Trumponomics: The Power of the Market Unleashed
Early on in the Trump administration, the President tweeted, “I believe strongly in free trade but it also has to be FAIR TRADE.”
The free trade/fair trade distinction goes back to the 1980s, when then President Ronald Reagan’s free market advisers unsuccessfully plead with him to focus solely on the former. After all, they argued, free trade is fair trade. It’s fair to consumers and producers, while tariffs, quotas and other protectionist policies promote unfair business practices. Fair trade is usually just a euphemism for protecting uncompetitive domestic industries from foreign competition. Reagan understood this, but he also had the political savvy to signal loyalty to American companies, so the hybrid “free and fair trade” mantra stuck.
Stephen Moore, a former President of the Club for Growth and an economic advisor to President Trump, thinks we are seeing a repeat of the Reagan trade doctrine. While Trump may be threatening countries with draconian tariffs on their exports, Moore says that he is angling for “zero tariffs” behind the scenes. The tough talk is merely a bargaining tactic designed to get other countries, namely China, to reform their own protectionist economies in line with the free world.
We can hope that this is the case, but this and other questions remain about Trump’s actual commitment to free market policies. Also troubling is the seeming one-sided focus on tax cuts without any significant reductions in government spending. As Milton Friedman observed, “to spend is to tax” — if not now, then in the future. Basic economics dictates that expectations of future tax increases will eventually either depress consumer confidence, or translate into higher inflation.
Moore, whose free enterprise bonafides are second to none, has an answer to this as well. While there may not be such a thing as a “free lunch,” economically speaking, there have been situations in which reductions in tax rates have led to increases in overall revenue.
Arthur Laffer is credited with the idea of the “Laffer Curve,” showing the optimal rate of taxation that maximizes revenues — past a certain point, the disincentive from higher taxes starts to shrink the overall economic pie, and the government’s larger percentage ends up being a smaller total amount. Moore and Laffer have co-authored a new book titled Trumponomics: Inside the America First Plan to Revive Our Economy (available Oct. 30, 2018), which makes the case for “growing the pie” as the primary objective of economic policy.
While most economists said that 4% growth would be impossible after so many years of 0–2% growth under Obama, the recent data is proving otherwise. Moore co-founded the Committee to Unleash American Prosperity in 2015 with Laffer, Larry Kudlow, and Steve Forbes. They aimed to “persuade the presidential hopefuls in both parties to focus on the paramount challenge facing our country: slow growth and stagnant incomes.” Did the plan work? Perhaps, but it remains to be seen whether economic growth will be enough to pull the US out of debt (now standing at $21,606,948,383,546.28).
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Trumponomics: The Power of the Free Market
Bob Zadek: This morning we are speaking with Steven Moore. Steven is one of Donald Trump’s chief economic advisors. He is a free marketeer from way back. He has written Trumponomics with Arthur Laffer, which is coming out at the end of October. He will explain to our listeners why they are doing so gosh darn well now compared to a few short years ago. Steven was the founder and President of the Club for Growth. He is a former member of the Wall Street Journal editorial board. He has worked closely with The Heritage Foundation. He was a commentator on Fox News, and now he is an economic commentator on CNN.
Steve, you have coined the phrase “Trumponomics,” which helps explain to 6 million Americans why they are better off than they were a few short months ago. Trumponomics wasn’t in the vocabulary a short time ago, so what is it? What is the secret sauce that President Trump was able to put together that made economic life in America so much better so quickly? One would think that something like our economic system would be slow moving and slow to change, but it was not. The change is astonishing. Please explain that.
Steven Moore: Well, you know, it’s funny, I saw the President on Monday briefly because he had a press briefing at the Rose Garden when he announced this new trade deal with Canada, and I just ran into him for a minute and said, “Mr. President, this economic program is working even better than when Larry Kudlow and I drew it up for you a couple of years ago. I knew that this program of deregulation and lower taxes and getting government off the back of business would work. I didn’t think it was going to happen so profoundly and so rapidly.”
So it has even surprised me that we have got 4% growth. We have the lowest unemployment rate now in 50 years, since the Beatles were still playing together. It’s an amazing accomplishment.
You’re right, there was a story in the Wall Street Journal this weekend that showed that the biggest wage gains and the biggest income gains in the last 18 months have come from the lowest income Americans, from adults without a high school education. So not only is a rising tide, but it is a rising tide that is lifting the boats of the lowest income Americans more than any other group, which is a fantastic achievement.
