On Trade
By Scott Lincicome
Let us assume that Donald Trump means what he says and would, upon being sworn in as president 2017, immediately seek the implementation of his two grandest campaign promises—the unilateral imposition of high (35 to 45 percent) tariffs on Chinese and other imports due to “currency manipulation” or outsourcing, and the withdrawal of the United States from all U.S. trade agreements, including the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO).
The first thing that needs to be said is that existing law clearly precludes such actions. No U.S. statute or regulation permits the president to impose unilateral tariffs on a broad range of products from a single country or group of countries. Indeed, the U.S. Constitution (Article I, Section 8) gives Congress the sole authority to tax imports (i.e., “to regulate Commerce with foreign Nations”). So Trump would need congressional approval to impose high tariffs on all Chinese or Mexican imports.
This would be true even if Trump instructed the Treasury Department to declare China a “currency manipulator” or utilized U.S. “fair trade” laws. The former is a superficial action that, contrary to promises made in Trump’s trade plan online, requires detailed findings and in no way authorizes U.S. tariff retaliation. The latter has strict procedural, evidentiary, and substantive requirements that the president cannot circumvent. Determining that imports from China (and other countries) have been illegally dumped or subsidized is under the control of U.S. anti-dumping and countervailing duty (CVD) laws, respectively. A finding of market-distorting surges in imports (thus violating “fair trade” provisions) falls under U.S. safeguards laws. Each type of measure applies to narrow bands of imports (e.g., hot-rolled steel) from certain countries, requires specific findings of “injury” to the U.S. industry, and takes at least a year to result in duties.
These legal barriers are significant: In 2010, the most protectionist Congress in decades balked at a far narrower action and did not pass legislation making currency undervaluation an illegal subsidy under the CVD law. The current Congress failed to pass a similar measure.
Nevertheless, assuming Trump did somehow convince Congress to impose these tariffs, or simply acted unilaterally in contravention of U.S. law, the results would cause immense pain for very little, if any, gain for the U.S. economy and workforce.
The most immediate damage would be done to consumers of imports in the United States. As basic economics and U.S. customs law dictate, they would be the ones who pay Trump’s tariffs—or, if those tariffs result in making it pointless to buy those imported goods, would be forced to pay higher prices for the same goods manufactured in the United States. It’s difficult to predict the precise magnitude of such taxes, but Representative Chris Collins of New York, one of Trump’s own spokesmen, recently suggested that the cost of food, clothing, and other necessities would rise by 10 to 15 percent. Considering the average American household spends about $11,000 on these items each year, such a tax would translate to an extra $1,100 to $1,650 per year that American families would have to spend under President Trump for the same things that they’re consuming right now—money they could have saved, invested, or spent on other important necessities (and the U.S. jobs that provide them). Almost 90 percent of free trade’s consumer benefits accrue to poor and middle-class consumers; Trump’s tariffs would have precisely the opposite effect. Thus, the tax imposed by tariffs is highly regressive.
Most U.S. manufacturers also would be affected for the worse by Trump’s tariffs. Because more than half of all U.S. imports, including from China, provide necessities for other American manufacturers (industrial supplies and materials or non-automotive capital goods), tariffs on these products would force import-consuming firms to pay more for the things they need to remain globally competitive. Such higher costs would mean lower output, fewer employees, and, in the worst cases, outright bankruptcy.
U.S. exporters, in both the manufacturing and service sectors, would likely share this pain. Broad-based unilateral U.S. tariffs would violate two of the United States’ most fundamental obligations under its World Trade Organization agreements. The first is the so-called most-favored nation provision. Under Article I of the General Agreement on Tariffs and Trade, or GATT, a WTO member must treat imports from all other members equally. Second, according to GATT’s Article II, no WTO member can impose tariffs above a so-called bound rate set forth in its tariff schedule. Immediately upon implementation, China (or Mexico) would quickly seek and win the right to impose retaliatory tariffs on U.S. goods-and-services exports in the amount of the damage caused by Trump’s tariffs. At Trump’s proposed tariff level of 45 percent, WTO-authorized retaliatory tariffs by China alone could amount to as much as $225 billion in new annual taxes on U.S. exports and intellectual property. Considering that U.S. exports to China totaled only about $115 billion in 2015, this retaliation would effectively close the United States’ third-largest export market.
This is what Trump’s tariffs would do. What wouldn’t happen?
For starters, China wouldn’t instantly cave to tariff threats; instead, it would likely escalate matters. China is a sovereign nation with its own domestic politics to consider. The Chinese government also knows how to use the WTO dispute-settlement system—and other more covert forms of retaliation. For example, when the United States slapped duties on Chinese solar-panel manufacturers in 2012, China instantly retaliated with similar duties on U.S. polysilicon exports, which cost American companies and workers billions. Finally, because U.S. businesses and consumers pay for tariffs, Trump is actually threatening to hurt China by hurting Americans. This is Blazing Saddles trade policy at its finest, with the sheriff pointing the gun to his own head and threatening to shoot.
