Donald Trump is portrayed as a clown, but his policies are more scary than amusing, says Matthew Lynn.
Since Jeremy Corbyn’s unexpected triumph as Labour leader in the summer, we have become used to worrying, at least a little bit, about “Corbynomics” – his madcap policy combination of printing lots of money, forgetting about the budget deficit, pushing up taxes and government spending, and trying to control industries from Whitehall. But there is, if it were possible, something even more scary than this out there. It’s Trumponomics. Trump’s plans are every bit as bonkers as Corbyn’s – even if you discount his recent proposal for a blanket ban on all Muslims coming into the country.
The Donald, as he is known to his fans, is way out in front in the race for the Republican presidential nomination in America, with the first primaries only weeks away. The first votes will be cast on 1 February, with the Iowa caucus swiftly followed by primaries in New Hampshire, then Nevada and South Carolina. Despite expectations that his campaign would quickly implode under the weight of its own ridiculousness, Trump maintains a solid lead. Indeed, it is getting wider. Polls last weekend showed him collecting 36% of Republican votes, 20 points ahead of his closest challenger, Ted Cruz. Extraordinarily, a majority of his party’s supporters trust him more on the economy than any other candidate.
Half-baked populism
Of course, his support may fade in the next few weeks. Too extreme, too inexperienced, too wacky, say the experts about his candidacy. But people said that about Corbyn as well, and he won his party’s leadership. Anyone with the kind of support The Donald has so close to polling has to be considered a serious candidate, even if scare quotes are needed around the word “serious”.
The trouble is, despite the billionaire’s success in business – which is itself starting to come under closer scrutiny now he is running for office – Trump is pushing a half-baked populism that would be deeply damaging to America and the global economy.
How so? Admittedly, it is quite hard to make a great deal of detailed sense of his plans. Even so, a few proposals have emerged from the barnstorming rhetoric. First, he seems determined to start a trade war with China (“Listen, you motherf***ers, we’re going to tax you 25%!” was how he pithily put forward the idea in one speech). His number-one priority appears to be to curb the trade deficit the US runs with China. That ignores the fact that buying lots of cheap stuff from abroad makes everyone richer, not poorer as Trump seems to think. And it also leaves open the question of what happens to the economy after China’s exports are banned from America – it is hard to see how a Chinese crash could be good for the rest of the global economy.
More broadly, Trump wants to rip up most of the trade agreements the US has signed in the past two decades, returning to the kind of America-first policies that were last in fashionin the 1980s. The North American Free Trade Agreement (Nafta) would be toast, as would the new Pacific free-trade deal (TPP). We could forget about the proposed trade deal with Europe (TTIP), although there are enough protectionists on this side of the Atlantic to scupper that anyway. Global trade has already stagnated, and badly needs to be revived, not curbed, if the global economy is to start growing at a healthy rate again.
On tax, he has an equally scatter-gun approach. He wants to repeal the estate tax – their version of inheritance tax – as well as slash corporate tax rates and set a 25% upper limit on income tax. At the same time, he has proposed a wealth tax on people much like himself: he wants to impose a one-off levy of 14.25% on all individuals and trusts worth more then $10m, which he estimates would pay off the national debt in one fell swoop.
The trouble with that, of course, is the very rich don’t usually keep 14.25% of their assets sitting around in cash. They would have to sell off stocks, bonds, property and whole companies to pay that tax bill. The result? The mother of all financial crashes – and we all know what they do to the economy. Given how little it costs to service the national debt with interest rates so low, it is, to put it mildly, a very weird idea.
Is Donald Trump a genuine threat
True, Trump may never become the Republican candidate, never mind the president. The problem is, pundits and experts keep saying that about extreme candidates, and yet, in this country, in France, in Greece, and in many other countries, maverick figures keep doing better and better in the polls. If he does make it onto the ballot in the autumn, he might even win – his opponent may well be Hillary Clinton, a weak candidate with potentially lots of skeletons in her closet that may derail her campaign.
Even if he does not make it that far, some very bad ideas are taking centre stage in the debate. Every other candidate will be forced to take account of his ideas and shift their positions to capture some of his supporters. If nothing else, the uncertainty and nervousness that would create will make an already fragile economy and stockmarket even weaker.