We can ask, “Why is it happening?”
I look at a lot of factors, but I would say the overriding factor is that we have replaced a community organizer who knew nothing about business, with a pro-business successful businessman who knows how to meet a payroll and who knows how to make a profit, who knows how businesses work, and that’s made all the difference in the world.
The chapter in my book Trumponomics is called “The light switch is flicked from off to on.” And that came from a guy who runs an auto mechanic store out in Cleveland, Ohio. When I asked him how business was, he said, “Steve, it’s like a light switch was flipped from off to on the day after Donald Trump was elected.” I talked to so many people from around the country, everywhere from Portland, Oregon to Portland, Maine, who say the same thing that there is just this new burst of confidence and optimism, because businesses now know that if they are successful, if they make a profit, and if they expand their operations, the government is not going to hit them over the head with a billy club.
Keynesian Failures and Obama’s Economic Bloodletting
Bob Zadek: There are various schools of thought on economics — the discredited Keynesian economics, the Austrian school of economics and the like. The question is, after a couple of hundred years of economic scholarship (since economics is a science) why wouldn’t all economists more or less understand or grow an economy? Once it was concluded that gravity existed, and if you sat under an apple tree you get hit on the head by apple, sooner or later everybody got it. That was a building block from which a further physical study grew. Why isn’t that true for economics? There is enough objective data so that there can be objective conclusions reached. How could so many economists — especially those who advise government — be so off?
Steven Moore: You raise a really good point. Why are there so many horrible economists out there? I would make the case that 75% of economists today, especially if they are trained at Ivy League schools, have been taught Keynesian economics. The lesson of the last 60 years, of course is that this experiment of Keynesian economics was a failure. Government does not create jobs. Government is the destroyer of jobs. All jobs and all wealth come from the private sector. A government worker can only have a job if there is a private sector worker to support him, right? That is why you get these crazy notions from liberals.
Obama tried Keynesian economics on steroids, right? He tried every single page of the playbook of Keynesian economics. He tried massive federal borrowing. We borrowed $10,000,000,000,000. Remember that $800,000,000,000 so-called “fiscal stimulus bill” with all the government spending for the so called shovel ready projects?
Then we had Obamacare, and three minimum wage increases.
We had tax-increases on the rich.
We had the feds flood the economy with cheap-dollars.
So every single idea of Keynesian economics was put to the test under Obama. It certainly didn’t work very well. We got the weakest recovery from the recession since the Great Depression. Now Trump has put supply-side economics to the test, which gives businesses and workers more incentives to work. The goal is to create businesses and to innovate and to become entrepreneurs.
In the past 18 months, this has been an amazing success. It has only been 18 months and things can change a lot. As we have learned, the economy and stock market has its ups and downs, but so far when you look at the record, we now have the lowest unemployment rate, the stock market is up over 42% since Trump was elected, we have 7 million more jobs today than we have people to fill them, and we are seeing wage and income gains after tax for middle class workers — something that had not happened under Bush or Obama — so you have to look the economy and say, “Boy, something is really going right here.” You asked the question, why is it happening, and that’s the right question.
Now the liberals say, “Oh, this is just a continuation of the Obama economy,” but of course that is a hard argument for them to sustain because 1) they all said that Trump would cause a second Great Depression if he was elected — as you know, people like Bob Rubin and Larry Summers said this would be a complete economic disaster — and now we have the strongest economy that we have had in in the past 40 years. The other reason it is not very plausible to say this is that we have absolutely reversed everything Obama did.
Obama raised taxes. We cut taxes.
Obama added regulations. We reduced regulations.
Obama got us into this idiotic Paris Climate Accord treaty, and we got us out of it.
I could go on and on, but how can you argue that it’s Obama’s policies when we’ve repealed all of Obama’s policies?
Bob Zadek: The thing that appears to me is that, obviously, like many areas of society, economics has become politicized. My observation is that with respect to Keynesian economics, which looks upon government as being the key player in the economic system, as opposed to the regulator, is driven by a political motive first. Keynesian economics becomes the economic rationale for what is really a political goal, not an economic goal.