Trump’s tariffs also likely wouldn’t result in a significant increase in U.S. manufacturing output or employment. A few directly competitive U.S. companies might benefit from import protection, but the far more widespread result would be “trade diversion”—with imports shifting from China to other (more expensive) foreign countries like Vietnam, India, or Mexico. This is exactly what happened when the United States imposed tariffs on Chinese tires in 2009, and it’s a very common result of U.S. anti-dumping and CVD cases. Indeed, because of trade diversion, the Brandeis University economist Peter Petri estimates that Trump would need to create a “global tariff wall” to impose his punishment on China—a move that would further impoverish American consumers and expose U.S. exporters to even more WTO-sanctioned retaliation.
Tariffs also wouldn’t bring back many U.S. manufacturing jobs, which have been declining since the late 1940s (as a share of the U.S. workforce) and since 1979 (in sheer numerical terms)—long before trade was a significant part of the American economy. The aforementioned tires case is instructive in this regard. U.S. consumers and importing companies suffered greatly; non-Chinese imports increased; U.S. tire manufacturers didn’t improve at all; and, even under the most generous assumptions, only a few U.S. tiremaking jobs were created (at a ridiculous cost of $900,000 per job).
Trump’s plan to “rip up” the WTO, the North American Free Trade Agreement, and other U.S. trade pacts presents even worse problems. In this case, he would likely have the authority under U.S. law and various trade agreements to withdraw the United States from these deals without the consent of Congress. However, simply withdrawing from these agreements would not permit Trump to raise tariffs or otherwise abandon the United States’ obligations under them. Free-trade agreements are not treaties, which require two-thirds approval by the Senate and have the force of law upon ratification. They are “congressional-executive agreements” that, even after being signed by the president, have no legal force until they are converted into legislation passed by Congress and then signed into law by the president. (This is why Trade Promotion Authority is such a big deal: It smoothes congressional passage of U.S. FTA implementing legislation.)
To change U.S. commitments under such laws, a President Trump would need Congress to pass a new law (or laws) reversing all of the commitments, including low tariffs, previous Congresses have passed over the last 30 years (for example, the massive Uruguay Round Agreements Act that implemented the World Trade Organization Agreements in the mid-1990s). Congressional cooperation with Trump’s schemes would be far from certain.
But while Congress dithered, our free-trade partners would immediately be set loose to raise their tariffs on U.S. imports, to block U.S. service providers, to stop enforcing U.S. intellectual-property rights, and to otherwise discriminate against U.S. companies (and their workers) in favor of domestic producers or other members of the trade agreement. Not only would millions of American jobs supported by exports be at risk of disappearing, but entire global supply chains would collapse, taking the U.S. and global economies with them.
Such thoughts are not mere abstractions. We have many existing examples of how Trump-style tariffs have resulted in lower growth, higher prices, foreign retaliation, and few, if any, new jobs. A President Trump who forced through the plans Candidate Trump has been touring would be calamitous for the U.S. economy—and the world’s.
Scott Lincicome is an international trade attorney, adjunct scholar at the Cato Institute, and visiting lecturer at Duke University. The views expressed in this article are his own and do not necessarily reflect those of his employers.
On Taxes
By James Pethokoukis
No 2016 presidential contender still in the race has a tax-cut plan as large as the one Donald Trump is proposing, nor does anyone now gone. Indeed, maybe no leading presidential contender has ever proposed cutting taxes as deeply. Trump-onomics would reduce federal tax revenue by nearly $10 trillion over a decade, according to the Tax Policy Center (TPC). As a share of GDP, the Trump tax cuts are roughly twice as large as those proposed and enacted by JFK, LBJ, Ronald Reagan, and George W. Bush. Now for some on the right, no more needs to be said. Reducing government’s take for taxpayers is an intrinsically good thing. And there are those who will argue that the less of our money government confiscates, the less it can and will spend, even though this “starve the beast” theory of public finance has never worked out in practice.
But slashing government tax revenue by a third isn’t the point for Trump (who, by the way, doesn’t concede such a fiscal result). When evaluating the Trump plan, one reasonable way to judge it is by the goals Trump himself sets for it. And they’re straightforward. He says he wants to provide tax relief for the middle class and accelerate economic growth without deepening the federal budget deficit and national debt.
On the individual side, the plan would consolidate the current seven tax brackets into four, lowering the top rate on labor income to 25 percent from the current 39.6 percent. Top investment tax rates would fall to 20 percent from 23.8 percent. Married couples making $50,000 or less would pay no income taxes at all, whether on their work or investments. The alternative minimum tax would be repealed. Itemized deductions would be limited in an unspecified way. On the business side, Trump would cut the corporate income tax rate to 15 percent from the current 35 percent, currently the highest among advanced economies. The top rate on pass-through businesses, such as partnerships, would also be 15 percent. Trump would impose a one-time transition tax of 10 percent on existing unrepatriated foreign income of U.S. companies.
