Trump economic speech: first step to unifying GOP
| Washington and Boston
In a finely tuned political speech Monday, Donald Trump reached out to mainstream Republicans on taxes and regulation, while sticking with the populist message on trade that helped him win the GOP presidential nomination.
The mix of policy prescriptions added some substance to Mr. Trump鈥檚 slogans and sought to unite Republicans bordering on panic over his sliding poll numbers. In the week after the conventions, the billionaire-turned-politician had veered into attacks on the family of a slain Muslim American soldier and resisted backing top Republicans in their reelection bids, before eventually relenting.聽
By Monday, in his economic speech in Detroit, a new Trump emerged 鈥� one who calmly withstood 13 interruptions by protesters and delivered a policy agenda that Republicans could rally around, including sharp digs at Democratic nominee Hillary Clinton.
鈥淚solation is not an option,鈥� Trump said, in an effort to reassure mainstream Republicans who favor international trade. He called for 鈥渙nly great and well-crafted trade deals where we as a country for once benefit.鈥�
Americanism, not globalism
But Trump also threw in some red meat for workers attracted to his 鈥淎merica first鈥� philosophy. 鈥淎mericanism, not globalism, will be our new credo,鈥� he said.
鈥淭his was a reset and contrast speech,鈥� says Republican strategist Ford O鈥機onnell. 鈥淥verall, it was one of his best policy speeches, because he was able to blend conservative economic theory with a mix of Trump populism. This was about solidifying the Republican base, but also pushing back on the meme that he doesn鈥檛 have substance and is all bluster and personality.鈥�
Trump has spoken out against the Trans-Pacific Partnership, a Pacific Rim free trade deal that has yet to be approved by Congress, as well as the North American Free Trade Agreement (NAFTA) that took effect in 1994, which many workers blame for the decline in well-paid jobs in the United States.
Key elements of Trump鈥檚 speech include:
- Adoption of the House Republican proposal for individual income tax rates. This would lower the top federal rate (currently 39.6 percent) and reduce the number of tax brackets from seven to three 鈥� 33 percent, 25 percent, and 12 percent.
- Reducing the business tax rate from 35 percent to 15 percent.
- Eliminating the estate tax.
- Allowing parents to fully deduct the average cost of child-care spending from their taxes.
- Tariffs against any countries that 鈥渃heat by unfairly subsidizing their goods.鈥�
Trump鈥檚 tax plan would raise more revenue than his earlier proposal, which had been forecast to cost $10 trillion over a decade.
鈥淭hey bumped up the income rate a little bit, but they鈥檙e still going to lose trillions of dollars,鈥� said Jared Bernstein, an economist with the left-leaning Center on Budget and Policy Priorities and a former member of President Obama鈥檚 economic team.
鈥淥ne interpretation of what we heard today is Republican-orthodoxy tax cuts on steroids with pretty punishing tariffs on imports thrown in,鈥� adds Mr. Bernstein, former economic adviser to Vice President Joe Biden.
Bernstein gives Trump credit for stressing that he鈥檚 not an isolationist on trade. But he questions what exactly he鈥檚 proposing to renegotiate on NAFTA and how it would benefit average families. He also sees a big loophole for the wealthy in Trump鈥檚 plan for 聽鈥減ass-through鈥� income. This is a way for professionals to be paid as a consultant and claim income as pass-through business income. Trump proposes a 15 percent pass-through rate 鈥� significantly lower than the top federal rate of 33 percent.
Roughly 70 percent of pass-through tax reductions accrue to the top 1 percent of taxpayers. 鈥淭his is one of these tax deals that tilts towards the well off,鈥� says Bernstein.
Looking backward?
Douglas Holtz-Eakin, president of American Action Forum and the chief economic adviser to GOP presidential nominee John McCain in 2008, calls Trump鈥檚 tax plan 鈥渁 peace offering to House Republicans鈥� but also cites outreach to labor by adopting Democratic positions on trade and infrastructure.
鈥淲e will build the next generation of roads, bridges, railways, tunnels, seaports, and airports,鈥� Trump said, a reference to an infrastructure plan that his campaign says would be double what Mrs. Clinton is proposing.
Mr. Holtz-Eakin criticizes Trump for talking about a revival of American steel, a vision of the mid-20th century US that is not forward-looking.
鈥淭he really striking thing to me is 鈥� that there鈥檚 no talk of Uber in here, it鈥檚 steel,鈥� says Holtz-Eakin, a former director of the Congressional Budget Office.
Donald Grimes, an economist at the University of Michigan, Ann Arbor, says that Trump made a sensible point in proposing a 10 percent tax rate on profits聽that US firms earn abroad but repatriate to the US.聽This matters more to US tech companies than automakers, he says.
But Trump鈥檚 trade protectionism is out of step with economic realities, even in Detroit, because the economy isn鈥檛 just manufacturing. The economy of Detroit, and Michigan as a whole, is steadily improving, he says.
Trump鈥檚 speech presented 鈥渁 better picture of Detroit in 2010 than it is today,鈥� says Mr. Grimes.
Trump repeatedly attacked Clinton for what he said were failed policies of the past. But Trump 鈥渋s the one who wants to go back to the past with this manufacturing revival,鈥� says Grimes.
Still, he agrees that infrastructure spending is needed. But Trump provided no details 鈥� and there are limits to what the federal government alone can do.
鈥淭his is mostly state and local government activity in the US 鈥� and most have sharply reduced their borrowings for capital projects,鈥� says Grimes.