Steven Moore: I agree with that. I think you are exactly right. Keynesian economics was basically an excuse for politicians to do what they wanted to do to increase their own power. This is the idea that they could just turn a dial and turn the economy on and off. It’s the height of the arrogance of the political system that somehow the economy is directed by government. It is not. Economy is directed by people who start businesses, entrepreneurs’, hard workers, and people who actually do the work that that creates growth in the first place. When you grow up the government, all you’re doing is making it more difficult for entrepreneurs and for men and women who start businesses. We have 27 million small businesses in this country. Those are the heroes of the economy, not the politicians and the bureaucrats and the regulators.
If you let them do their thing, the economy will thrive. Trump is basically just saying America first. He wants American businesses to succeed because he knows that when businesses succeed then workers succeed.
Liberals love jobs but they hate employers. You can’t have a job unless you have an employer in the first place with a business, unless we are all going to work for the government. So the nice thing about what has happened in the last 18 months, at least for me as an economist, is that it has proved the ideas of Milton Friedman and Adam Smith correct. Our ideas of private sector growth work, and their ideas of relying on the government do not.
Bob Zadek: What’s interesting is this word “work.” A lot of my guests use the word “works.” Something works — a policy works… What is interesting is that you have to drill down a notch, because when Obama was saying his policies “work,” I had guests on my show who said, “No, they didn’t.”
The disagreement really was what the goal was of the policy. I think, insofar as Obama’s policies were concerned, they did work, but the goal was not economic success. The goal was some political goal. Obama’s goals worked perfectly. Paul Krugman would say, to pick him at random, that Obama’s policies did work.
They worked for him because he had a different standard of success than you. I think our audience must realize that when somebody says “policies work,” you have to ask them, “work towards what end?” The goal of Trumponomics is to grow more jobs and grow the economy, not to grow the political system. So, Obama’s program did work by his standards.
Steve Moore: Well first of all, Paul Krugman is probably the most wrong economist in the last 30 years. I mean, he is the one who said the day after the election that Trump’s policies would cause a stock market crash, and of course it is up 40%. Anybody that took his advice lost a lot of money. His argument about why Obama’s policies didn’t work better — you won’t believe this, but it is true, because I debated him a couple of years ago in front of 2,000 people in a big economic forum — was that he didn’t spend and borrow enough!
Let me say that again. He thinks we didn’t borrow enough. We borrowed $10,000,000,000,000, but he doesn’t think that is enough. Yet we ran up the budget by record amounts. That is the height of stupidity, right? To keep banging your head against the door when, when something isn’t working. To give Obama his credit, we did have a recovery. Remember 2007–2008 there was the worst crash since the Great Depression, and Obama took office after that. However, there are natural healing powers and the economy was going to get fixed one way or the other. We had a long recovery under Obama. It has been over 100 months since we have had a recession. That is a really good long stretch. One of the longest in history actually, but it was really anemic and flat.
It wasn’t much growth at all. I have a chapter in the book showing that if we had had a Reagan-style recovery from recession rather than the Obama recovery, we would have added about $3,000,000,000,000 more output by the year 2016. That’s a big deal. That’s Ohio, Michigan, and Indiana’s annual outputs combined, and Americans felt that. And there were also so many areas in California that did very well, such as Silicon Valley, Hollywood, Los Angeles, places like that. But if you went to middle America the areas that Trump won, such as states like Michigan, Ohio, Wisconsin, Pennsylvania, Kentucky, and West Virginia, those areas had no recovery at all. And those were the voters that Trump really spoke to. And he just said, look, I am going to bring back those jobs.
Hillary went to these places and said, you know, manufacturing and mining isn’t coming back. Remember, Obama said at one point a few months before the election, “How is Trump going to recreate all these manufacturing jobs? Is he going to wave a magic wand?” Well, apparently he did have a magic wand, because since the election, we have created 1 million manufacturing mining and construction jobs. It is an amazing performance.
Bob Zadek: I have two comments. Number one, to say that Obama’s program kind of worked, but it was anemic. I would somewhat take issue only in the margins with that statement. Our first president, President Washington, was ill and he died through the policy of bloodletting. They bled him because that was believed to be a medicine, but it killed him. However, some people survive the bloodletting and they got better anyways.
It doesn’t mean bloodletting was a good idea. It means the body is so strong it even survives bloodletting. Well, I say our economy is so strong that it even survived Obama. Obama gets no credit for turning the economy around. He gets credit for delaying the recovery. We have such a vibrant economy and it is so strong that it could recover from anything. It does not mean that a bad policy worked.