Let us judge the plan by Trump’s own criteria. Would it help the middle class? Given that this plan pretty much cuts taxes for just about everyone who pays income taxes, it would certainly appear to. On a static basis—without assuming that tax cuts boost economic growth and worker incomes—the Trump plan would cut taxes by an average of $5,000 for U.S. households, with the middle fifth seeing a $3,600 increase in after-tax income. Factor in an extremely optimistic analysis of how the tax cuts would affect economic growth, and middle-class income gains would end up twice as great, if not more. The Tax Foundation’s model finds that middle-income taxpayers in the 30th to 70th percentiles would see a nearly 20 percent increase in their long-term after-tax income versus 6 percent on a static basis. Finally, the Trump plan would dramatically increase the number of households paying no income tax at all, to 110 million up from the current 77 million.
Despite Trump’s populist tone, his plan would also slash taxes for the rich and super-rich, as well as the middle. The top 1 percent would get a $400,000 tax cut on a static basis, the TPC calculates, while the top 0.1 percent would get a reduction of nearly $2 million. Trump has gone out of his way to specify one group of rich folks who don’t deserve a tax cut: hedge-fund managers. Trump has described them as paper shufflers who “get away with murder.” At a debate, he said: “The hedge-fund guys won’t like me as much as they like me right now—I know ’em all. But they’ll pay more.” They probably wouldn’t. Yes, Trump would make them pay ordinary income tax rates on the “carried interest” chunk of their income—earnings that are now taxed at preferential investment tax rates of 23.8 percent (the capital-gains rate). But those ordinary rates, recall, would be only 25 percent. Moreover, a lower tax rate on so-called pass-through income means that, effectively, carried interest income would be taxed at a top rate of just 15 percent. In the end, Trump wouldn’t raise taxes on hedge-fund managers; he would cut them by a more than a third.
Cooking up a plan that massively cuts taxes is easy. But designing such tax cuts so they don’t explode the already large U.S. government debt makes the task vastly more difficult, if not impossible. Even if you assume the Tax Foundation’s optimistic “dynamic scoring” of the Trump plan, it would still reduce the government’s revenues over a decade by $10 trillion (as opposed to the $12 trillion number, if you assume no growth effects from the Trump tax cuts). Anyway you slice it, the Trump plan would make the U.S. debt situation markedly worse. Indeed, once you add in higher debt-interest costs, the Trump plan would cause the national debt nearly to double in size over the next 20 years as a share of the economy. And that huge increase would almost certainly have a dampening effect on economic growth. Indeed, the parts of the Trump plan costing the most revenue—the individual income tax cuts—are the very parts that provide the least amount of growth. According to the Tax Foundation, for instance, Marco Rubio’s tax proposal would have cost the government a third as much as the Trump plan while generating more economic growth.
In other words, the pieces of the Trump tax package really don’t fit together in any sort of coherent way. It features cuts so large that any growth they generate might get swallowed by unprecedented debt increases. It supposedly tries to sock it to the undeserving wealthy but will actually reduce their tax burden.
It’s almost as if the point of this plan has little to do with outlining a sound economic approach that meets America’s economic challenges. Rather, it looks like a naked appeal to supply-siders and low-information voters who get the bulk of their economic information from talk radio. These are potential supporters who might be willing to accept the idea that the Trump plan could possibly pay for itself through faster growth—even though the Committee for a Responsible Federal Budget calculates such a feat would require the economy to grow at 10 percent a year for a decade. That would be three times the growth rate generously calculated by the Tax Foundation and twice as fast as the fastest growth period in the last 60 years (which was between 1959 and 1968). Only poor nations playing economic catch-up, like China or India, grow so quickly.
Trump says America is a poor nation, but we’re not that poor.
James Pethokoukis is a scholar at the American Enterprise Institute and an official CNBC contributor.
On “the Wall”
By Linda Chavez
A Donald Trump presidency would be an unknown on many fronts, but on one issue he has been clear from the moment he announced his candidacy. He aims to stop illegal immigration to the United States once and for all. His plan is to build an impenetrable wall across the border with Mexico and deport the 11 million illegal immigrants currently living here.
Trump says that his wall will cost a mere $8 billion to construct along some 1,000 miles of the approximately 1,900-mile border with Mexico—much of the rest of which, he admits, already has substantial natural barriers. But the U.S. has already built fencing along about a third of the border, and it has positioned vehicles and set up high-tech surveillance in the most heavily trafficked areas. According to the Congressional Research Service, the cost to date has been $7 billion to build and maintain the less lengthy and substantial barriers, which suggests Trump is grossly underestimating the cost of his plan.
It will take a huge engineering feat to build a wall 30- to 40-feet tall, higher than the Great Wall of China and buried deep in the ground to prevent tunneling, along land that stretches from deserts in Arizona to mountains in New Mexico, two-thirds of which includes riverbanks. We know Trump is a fan of eminent domain, but not all those ranchers whose lands would have to be taken to build the wall might feel the same, despite their complaints about trespassers from Mexico. Nor do Trump’s figures likely take into account compensation for the land seized. And of course there are environmental impacts that would have to be considered by agencies and the courts, which would slow down the process by years, perhaps decades.
Several structural engineers have weighed in on social media, estimating the cost of building the Great Mexican Wall; one took the trouble to price materials alone, including cast-in-place concrete, pre-fab concrete slabs, and rebar, which amounted to $17,073,806,000, roughly the size of the annual budget for the National Security Agency. Of course, Trump insists Mexico will pay for it. But who, I wonder, does he think will build it, especially with the construction workforce in the U.S. reduced by some 15 percent once he has deported those construction workers who are illegal immigrants?
