New York
Cnn
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President Donald Trump, in a conversation with global business leaders on Thursday, gave the clearest appearance of how he plans to make the economic promises he campaigned: he proposed a carrot and contagious approach to the world economy he believes will help In resolving the inflation crisis for good and finances its mass tax reduction proposals.
Trump spoke from Washington in direct slate-slate remarks and a session of questions and answers held by the World Economic Forum in Davos, Switzerland, presenting a vision of American economic prosperity:
- Lower taxes within America’s limits, stimulating companies to do business there.
- Increase taxes for businesses outside of America, bringing revenue that both will pay for the income lost from the lowest tax rates and promote more US products to boost the economy.
- Produce more oil to reduce energy costs to overcome inflation.
- Lower interest rates to reduce costs for businesses and consumers.
Although Trump has articulated various aspects of his plan throughout his president campaign, he never linked all these topics together in a special vision to solve everything Ails America of America, beating high prices , high taxes, stagnation production, a slow labor market and high and high interest rates all at the same time.
The problem, of course, is that Trump’s plan is not so simple to achieve – and, in fact, can be counterproductive.
Here is Trump’s plan, step by step:
Step One: Lower taxes. Trump says he will work with Congress to lower corporate tax level to 15% (down from 21% current). This, he says, would ignite business growth and investment in the United States.
Step Two: Raise the fees. The lower tax offer is only good for companies that do their things in America. If they want to continue doing business at the US while doing products abroad, they will be subject to large penalties in the form of tariffs.
“My message to any business in the world is very simple: Come to make your product in America and we will give you among the lowest taxes of every nation on Earth,” Trump said on Thursday. “But if you don’t make your product in America, which is your prerogative, then you will simply have to pay a fee.”
Trump predicted that tariffs would bring hundreds of billions of dollars – perhaps trillion dollars – in the US Treasury, which would help pay America’s mass debt and its planned tax cut. With a carrot and contagious approach, Trump said he believes companies will be stimulated to make products in America, increasing American production and its work strength and thus increasing the economy.
Step Three: Lower power costs. Trump said he believes he could make a deal with OPEC, the oil card, which has slowed production to keep prices higher. And he has signed executive orders to strengthen the production of US oil and gas. Combined, Trump believes that these actions will lower energy prices, leading to lower prices for US consumers.
Step Four: The lowest interest rates. Reducing inflation may allow the federal reserve to lower interest rates, which Trump said he would seek the Central Bank of America.
“By lowering oil prices, I will ask for interest rates will drop immediately,” which would reduce borrowing costs for businesses and consumers.
Parts of the Trump plan have some high -profile supporters: JPMORGAN JAMIE DIMON, the leader of the largest bank in the world. Dimon in Davos on Wednesday told CNBC that tariffs can be an effective economic tool – or weapons.
“I would put in perspective,” told Dimon Andrew Ross Sorkin of CNBC in an interview. “If it is a little inflationary, but it is good for national security, so be it. I mean, overcome it. ”
This may be true for fees, which Trump has often threatened as part of negotiation tactics. But his full vision could be very difficult to accomplish.
There are many holes in Trump’s logic, as economists and policy experts have noticed throughout the political spectrum for years.
Corporate tax level effort is expensive. Trump did it earlier, in 2017, bringing the high corporate level to 21% from 35%. While this gave the economy an incentive, increased salaries and productivity, the benefits were not almost enough to compensate for tax revenue losses that have expanded the US deficit, according to an analysis by the Booth Business School of Chicagos.
Everyone loves lower taxes. But America is developing a great deficit, which is providing well -known social services, including social and media, more and more financially troubled. To finance those services and the rest of the business the government does, America must borrow large sums of money in the form of treasury bills.
Problem with bonds: The more you flood the market with them, the more their price falls. And yields – which are related to all types of consumer credit levels, including mortgages – increase. Trump’s massive borrowing promises are a major factor after mortgage levels that change their decline and increased over 7% even when the federal reserve has reduced its interest rates in recent months.
Fees are also potentially problematic: Their costs are paid by US importers, not by foreign exporters. This means that those costs are passed on to American consumers, which can reign inflation and damage the economy.
“I think his economic policies are crazy. There are reasons why we don’t have super high tariffs,” said James Angel, a professor at the Psaros Center of Georgetown McDonough for financial markets and policies. “For one thing, they kill the world trade. If you withdraw imports, you withdraw our ability to export, and this will cause a lot of work losses. “
Energy demand is in a decline: It will be difficult to pump more oil. Demand is poor all over the world, as economies – especially China – fight inflation and slow growth.
Meanwhile, the United States already produces more oil now than any other country at any other time. Energy companies are not gathering for new oil drilling rents, as evidenced by the latest auction of Alaska’s wild animal shelter receiving zero offers.
And even if OPEC lowers prices, then Saudi oil revenue will fall, making it harder for the country to invest $ 600 billion up to $ 1 trillion in America that Trump says it is negotiating with the crown prince.
Lowering interest rates is the job of the Fed, not the President: The Central Bank maintains its independence harshly. Trump has previously transmitted his desire to exercise more direct control over interest rate movements and called Jerome Powell, Fed Trump chairman appointed in his first term, not to reduce interest rates faster . Amid speculation that Trump would try to light Powell – a rumor Trump has repeatedly denied – the Fed chief withdrew a strong line, telling reporters in no uncertain terms that such action was “not allowed by law”.
It’s not as if no one has tried to show Trump’s logic steps and the apparent misunderstanding of his ECON 101 textbook. During the summer, at the Agoikago Economic Club, Trump simply refused to admit that his tariff plans will increase costs for Customers, telling Bloomberg News editor John Micklethwait that his critics have “wrong for everything. So have you been, by the way, you were wrong … you have wrong your life in these things.”