Steven Moore: So here’s an amazing thing. When Obama came into office in February of 2009, his own economics team did this report and they said, “what if we just let the economy heal on its own?” They then charted the path of recovery because there is always money from a recession.
And then they said, but if we do this $800,000,000,000 stimulus plan, the economy will go up much faster. So what really happened after we spent $800 million is that our economy recovered, but it actually recovered more slowly, and they estimated that it grew more slowly than if we had done nothing. These are Obama’s own numbers; this is not the Heritage Foundation numbers.
Bob Zadek: Obama was bloodletting. That’s what he was doing and it didn’t work.
Steven Moore: Not only did we not have a recovery, but we got stuck with $10,000,000,000,000 of debt, right? Every future generation for the next 100 years is going to have to be paying for Obama’s mistakes because this stuff isn’t free, right? It’s like if you went out and borrowed a million dollars and squandered it. It is not like, “Well, I’m no worse off.” Yes, you are, because now you have to pay back the million dollars you borrowed. In this case, it wasn’t a trillion, it was $10,000,000,000,000. Our kids and our grandkids and our grandkids’ kids will be paying for those mistakes for the next hundred years.
Unshackling and Unleashing American Prosperity
Bob Zadek: Steven, among your other activities, you formed the Committee to Unleash American Prosperity with Arthur Laffer, Larry Kudlow, and Steven Forbes. Tell us about the Committee to Unleash American Prosperity.
Steve Forbes and Larry Kudlow and Art Laffer, are obviously economic icons in this country. They are probably the best economists in the last 50 years. And of course Steve Forbes changed our country when he ran for president in 1998. That was the first presidential campaign where I went down to a storefront office and I said, “I want to work for this guy. I want to stuff envelopes, I want to do whatever I can.” It broke my heart when he didn’t survive the primaries.
Steven Moore: That is right. I felt the same way. But one of the points I make to Steve Forbes all the time is that sometimes even when you lose, you can make a big mark in history. Steve Forbes ran on a reformist free market agenda of term limits and social security personal accounts and a flat tax. All of these things are now actually kind of boiler-plate Republican Party, so I think Forbes really did change history with that election.
But anyway, the purpose of our group is really to try to educate Republicans to make sure when they were running for president in 2016 that they ran on a pro-economic growth, supply-side, lower taxes, less regulation agenda. Of course, what happened was that we met Trump and we teamed up with him. Larry Kudlow now, as you know, is the chief economist for Donald Trump, which is a fantastic thing. The most important economist in the world today is Larry Kudlow who is a total supply side, tax-rate cutting guy. I have to say that Trump got these ideas, and he is not an ideological person in the sense Ronald Reagan was as a conservative. Trump is just a common-sense guy who understood the ideas because he has experience running a business.
He knows that if you cut taxes for businesses, they can invest more in the business. I mean these seem like simple ideas, right? I don’t understand why liberals can’t capture these ideas.
As Larry Kudlow likes to say, if you tax something, you get less of it and you tax something less, you get more of it.
So we took the taxes off of the businesses and off the workers so that we could get more work and more businesses and more investment. That’s really one of the keys of the success of what we did. Donald Trump was fully on board. He was not a hard sell on these ideas. In fact, I think he had accepted a lot of these ideas long before we we talked to him about it. In fact, he wanted to cut taxes even more than we did!
Bob Zadek: One of the ideas in your book, and it was a cornerstone of President Trump’s policy, was reducing our corporate tax rate from about 40%, the highest in the Western world, to about 20%. All of these are approximate, of course. Well, Steve Forbes got my attention. I had just started doing radio and one of my very first shows was on the subject of the corporate income tax, a policy that is utterly economically insane and unjustifiable. Since you are on a roll in reducing the corporate tax rate from 40 to 20, why not from 40 to 0%, since it is only a political concept and it has no economic basis, whatsoever?
Steven Moore: That is a great point. When we first sat down with Donald Trump, we had a chart that showed us at 40% on our corporations, but also on small businesses. One of the first things Trump said to us was that I want to cut the corporate tax, but I also want the 27 million small businesses get a tax cut. So that was a big part of the plan. In any case, we went from 40% to 20% because the rest of the world was closer to 20%. We said this is like putting a tariff on our own goods and services. What country does that? Why would we put ourselves in an economic hole right from the get go by having a 20 percent disadvantage?