Trump has never explained in detail how he will accomplish his task of rounding up illegal immigrants, but he has spoken favorably of “Operation Wetback.” The program instituted during the Eisenhower administration resulted in many deaths, including 88 people in one roundup alone who died from heatstroke in the Mexicali desert where they were dumped. Much has changed from the 1950s for the better, and those changes make unthinkable the kind of dragnets of the 1920s, ’30s, and ’50s that forced out thousands of legal aliens and American citizens along with illegal immigrants. But, for the sake of argument, let’s suppose that President Trump could make good on his promise to triple the number of border-enforcement agents, create a “deportation force,” and round up 11 million illegal immigrants and their American-citizen family members. “We’re going to keep them together, but they have to go,” he said. Legality aside, what would all this cost American taxpayers and the U.S. economy if Trump got his way?
The American Action Forum (AAF), a center-right research organization founded by Douglas Holtz-Eakins, former Congressional Budget Office director, estimates that it would cost some $300 billion to remove all 11 million illegal immigrants in two years, as Trump has promised to do. The program would be Big Government writ large, requiring an increase in apprehension personnel from the current 4,844 to some 91,000; increasing the number of detention beds available from today’s 34,000 to nearly 350,000; upping the number of immigration courts to handle cases from 58 to 1,136 and the number of attorneys from 1,430 to 32,445; and adding a minimum of 17,296 chartered flights and 30,701 chartered bus trips each year.
But the real cost of Trump’s proposal is far greater than expanding the federal budget. Illegal immigrants live, work, buy, and rent in our communities, and they pay income, property, and sales taxes. They are deeply imbedded in our society, providing their goods and services while consuming others. AAF estimates that the removal of illegal immigrants over two years would result in a “sudden and deep recession similar to what the United States recently experienced during the Great Recession.” The workforce would shrink by some 6.4 percent in two years, or some 10.3 million workers. As a result, AAF estimates, the economy would be 5.7 percent smaller at the end of Trump’s second year in office than it would have been, and real GDP would be $1 trillion lower, wiping out all gains over the last three years. And these figures do not even take into account the future losses incurred because we will have removed children we paid to educate but who will not repay this investment with future taxes after we’ve sent them packing with their parents.
Trump would also institute a “pause” in legal immigration, one that he says might last two years, while out-of-work Americans supposedly will rush to fill jobs immigrants, legal and illegal, now take. But there is no evidence that Americans would rush to pick fruits and vegetables, de-bone chickens, scrub office floors and toilets, the jobs illegal immigrants currently dominate. Nor will there be enough American engineers, scientists, mathematicians, and other specialists to fill jobs that now go to high-skilled legal immigrants. If he got his way, a President Trump would leave America smaller and poorer. This is not a blueprint to Make America Great Again but very nearly its opposite.
Linda Chavez, a frequent contributor to COMMENTARY, is president of the Becoming American Institute.
On Health Care
By Tevi Troy
Donald Trump has been extraordinarily vague on health care. To begin with, his standard line has been that he was going to repeal Obamacare and replace it with “something great.” On other occasions, he chose a more modest approach and instead promised to replace President Obama’s Affordable Care Act with “something very good.” As his campaign has progressed, he’s added a few details, such as allowing individuals to purchase health insurance across state lines and expanding the use of health savings accounts. Both are well within the mainstream of the best conservative reforms for health care. Ted Cruz lists both on his campaign website, and most conservative alternatives to the ACA include them.
But these alone are insufficient, to put it mildly. Marco Rubio mockingly pointed this out during the late February Houston debate by saying: “So, you’re only thing is to get rid of the lines around the states. What else is part of your health-care plan?” In his response, Trump seemed to confuse insurance plans, which would be affected by his proposal, with an overall health-care plan, in which purchasing across state lines should be part of a larger whole. He concluded his argument with Rubio by saying: “You get rid of the lines, it brings in competition. So, instead of having one insurance company taking care of New York, or Texas, you’ll have many. They’ll compete, and it’ll be a beautiful thing.”
The exchange revealed that Trump’s plan was, shall we say, lacking in detail. So perhaps it was no coincidence that less than a week passed before Trump released a more detailed health-care plan. It has some surface appeal. There are seven planks, including the Trump standbys: repealing Obamacare, allowing purchases across state lines, and using health savings accounts. To these, Trump added making health-insurance premiums tax deductible for individuals, promoting price transparency, reforming Medicaid into a block grant, and allowing for the re-importation of pharmaceuticals from other countries to sell at lower prices than those found in the United States.
With the exception of the last plank, all of them sound as if they could have come from the standard conservative health-care-reform playbook. As for drug re-importation, it is not surprising that Trump would go against standard conservative doctrine and opt instead for a populist element. The seven-point plan also seemed to soothe conservative heartburn by pointedly not including other Trump campaign positions such as maintaining Obamacare’s individual mandate and somehow saving the federal government $300 billion through direct negotiation of pharmaceutical prices (total spending in the United States on prescription drugs: $297 billion).
