Trump's announces his Economic Plan: Lower Taxes, Higher Tariffs, and a new Government 'Efficiency Commission'

Credit...Former President Donald J. Trump speaking at the Economic Club of New York on Thursday
The New York Times

“My plan will rapidly defeat inflation, quickly bring down prices and reignite explosive economic growth,” is what Trump promised, this Thursday, at the New York Economic Club. Known for his bold claims and proposals, Trump is promising a whole lot in this upcoming election under the pressures of an inflated economy and increasing U.S. national debt. 

Trump claims that the first action he will take, if reelected, is to reduce taxes. He wants no tax on tips and Society Security benefits, expanded R and D tax credits, one-hundred percent bonus depreciation, and most importantly, a reduction on corporate taxes from 21% to 15%, but solely for companies that manufacture their products domestically. With this surprising condition of the tax cut, Trump seems to want to spur domestic production as a way to prop up the economy. Not only that, these proposals are similar to the tax cut he enacted in 2017 where he slashed corporate taxes to 21% from 35%, and as part of his economic campaign, Trump also wants to extend his 2017 tax cuts, which expire next year.

In comparison, Democrat and presidential competitor Kamala Harris’ economic plan is much different. She outlines a corporate tax increase to 28% from 21%, but aims to balance this by trying to incentivize new businesses–her goal being 25 million new business applicants–through a $50,000 tax deduction waiver for small businesses.

Trump’s reasoning for the tax cuts–to promote domestic production–looks to be wobbly in front of Harris’ plan; unlike Harris’ proposal, there is no equalizer for the tax cuts in Trump’s economic plan. The chances of domestic production filling the hole left by a deduction in taxes are slim, and begs the question: will Trump’s new proposed tax cuts really help the economy? Although his 2017 tax cuts did indeed fare well economically, it only did so for a short while before the repercussions caught up. After a year, the tax cuts actually widened the national debt. If Trump’s tax cuts failed the economy, how will lowering taxes again benefit the economy, if the result is a bigger deficit than before?

Interestingly, Trump’s answer to the question lies in increasing tariffs. Specifically, he plans to increase tariffs on national goods to anywhere between 10% to 20%. Moreover, he wants to place a 60% tariff on imports from China (this appears to fall in line with his emphasis on domestic manufacturing). His reasoning? To 1) generate revenue to pay for his proposed tax cuts–which he estimates to be trillions of dollars 2) protect working-class jobs and punish “unfair trading practices,” and lastly 3) help families afford childcare. 

Though the first reason is valid, but may prove to be insufficient, the last two are a bit questionable to say the least. Trump claims that these tariffs will protect working-class jobs, but existing tariffs on imported goods have already cost Americans more than $230 billion in a report by the US Customs and Border Protection. Furthermore, in a paper published by the Peterson Institute for International Economics, Trump’s call for increased tariffs would cost middle-income families an estimate of $2,600 a year. More tariffs means higher prices for the imported goods that Americans enjoy. While the 20% international tariff and 60% tariff on China would account for the tax money lost by tax cuts, the general American public is still paying for these tariffs, via the higher-priced imported goods. The third reason, childcare, which Trump justifies his tariffs by, saying that they “[will] be taking in trillions of dollars, and as much as childcare is talked about as being expensive, it’s–relatively speaking–not very expensive, compared to the kind of numbers we’ll be taking in.” This however, does not add much value to his economic plan–there’s already a burden from the tax cuts, and on top of that, middle-class families will be affected by these tariffs, so why is child care a priority of this tariff proposal? Clearly, Trump is blowing the potential impact of these tariffs out of proportion, and by linking it all together, his economic plan is deeply flawed, as it relies on the successes of his proposed tariffs–which may not even work out in the end. 

There is some hope to Trump’s economic plan, and that is the establishment of a new government sector: an efficiency commission. Trump adds on, explaining that the goal of the commission is to “conduc[t] a complete financial and performance audit of the entire federal government.” What’s surprising is that he fully consents to letting Elon Musk, CEO of Tesla, SpaceX, and X (formerly Twitter), be in charge of the commission. Inviting Musk into the efficiency commission looks like a desperate move on Trump’s part, and given that SpaceX–one of Musk’s companies–is a government contractor, there is much debate and controversy between this unexpected collaboration. 

Perhaps the best summary of Trump’s economic plan can be explained in terms of the four P’s (power, policy, process and politics) covered in class: Trump, who has political power as a former president and current candidate for the upcoming election, is proposing his economic plan, consisting of policies–like tax cuts and tariffs–that will eventually be part of a process to be enacted or rejected, to assuage concerns about the economy especially in a time of inflation and high national debt.

Sources Used:

https://www.reuters.com/world/us/trump-adopt-musks-proposal-government-efficiency-commission-wsj-reports-2024-09-05/

https://www.nytimes.com/2024/09/06/business/dealbook/trumponomics-trump-economy.html

https://www.nytimes.com/2024/09/05/us/politics/trump-elon-musk-efficiency-commission.html

https://www.pbs.org/newshour/show/comparing-trumps-and-harris-differing-ideas-on-how-to-boost-the-economy

https://www.cnn.com/2024/09/05/business/trump-economy-tariffs/index.html

https://www.cnn.com/2024/09/05/politics/trump-economic-plans-musk-government-commission/index.html

https://www.ft.com/content/f9f6b40c-7f00-49aa-883e-b82df6d76267

https://www.pbs.org/newshour/politics/watch-live-trump-delivers-remarks-at-economic-club-of-new-york-luncheon

https://apnews.com/article/trump-economy-harris-corporate-taxes-15ba5ecfdf5e907bd9b2c349b07222b8

https://thehill.com/homenews/campaign/4863990-trump-economic-agenda-elon-musk-commission-immigration-crackdown-tariffs/