Trump instantly understood that. I remember Larry said to him, you know, that is why we think you should endorse a 20% corporate tax. You’ll love this. He said, “You know, I’m not going to do that. I don’t want to go to 20%, I want to go to 15%.”
Why not zero? You are right because businesses just pass on the taxes to the workers and the consumers anyway, so it is just a hidden tax. When you have a capital gains and dividend tax and then you have a corporate tax on top of that, you are basically double charging taxation, right?
So if a company, let’s say makes a $100,000,000 of profits, let’s say it’s apple and then the first thing that happens is the government was taking a 40% cut off of that and then from there, you know, that is sixty cents after tax that is then passed onto shareholders, and the shareholders then have to pay a 40 percent tax on that. Trump got that. We haven’t eliminated the double taxation problem as you suggested we should do, but we did alleviate it by cutting the corporate tax very substantially. By the way, investors pay that as well. Anyone who was as a 401k plan or an IRA plan or anyone who just owns individual stocks — not just rich people — over half of Americans, 150 million Americans own stock. So, this is good for the stock market as well.
Bob Zadek: I remember learning that if you analyze who ultimately pays the corporate income tax, it’s the lowest 25% of the economic earners. When they buy a sofa or when they buy milk, they are paying the corporate income tax built into the product. That, to me, is cruel. It is a hidden tax, so nobody knows they are paying it, which means the government gets to tax free because nobody complains. Ultimately consumers do not know they are paying, so while you are on this roll of reducing it from 40%, go all the way to 0%.
By the way, as you know, corporations, therefore misallocate capital because of the tax effect. Transactions become inefficient, and we all pay. It is a waste. It makes no sense economically whatsoever.
Steven Moore: I’m going to make an additional argument that Larry Kudlow used to make a lot and I think there’s a lot of truth to this. He always used to say — and Trump started saying it too — that when you are cutting the corporate income tax, it is a middle class tax cut. Now people may wonder what that means? How can it be that when you cut taxes on corporations the workers benefit? The reason I was asking my high school and college students, “Why is it that an American is paid $30 an hour, whereas the average wage in Mexico is $8 an hour?”
One of the major reasons for that is that Americans have more capital to work with. They have more computers, more technology like tractors and trucks and things that make them more productive. So, as you cut the corporate tax rate you get businesses to invest more. As businesses invest more, that means that the benefits of that investment go to the workers. So we are seeing that now in the form of rising wages. Wages have not risen as much as we like to see them yet. I do anticipate in the next three to six months, as we continue to create a very tight labor market, that wages are going to start to rise. I am going to make that prediction and I feel pretty confident in that.
You’re seeing that this week, by the way, with Amazon. Amazon has 250,000 workers across the country. They are one of the biggest employers in the nation and they are increasing their starting wage rate to $15 an hour. The reason they are doing that is because of the competitive pressures they have, so they need to pay workers more or the workers will leave. Walmart, with a million workers, has increased their wage rate to $11 an hour. Target has raised their wage rate. Many of the restaurant chains have, and now Disney has raised their wage rate. So you’re starting to see the effects of a tighter labor market in the form of higher middle-class wages for workers, and that is a positive thing.
Preventing Government From Squashing Small Business
Bob Zadek: The magic of that is that we have a marketplace in forced minimum wage. It is a minimum wage because cannot get away with a lower wage or the workers will quit. How much healthier that is to the economy when the minimum wage is market-driven, not mandate-driven by government.
Steven Moore: That’s an important point. I want to punctuate that point that you just made because no sooner did Jeff Bezos announce that he was going to raise his wage rate to $15 an hour, than do you know
what he did next?
Bob Zadek: No.
Steven Moore: He said, “I am going to go to Washington and require that every business raise their federal minimum wage.”
Now, think about the impact of that. Jeff Bezos has a company that is now valued at a trillion dollars. They’re a massive, massive company in consumer goods and services. What they want to do now, since they are paying $15 an hour, they compete with other companies that are smaller that have $10,000 in the bank. What Bezos is doing is trying to do is not some altruism thing. He wants everybody to raise their wage to $15 an hour to drive the little guy out of the equation. That’s one of the reasons, you know, you started this by saying you have got the longest running libertarian show in the country and congratulations on that. I’m a libertarian myself in most cases. The government does not help the little guy, it squashes the little guy!