If all analysts had to go on was the listed policies in the paragraph above, one would assume that a candidate with such a plan was no deficit hawk, to be sure, but still a conservative in good standing, albeit with a populist edge. But there were additional details that vitiated such an assumption. On his core plank of allowing for the purchase of health care across state lines, he added the caveat that “the plan purchased [must comply] with state requirements.” In doing so, he subverted the whole purpose of the idea, which is to allow people in high-cost, high-mandate states such as New York to purchase cheaper plans in states such as Utah that do not impose as many costly coverage requirements on insurance plans sold in those states. With regard to his idea to “allow individuals to use Health Savings Accounts (HSAs),” that simply restates existing law.
Some of the other proposals are similarly flawed. Price transparency is a great thing, but it sounds as if Trump may be leaning on the heavy hand of government to mandate that worthy aim. And extending the tax deductibility of health care to individuals could bring about the equalization of tax treatment of health-care benefits between employer-sponsored care (which has long been tax deductible) and individually purchased care (which is not). Trump’s plan would make the tax break for individuals purchasing health care open-ended, costing the Treasury a great deal of money by effectively subsidizing individual health plans of any size.
The idea of allowing the re-importation of pharmaceuticals reveals a misunderstanding of the existing market for pharmaceutical products. The states that have tried it have had little success with it, it raises real safety concerns, and it would affect the development of new pharmaceutical products by damaging the profit motive for manufacturers. As I wrote in Commentary when the Obama administration was considering such a policy: “A study by the Task Force on Drug Importation convened by the Department of Health and Human Services found that the loss of profits caused by re-importation could lead to between four and 18 fewer drugs per decade. There is no way to know which promising enhancements would be lost.”1
The one Trump plank that conservatives could unreservedly support is the idea to block-grant Medicaid and lighten the federal government’s hand on state-based health-assistance plans. But getting such a proposal past Democrats in Congress is a non-starter, as long as there remains a 60-vote requirement in the Senate to overcome filibusters.
Overall, Trump’s health-care plan would need a lot of fixing before it could make health care great again.
1 “The End of Medical Miracles,” COMMENTARY, June 2009.
Tevi Troy is a former deputy secretary of Health and Human Services and the author of the forthcoming Shall We Wake the President? (Lyons).
On Infrastructure
By Philip Klein
“When you talk about building, you had better talk about Trump,” writes Donald Trump in his 2015 book, Crippled America. Nothing has played a more central role in Trump’s argument that he’s the man to restore America to its former greatness than the idea that he is a master builder. He has insisted throughout his presidential campaign that his experience negotiating real-estate deals, constructing skyscrapers, and developing luxury hotels gives him the chops to solve the nation’s problems in a way that “all talk, no action” politicians could not.
During the campaign, Trump’s background as a builder has been most associated with his pledge to build a border wall to be paid for by Mexico. But beyond immigration policy, Trump has also talked repeatedly about how his background as a builder would be essential to transforming the nation’s infrastructure. He has criticized U.S. infrastructure as “terrible” and “a disgrace” more worthy of the Third World. Comparing the U.S. unfavorably with China, he said at a March rally in Maine, “They have trains that go 300 miles an hour. We have trains that go: Chug. Chug. Chug.” As president, Trump has vowed that, “fixing the country’s infrastructure would be a major priority project.”
Infrastructure is one of the areas in which Trump has most clearly broken with conservative policy orthodoxy. Talking about massive public-works projects is consistent with the Keynesian view of government spending as being the key to boosting economic growth, and it also fits in with liberals’ romantic notion of a government that can do “big things” (as President Obama has put it). Though most conservatives spent the Obama era opposing his public-works agenda, Trump was an early booster.
“It looks like we have somebody that knows what he is doing finally in office,” Trump said in February 2009 following Obama’s first prime-time press conference, in which Obama talked about his economic stimulus plan. In addition to the tax component, Trump said, “building infrastructure, building great projects, putting people to work in that sense is also very good.”
In his campaign manifesto Crippled America, Trump further embraced infrastructure spending as a form of stimulus. “There is nothing, absolutely nothing, that stimulates the economy better than construction,” he wrote. Free-market economists have long argued that massive government spending on infrastructure, at best, acts as a short-lived sugar high, but, at worst, does lasting damage to the economy by distorting incentives, crowding out private investment, and adding to the nation’s debt burden. As Obama learned, “Shovel-ready was not as shovel-ready as we expected.”
Trump insists in his book, “Our airports, bridges, water tunnels, power grids, rail systems—our nation’s entire infrastructure is crumbling, and we aren’t doing anything about it.” But his notion that nothing is being done about the nation’s infrastructure is inconsistent with the actual data, which show that government at all levels spent $416 billion on infrastructure in 2014, representing about 2.4 percent of GDP, according to the CBO, which noted: “Public spending over the past three decades has been fairly stable at 2.4 percent.” (It peaked at 3 percent in 1959 when the interstate highway system was being built.)
A Trump presidency would aim to spend a lot more as part of “the greatest long-term building project in American history,” but he has been vague about how he intends to pay for it.
