in conjunction with proposed spending cuts.Integratively and synergistically! Wow – this must be some incredible model. But as we read on, Navarro contradicts himself:
Donald Trump’s tax, trade, regulatory, and energy policy reforms deal with the root causes of this problem. Trump understands that our economic problems are long run and structural in nature and can only be addressed by fundamental structural reforms. This is a key distinction between Donald Trump and an Obama-Clinton strategy that has relied so heavily – and futilely – on repeated fiscal and monetary stimuli. All we have gotten from tilting at Keynesian windmills… The growth in any nation’s gross domestic product (GDP) – and therefore its ability to create jobs and generate additional income and tax revenues – is driven by four factors: consumption growth, the growth in government spending, investment growth, and net exports. When net exports are negative, that is, when a country runs a trade deficit by importing more than it exports, this subtracts from growth.Navarro first mocks Keynesians and then basically tells us he is running a purely Keynesian exercise? I bet Gerald Friedman is screaming that he did that and he got hammered for it. As I read this latest exercise, I did not find a shred of consideration of things like potential GDP and how it might evolve over time in response to the Trump proposals. We do see this claim:
To score the benefits of eliminating trade deficit drag, we don’t need any complex computer model. We simply add up most (if not all) of the tax revenues and capital expenditures that would be gained if the trade deficit were eliminated. We have modeled only the impacts of implicit profits and wages, not any other economic aspect of the increased activity.I’m sorry but we do need to model out the supply side. If Navarro does not know this – he is not qualified to do the analysis.