Bob Zadek: That’s why Walmart was a strong supporter of Obamacare. It was at a competitive disadvantage so it wanted to force its smaller competitors to pay as generous a health healthcare system as they were paying in order to put them out of business.
Steven Moore: I’ll give you another example, because this is a really important lesson. Back when we passed the Dodd Frank financial regulation bill on banks, it imposed huge costs on lending institutions, but all the big banks like Wells Fargo and Citi were very much in favor of that because they could absorb the costs of these higher regulations. However, the small community banks and neighborhood community banks couldn’t do it.
Bob Zadek: They went down from 14,000 banks to 8,500 banks.
Steven Moore: The sharks were eating up the minnows. We need community banks in this country. So, small businesses couldn’t get loans. It was a perfect example of how big business and big government together try to create a kind of cartel influence that makes it very difficult for small entrepreneurs to do business. So when someone says Bezos is calling for a $15 minimum wage because he cares about middle class workers, that’s not true. He is doing this because it will benefit his company.
Bob Zadek: What I find so interesting is you and I are speaking about the interaction between government and economic policy and economic growth. Most Americans have never thought about how our Constitution has only a very short — four or five word phrase — dealing with economic policy. Our Constitution is totally benign. It has nothing to say about economic policy. Free markets don’t exist per se in our Constitution because it was assumed that of course a country does not get involved in economic policy. The only phrase dealing with economics is interstate commerce, a somewhat benign phrase which became very powerful, but it was benign.
Who decided that the role of government is to manage the economy? Your committee is the Committee to Unleash American Prosperity. I focus on the word “unleash.” Unleashed means to let go, to step back. Any government policy that does less economically is a good policy.
Steve Moore: Well put. I can’t improve on that. That is why we chose the term Committee to Unleash
Prosperity, because all you need for the private sector to do better is to unshackle — maybe we should have used the word “unshackle” because the government puts leg weights around the economy to slow it down even though they act as if they’re doing this to help the economy.
Let’s not forget that the de-regulations that Trump has put into place have been enormously helpful. We all want clean air and clean water and a safe environment, of course. We want safe workplaces. But the Obama people were regulators with steroids. They viewed their role as to shut down businesses, not to allow our businesses to succeed.
That has made a big difference. For every new regulation that has passed under a Donald Trump, we have repealed twenty. That is an amazing thing. What a reversal from Obama, where you saw a regulatory onslaught against businesses. Businesses got profitable after the recession ended and they actually cut their costs — they de-leveraged, and they became ruthlessly efficient. The best businesses in the world today are American businesses. Their valuations went up and the stock market went up.
What happened when the recovery broke down was that they did not reinvest that money in their businesses. A lot of economists were scratching their heads and saying “Why aren’t you doing this?” I was working at the Wall Street Journal at the time and we would see the CEOs of major companies and we would ask them why they weren’t reinvesting in their businesses like they normally would do.
They said, we can’t do it because we are terrified. We are afraid of what Washington is going to do to us next. They never knew what was coming next. Now they have got somebody in the White House and that is why it is not so much what Trump has done. It is what he’s not doing. He is not hitting these businesses over the head with a two by four.
Bob Zadek: You are exactly right, and that’s why I focused on “unleash.” To me, when we talk about economic policy, all I want to hear is what the government isn’t doing. Every time government does something, it makes it worse, especially when it comes to economics.
Tariffs: Protectionism or Levelling the Playing Field?
Bob Zadek: I would like to cover the big area, it is in the news all the time, of trade policy and tariffs. It has been an area which, as you know, libertarians such as myself are wary and we perk up, because the language sounds mighty scary and mighty anti-free market. So tell us what you see to be Trump’s view of trade and how it fits in to this narrative.
Steven Moore: Well, first of all, this was one of the areas when I first met with Donald Trump, and we talk about this in the book. When he asked us to work for him, we said, “We can’t do that because we are for free trade and you are a protectionist.” I remember he banged his fist on the table and said, “I am not a protectionist.”
He said, “I understand the importance of global commerce and international trade. I just want to make sure that the United States is getting a fair deal and that there is a level playing field on trade.” I think that Donald Trump has some protectionist inclinations, with respect to, for example, the steel and aluminum tariffs, which I think are a mistake. I don’t agree with him on that. I think auto tariffs are a big mistake, too. By the way, steel and aluminum tariffs don’t even create jobs for Americans because, although we were supposedly saving 15,000 steel and aluminum jobs, think of all the companies that are losing jobs because they have to pay higher prices for steel.