Trump concedes that “this is going to be an expensive investment, no question about that.” But he does not elaborate on any sort of creative plans for financing such spending—say, privatizing some projects such as toll roads or charging user fees. Instead, he writes: “We need to put together a variety of sources to get it done. In some places there need to be bonds issued.” But issuing bonds, even if states and local governments could find eager buyers, would merely create more debt at a time when they are already facing crushing budgetary pressures from Medicaid, education, and pension obligations, among other mounting expenses.
Furthermore, it’s difficult to square Trump’s ambitious talk on infrastructure with his broader comments on the budget. One of the main reasons there isn’t more money available to invest in major projects is that the federal government is burdened by spending on entitlement programs, which Trump has said he doesn’t want to change. He also recently told the Washington Post that he would wipe out the nation’s $19 trillion debt within eight years. The prospect would already be mathematically impossible without serious cuts to entitlements, but it would be even further out of reach were he to pursue his public-works vision.
All of this brings us back to the idea of Trump as a great builder. In writing about his plans to fix the nation’s infrastructure, Trump argues that his experience renovating Wollman ice-skating rink in New York City’s Central Park, building apartments on the West Side of Manhattan, and constructing a luxury hotel in Washington, D.C. show that he could fix the nation’s infrastructure.
To rebuild, “you need someone who knows how to deal with unions and suppliers and, without any doubt, lawyers,” Trump writes. “I deal with them all each day, and I don’t lose to them.” He explains: “When I build a project, I watch the money.”
However, as president, Trump would be charged with overseeing foreign and domestic affairs. He wouldn’t have much time to sit down and haggle over concrete and steel prices for every construction project across the country. Furthermore, all spending has to go through both chambers of Congress, and government projects are subject to a ton of regulations, such as those governing the use of union labor, which naturally drive up costs.
This gets to the broader danger in thinking that Trump could make the leap to president because of his background in business. The president does not “run” the economy. Leftist presidents may want the government to take a more active role in managing the economy, but conservative presidents fight to remove government barriers so that individuals and businesses can create and innovate. Trump wants to claim the mantle of the latter but his every inclination is to behave like the former.
Philip Klein is managing editor of the Washington Examiner.
On NATO
By Tod Lindberg
The North Atlantic Treaty Organization was born in response to Soviet expansionism in Europe following World War II. Moscow’s designs on Western Europe were clear. And so began the U.S. policy of containment of the Soviet Union, the most important element of which was the U.S. pledge to defend Western Europe against Soviet attack. That pledge was codified in the Washington Treaty establishing NATO in 1949. The treaty’s Article 5 declares that “an armed attack against one or more” of its members “shall be considered an attack against them all.”
The Soviet Union is no more, but the alliance has hardly grown moribund. In the 1990s, NATO went to war twice in Europe to stop atrocities in the disintegrating former Yugoslavia and deployed peacekeepers there in the aftermath. NATO invoked Article 5 following the 9/11 attack on the United States and took command of the military mission in Afghanistan from 2003 until 2014. In 2011, NATO conducted air strikes on Muammar Qaddafi’s Libya to prevent the slaughter of opponents of the regime, which then collapsed. NATO is currently involved in myriad assistance and training programs with partner countries. In the wake of Russia’s 2014 annexation of Crimea and invasion of Eastern Ukraine, President Obama flew to Estonia, to offer reassurance to the presidents of three Baltic countries—once captive Socialist Republics of Moscow, since 2004 members of NATO—that the United States remains committed to their defense under Article 5.
For his part, Donald Trump has called NATO “obsolete,” citing its Cold War origins and a primary security threat that now comes from radical Islam. He has said NATO costs the United States “billions” and that allies don’t contribute a fair share—a point he has also made about our Asian alliance relationships. Two generations ago, when we were a rich country, it might have made sense for the United States to subsidize the security of others countries, he has said, but not now that America is poor. He also seems to question the value of what the United States is committed to defend: After the recent terrorist attack there, he remarked that Brussels has become a “hellhole.” Trump has also expressed admiration for Russian President Vladimir Putin, and while he seems to find Russia’s military intervention in Ukraine regrettable, what seems to irk him still more is that the United States rather than our European allies, in his view, has shouldered the lion’s share of the burden of responding to it.
Each of his substantive points is readily rebuttable. First, the United States is still a rich country—the largest economy in the world and fifth in GDP per capita, according to the International Monetary Fund. Second, the United States reaps great benefits from NATO and its other alliance relationships. Trump points to the so-called free-rider problem, according to which European governments can spend as they wish on domestic programs because they need not pay for their own defense. But it is far from obvious that the United States could more cheaply protect its national interests without these alliances. We have fought bloody wars to prevent the domination of Europe and Asia by powers hostile to our political principles, and the deterrence value of our alliances and our ongoing military presence in these areas is a bedrock element of keeping the peace.
Third, the external threat radical Islam poses to the United States and its allies is now manifesting a homegrown counterpart in Europe, but Europe’s capitals have hardly become “hellholes.” And in coping with these new threats, an approach in which the United States remains a willing partner stands a better chance of success than one in which we act as if oceans provide the same protection they did 150 years ago.
