Taxes, tariffs, and character

With the two candidates and the two political parties articulating drastically different economic visions, I find it remarkable that, assuming the polls are right, this nation is evenly divided, and the race is too close to call. I just don’t get it.

Ideally, whatever economic policy is enacted during the next administration will serve the greater good; but with any policy, we’ll end up with winners and losers. And with every policy, we’ll inevitably be faced with trade-offs. The challenge is to effect a policy in the face of these disparate costs and benefits and trade-offs where most of the American public deem it to be fair. So far, it doesn’t appear that either candidate has convinced the majority of the American public that their policies will meet this hurdle. Perhaps even more worrying, whatever either candidate may say, it doesn’t seem that many minds will change.

Irrespective of the disagreements that we may have about any given policy, my guess is that we have near universal consensus that we should be striving to have an economy that delivers full employment with low, reasonably stable inflation. The debate is how best to get there. In this regard, I see the starkest difference between Democrats and Republicans as having to do with tax policy. At the risk of being overly simplistic, I see Republicans largely championing lower taxes, pretty much across the board, although, inevitably, wealthier taxpayers will enjoy the larger monetary gains. Democrats, on the other hand, favor increasing taxes, albeit with the increased burden falling entirely on high-net-worth individuals and corporations currently viewed as not shouldering their fair share.

Back in the Reagan era, supply-side economics was widely promoted, with the idea that lower taxes would pay for themselves as a consequence of the economic growth and hence expansion of the tax base that would be spawned under this new tax regime. It didn’t quite work as advertised. The tax cuts did stimulate the economy, but not to the extent that the tax cuts would pay for themselves.

At the time (and since), I reacted to supply-side economics as little more than a re-branding of the Keynesian idea of using deficit spending to stimulate economic growth. Yes, growth was stimulated, but the policy also piled up deficits. During the Carter years (1977–1980) our largest deficit was less than $60 billion. During the Reagan administrations (1981- 1988), deficits skyrocketed and the national debt more than quadrupled. Beyond that, with the Reagan tax cuts disproportionately going to the nation’s wealthiest, the policy dramatically exacerbated the disparity of wealth in the US. The Trump campaign seems to be intent on implementing this same approach in the coming four years if given the opportunity. In the face of this history, the embrace of Trump’s economic program seems to me to be a willful disregard of the lessons of history; but that seems to be where we are.

The truth is, without 60 votes in the Senate, the prospect of either of the respective visions offered by our two candidates coming to fruition as advertised is dubious; and the same could likely be said about what each would be able to achieve on the spending side of the fiscal ledger. Still, the presidency is a powerful bully pulpit, and whoever sits in that office can reasonably be expected to be able to tilt the policy in one direction or the other and alter the trajectory of America at least for the duration of his or her administration. Perhaps this consideration would be most significant in connection with tariffs, which tend to be initiated by administrative actions, as opposed to Congressional legislation. In that regard, Trump’s talking points are truly disturbing.

As is probably well known at this point, Trump wants to impose a 20 percent tariff on all imported goods, with higher tariffs specifically for Chinese goods, including a 100 percent tariff on Chinese electric vehicles. Like so many other things that Trump lies about, he’s lying here when he says that these tariffs will be paid by the exporting countries. Even those with the most basic economic education understand that tariffs are paid by the importer — not the exporter or exporting countries, as Trump would have you believe. (And Mexico will pay for the wall!) It reflects poorly on the Wharton School that one of its graduates can so grossly misconstrue and misrepresent a simple economic policy lever. And it reflects even more poorly on those of his supporters who continue to listen to Trump’s drivel with nary a concern.

Given this background, I find the expectation the Trump would be the better steward of our economy by as much as half of my fellow Americans — or more — to be truly astounding. This judgment could derive only from the nostalgia about a handful of admittedly critical (and visible) prices that had once been lower than they are now, but that reasoning is flawed. People aren’t suffering from inflation any longer. That problem has largely been brought under control. The real source of discontent is the memory of certain food products and housing costs in particular that were cheaper prior to the pandemic than they are today, and people are not happy about that. Thinking that either candidate has a silver bullet to reverse those price increases in the foreseeable future, however, is a pipedream.

Where the difference between these two presidential candidates couldn’t be clearer is in the realm of character: Kamala Harris has vast experience in public service, culminating with her last four years serving honorably as the Vice President. Donald Trump is a twice-impeached, disgraced president who, to this day, continues to lie about his direct involvement in a coordinated effort to overturn the results of a free and fair election; and looking ahead, he’s holding fast to the same game plan of refusing to accept the outcome of certified election results in the 2024 election unless he wins. He puts himself out as a presidential candidate with 34 felony convictions to his name, a sexual assault judgment against him. and scores of officials from his own prior administration as well as other Republican leaders who have not only endorsed Kamala Harris but have also denounced Trump as being manifestly unfit to hold the office of the presidency. These are people who had gotten to see President Trump up close and personally. We disregard their counsel at our own peril. There was a time when character mattered — and it still does.