This week, something happened that was overshadowed by the cabinet hearings with Kavanaugh. Trump made an agreement with Canada. I’ve always been a big fan of NAFTA. There were some problems with NAFTA, but I did believe that it was a good thing for the whole continent, but mostly for Canada and Mexico, which really needs access to the American market. The good news is that he has got a deal that is a modernization of NAFTA. We are not going to call it the same name any longer, but it is a free trade agreement for our continent. As we move forward and as North America competes with Europe and Asia, it puts us in a strong position.
My point is that six months ago I was very worried, as many investors were, about the possibility of a global trade war because of Trump. In fact what has happened is that Trump is actually getting these deals done. In the end, he might actually be the president who is actually responsible for the reduction of tariffs, because that is what he is asking for. He is asking for Canada, Mexico, Germany, Japan, Korea, and of course China to reduce their trade barriers against the United States. Incidentally, those trade barriers, especially in these Asian countries like China, are very high.
Bob Zadek: Now, of course, it is said that when China and other countries that impose tariffs on American goods, they are doing nothing other than imposing a tax on a domestic consumers. Why should we care if they choose to tax their consumers? Therefore, is a tariff that China imposes on American goods unfair to American workers or just unfair to Chinese consumers or both?
Steven Moore: Both. I mean, they are hurting themselves and hurting us. You know, the Chinese consumers definitely pay a lot more for basic things that we can buy at Walmart for $0.99 because they don’t have open trade. However, it also hurts American companies. China has a billion people. They have got a $10 trillion economy. We have opened up our markets to them but they haven’t opened up our markets to us. That’s just unfair.
I tend to be in agreement with Trump when it comes to China. I think China is cheating and stealing. One of the big issues with China is that we produce intellectual property here in America more and more. You understand this in California and places like Silicon Valley. We produce computer software and design all sorts of drugs and vaccines and copyrights and patents, and we send it over to China and they just steal it. They don’t pay us for it, and that’s not fair. If you invented something and then I just stole your invention, is that a fair thing to do? Of course it isn’t. I think we’re in a stronger position now because now we have these deals with Europe, and we have the deal with North American allies. I think at the end of the day Trump is going to prevail here because China needs the United States more than we need them with.
Bob Zadek: What struck me as a little strange about our agreement with Mexico is that it requires, insofar as auto manufacturing is concerned (and I will paraphrase), that where goods come into this country manufactured in Mexico they will have to have paid a $16 dollar minimum wage. We are trying to remove Mexico’s competitive advantage in low wage rates. Doesn’t that just increase the cost of cars to American consumers?
Steven Moore: You are exactly right about that. I hate that feature of this plan. By the way, it hurts Mexicans too because that is like saying, maybe we should have him pay $25 an hour or $30 an hour, and then there are not going to be any jobs in Mexico. That’s one of the things I like least about this deal, but the big picture is that we are going to balance and continue to have lower tariffs among all three countries and that is a really important thing.
To combine Canada, Mexico, and the United States, we can become the energy dominant region of the world. The United States, Canada, and Mexico are producing a lot of oil and gas. We have more coal than any other country in the world. So, we have a real possibility of seizing from the Middle East the energy capital of the world. That has huge advantages of our economy as well as the security and safety of our country.
A Future of Global Prosperity
Bob Zadek: What can we look forward to economically in the next two years of Donald Trump’s administration?
Steven Moore: You’re going to see continued improvement on the trade front. We are going to see two or three or four more years of 3–4% economic growth, which is phenomenal. You will see wages starting to rise for American workers at a much faster pace. Everybody’s going to want to invest in the United States because we will be the most pro-business, pro-investment place on the planet. You will start to see other countries begin to imitate our policies just as happened under Reagan. They will cut their taxes and regulations. So this is going to cause a global burst of prosperity.
LINKS:
- Committee to Unleash American Prosperity
- Trumponomics: Inside the America First Plan to Revive Our Economy (2018) by Stephen Moore and Art Laffer
RELATED SHOWS:
- Trump vs. Free Trade with Richard Epstein, April 2017
- The Return of Big Spending Republicans? with Ivan Eland, January 2017
- It’s not the Deficit, Stupid, with David Shellenberger, March 2013