Fourth, as for Russia, Trump’s affinity for Putin is perhaps a sign of respect for power effectively wielded, something Trump believes the United States has been failing to do. But complaining bitterly about the cost of deterring Putin is hardly the way to deter him from further adventurism.
Though Trump seems to ad-lib his way through questions about policy matters, his view of NATO and other alliances is not incoherent. I doubt he simply fails to understand that NATO has been the cornerstone of the security relationship between the United States and Europe for nearly three generations. Probably he did not miss the fact that after the Soviet Union broke up, NATO found a new “out of area” mission countering radical Islam in Afghanistan. More broadly, nor did he miss the fact that the alliance has more recently renewed its focus on deterrence and territorial defense in light of Russia’s rekindled adventurism. He likely understands that the challenge of the Islamic State as a coordinator of attacks in Europe suggests that NATO’s engagement in counterterrorism missions will continue. It may even have come to his attention that along with the global U.S. commitment to keep sea lines of communication open, NATO is the baseline test of the credibility of all U.S. security commitments, such as those to Japan and South Korea—and therefore of the U.S. commitment to maintain the global order that previous presidents worked so hard to set up and manage.
The Donald Trump problem isn’t ignorance. It’s that he believes we can safely jettison our commitments until we get a “better deal.”
According to textbooks on how to negotiate, lest you overpay, you must enter a negotiation knowing your BATNA—“Best Alternative to a Negotiated Agreement.” Trump’s BATNA is a world on its own, without U.S. engagement. Rather than being willing to pay a price to avoid living in such a world, he believes the world should be paying us for the services we render. If it doesn’t, best of luck—and to us as well.
Tod Lindberg is a research fellow at Stanford University’s Hoover Institution and author, most recently, of The Heroic Heart: Greatness Ancient and Modern (Encounter).
On Asia
By Michael Auslin
Just at the moment when Asia faces its greatest challenges in decades, Donald Trump essentially proposes to undercut, if not destroy, American leadership in the Pacific. The Republican front-runner, whose stock answer to any question about relations with any foreign country is that he owns buildings there, never seems to consider that it is the U.S. security system and the open trading system created by Washington that together have provided the base for Asian economic development and stability over the past 70 years.
Trump has said that he would consider withdrawing U.S. troops from both Japan and South Korea, if those countries did not pay more to host them. Yet one of the main reasons that Asia has been spared large-scale conflict since the end of World War II is the decades-long presence of U.S. military forces, which underwrite regional security. America’s so-called hub-and-spoke alliance system plays a major role in providing both security and assurance to Asian nations, allowing them to develop politically, build up their industrial capacity, and participate in the global trade network precisely because of their confidence in their physical security. Withdrawing our troops would be tantamount to ending our alliance with both countries and plunging the Pacific into dreadful insecurity with unknowable consequences.
Even worse, Trump has actually said he would be “open” to allowing both Tokyo and Seoul to build their own nuclear arsenals. This would ignite a nuclear arms race in East Asia. The core goals of U.S. strategy in Asia since 1945 have been to prevent any one power from dominating the region and to forestall nuclear competition among countries with a bitter past. Trump is right that our current commitments are costly. But far more costly would be an Asia in crisis or armed conflict, let alone one where nuclear weapons are widespread. Trump would not only throw the region into alarming uncertainty but would also tilt the strategic playing field decisively toward China.
Trump’s views on Asia’s economy are just as wrong-headed. While he never tires of reminding his questioners that we “owe” trillions to China and Japan, Trump has thought little, it seems, about the benefits the American consumer has received from East Asia’s becoming the workshop of the world and providing affordable goods from clothing to flat-screen TVs. To argue that the global economy is a rigged game is not to offer a coherent approach to ensuring continued development and opportunity in a changing American economy.
Oddly enough, Trump treats Japan as though this were the 1980s, apparently unaware of the fact that Japan has been the largest foreign investor in the United States for the past several years, pumping in $36 billion in 2015 alone. His animus toward Japan is as out of place as his assumption that China is an unstoppable economic juggernaut—when its economy is in fact slowing and its own internal demographic conflicts are coming to the fore.
Whether in economics or security, Trump offers the outlines of an Asia policy that reneges on U.S. promises, undercuts our friends and allies, and reduces U.S. leadership in the world’s most dynamic region. This is of particular concern given that Asia is dealing with a growing set of risks that threaten its future prosperity and stability, including China’s slowdown, which is sending economic shockwaves throughout the region. Just when free trade is needed to spur competitiveness, open up new markets, and provide new opportunities, Trump’s threats to retaliate against some of America’s largest trade partners all but ensure a currency war and worse.
Even more dangerous, China has rapidly developed its military over the past several decades and is now using it to intimidate and sometimes coerce its neighbors over contested territory in the East and South China Seas. Beijing has recently built islands on reefs in the South China Sea and has begun militarizing them, thereby giving itself the potential to control the skies and seas of one of the world’s most important waterways. Meanwhile, North Korea has continued its nuclear-weapons and ballistic-missile programs, conducting nuclear tests and firing off missiles even as reports circulate that the Obama administration has tried to reopen talks with the totalitarian regime.
Tensions are high in Asia, and concern for the future is growing. As uncomfortable as it may be to admit, American leadership is both more needed and wanted in Asia than ever before. Trump’s policies promise to send America’s friends in Asia reeling, embolden and encourage both Beijing and North Korea, and deal a blow to continued economic liberalization. Kicking half the world to the curb is a recipe for disaster.
Michael Auslin, a resident scholar at the American Enterprise Institute in Washington, D.C., is the author of The End of the Asian Century (forthcoming, Yale)
On Israel
By Jordan Chandler Hirsch
The Middle East is in anarchy, and in some ways Israel has never faced greater regional peril. As president, Donald Trump would likely seek to knock down the pillars of the U.S.-Israel alliance.
He said otherwise at the AIPAC Policy Conference in March, calling Israel “our strategic ally” and “cultural brother.” But his speech there surely represented a walkback of his genuine views. The AIPAC appearance was alien not only because Trump used a teleprompter but also because he had made his real position on the U.S. role in the region unmistakable in debate after debate.
Outside of vowing to “bomb the hell” out of ISIS, the GOP front-runner is a belligerent “America First” isolationist. He promises that “we will not be ripped off any more” by “tremendously rich” countries that leech off our military might. NATO is “obsolete”; “what the hell do we care” if Russia returns to the Middle East? It’s time for us to “take care of ourselves.” These notions represent something close to principle. As far back as 1990, he told Playboy that America is “laughed at around the world” for “defending wealthy nations for nothing” while allies “are making billions screwing us.”
When Trump lists the erstwhile partners guilty of such grifting—Germany, Japan, Saudi Arabia—he mostly excludes Israel. But as the largest recipient of U.S. military aid in the world, Jerusalem is only one breath away. Any inclination to back Israel would have to override decades-long inclinations on Trump’s part and would violate one of the few consistent stands he has taken. Trump’s gut comments—the best guide to what he would do as president—indicate that the Jewish state would fit too seamlessly in his litany of moochers to escape his gaze.
Trump might first turn that gaze to the moribund Israeli–Palestinian peace process, where he promises there is “nothing that I would rather do” than strike a deal. He mentions this aspiration so frequently that he would likely follow one presidential tradition worth breaking: attempting to ride the conflict to a legacy-clinching moonshot. For Israel, that is a familiar path to unilateral concessions and more war. Trump would make it even more perilous by being a “neutral guy.” If Washington assumed that stance, Jerusalem would have no major power behind it—even as the Palestinians deployed the Islamic world and a growing cadre of European capitals. And if talks floundered, Trump would likely blame Israel. “A lot will have to do with Israel and whether or not Israel wants to make the deal,” he said last year, “whether or not Israel’s willing to sacrifice certain things.” Any difficulties in capturing his golden deal could lead an enraged Trump to punish Israel. Trumpian retribution could lead to a global sanctions campaign that would cripple Israel’s economy or to security arrangements that would leave extremists in charge of the West Bank and Jerusalem with little power to respond.
Trump’s views on the broader region offer little comfort. He wonders why we should care if Russia resurrects itself as a great power in the Middle East, and he speaks with sweeping bigotry about Islam. His frustrations with America’s recent fortunes in that neighborhood are understandable. But abandoning the field to Moscow and alienating local partners would only spur on the chaos now threatening Europe and Africa, making Israel’s borders less stable than ever. And, most dangerous for Jerusalem, it would embolden Iran. Trump has repeatedly suggested that he would uphold the Iran nuclear agreement (despite calling it a terrible deal) and has complained that Tehran cannot use its Obama-granted sanctions relief to buy American missiles and planes. Given new leeway, and tacit U.S. support, the Islamic Republic would double down on its wars against Sunni powers and probe Israel’s defenses with greater daring. And it would advance its nuclear program to the point of full immunity and no return.
Trump’s impulses suggest he would depart the Middle East as conclusively as the British did following World War II—leaving the region without the presence of a major Western power for the first time in over a century. This is all the more alarming given his views on the U.S.-Israel defense relationship. Just before his AIPAC speech, Trump suggested that he would make Jerusalem pay for defense aid. “I think Israel,” he said, “can pay big league.” That may include renegotiating or canceling the Memorandum of Understanding, which underwrites the bulk of U.S. aid to Israel, or attempting to shed America’s commitment to Israel’s qualitative military edge over its rivals. Even a modest reduction in defense partnership would leave Israel exposed at a moment of maximum Middle East bedlam and invite adversaries to ramp up the pressure. It would mean nothing less than cutting the cords on the alliance.
Trump may not follow through on anything he says; there is always the chance he is led, against his irritable mental gestures, toward sound policy. Yet the core menace of a Trump presidency to Israel is ultimately the menace it poses to America itself. Israel does not merely need guns and missiles, but the global armor of American leadership. A world in which the United States betrays bedrock alliances, cozies up with enemies, and raises the drawbridge is a world in which the Jewish state will struggle to endure.
Jordan Chandler Hirsch, a former editor at Foreign Affairs, is a visiting fellow at the Columbia Institute for Israel and Jewish Studies and a member of the John Hay Initiative.