Whatever we might say about the policies that Donald Trump discussed during his February 28 speech to a joint session of Congress, we can grant that Trump sounded more like a statesman than he has in the past.
Trump opened by condemning the recent vandalism of Jewish cemeteries, the threats against Jewish centers, and the attack on two Indian men in Kansas—apparently ethnically motivated—that left one dead. He stressed common American values and invoked optimism about America’s future. He highlighted some American heroes, including a disease survivor, a succeeding schoolgirl, people in law enforcement, and fallen Navy operator Ryan Owens. In all, it was a presidential speech.
Policy-wise, Trump’s speech was a mixed bag from the standpoint of liberty, as expected.
Let’s briefly run down some of the main issues.
The proposal that Trump has picked up to “help Americans purchase their own coverage, through the use of tax credits and expanded Health Savings Accounts,” is probably the most important reform on the table. Our insane employer-provided health-insurance system—a product of decades of stupid government policies—could slowly be unwound starting with equitable tax treatment for individual policies.
Trump’s endorsement of giving “Americans the freedom to purchase health insurance across State lines” is also a good policy that would effectively nullify many onerous state insurance regulations.
Trump predicts, “Crumbling infrastructure will be replaced with new roads, bridges, tunnels, airports and railways gleaming across our beautiful land.” This will require a trillion dollars of “public and private capital,” Trump says.
Trump seems to presume that it’s obvious what “infrastructure” is and that the national government should finance it. In reality, infrastructure can be interpreted as broadly or narrowly as we like, to include practically all capital goods or only a small (typically arbitrary) pool of them. The only plausible economic argument for government spending on infrastructure is to pay for “public goods.” At least airports and railways are not public goods—people have to pay to use them—so a pro-liberty administration would work toward fully privatizing those things, not further nationalizing them.
Regarding interstate highways, isn’t the point of the gasoline tax to provide the funding for roads? Taxes directly related to use are better than special general taxes. (Whether a truly free market in such projects is possible or desirable is beyond our scope here.)
Taxes and Regulations
In some ways Trump wants to ease tax and regulatory burdens; in other ways he wants to expand them.
Reducing corporate tax rates is probably the single most important thing Trump can do in terms of improving the economy.
Although ham-handed, Trump’s policy of eliminating two regulations for every new one passed on net probably will result in a less oppressive regulatory climate. Trump clearly wants to ease up the Environmental Protection Agency’s controls of American energy producers.
At the same time, Trump apparently wants to impose higher taxes on incoming goods—taxes that harm American consumers and exporters—and make it “much harder for companies to leave” the country, an ominous if vague threat.
The story that Trump tells about international trade goes something like this. Freer trade results in manufacturing jobs fleeing the U.S. for other countries and in a debilitating “trade deficit.” And other countries tax incoming American goods with impunity because of our lax tariff policies. So the solution is to restrict trade, impose more tariffs, and punish American companies that leave the country.
Almost nothing about Trump’s account of trade is true. He’s right that onerous taxes and regulations at home make it harder to do business here and drive many companies away; beyond that his view of trade is mostly mercantilist nonsense discredited since the 1700s.
Yes, free trade results in different mixes of production in trading countries—that’s the entire point of it. The reason people can gain from specialization is that different peoples in different regions can produce some things relatively better than others. But it is not true, as Trump implies, that free trade costs jobs on net. With imports come exports and foreign investment. Taking into account all relevant exchanges, the “trade deficit” is an illusion. Trade doesn’t cause above-normal long-term unemployment; stupid domestic labor policies do.
Anyway, manufacturing is hardly on the decline in the United States; since 1980 real output has more than doubled. But output has expanded as manufacturing employment has declined. Is this because of NAFTA and China, as Trump pretends? Obviously not—it’s due to expanded use of technology in manufacturing. Basically, machines make more and people make less. Because free trade is not the problem, restricting trade is not the solution—as Trump’s supporters will inevitably discover or at least experience.
Regarding tariffs, Trump pretends that imposing high tariffs on foreign goods is somehow a sensible reply to other countries imposing tariffs. It isn’t. When Country X imposes high tariffs on American goods, that hurts the consumers and exporters of Country X along with American businesses. If America also adds high tariffs, that further hurts American consumers and exporters. If Trump wishes to use his fine negotiating skills to get foreign governments to lower their tariffs, great; but by threatening to impose higher tariffs Trump holds the gun to the heads of American consumers.
Typical of him, Trump assumes that a job somehow belongs to the nation rather than to the person or company that creates the job. Beneath all of Trump’s rhetoric on immigration is the call to forcibly prevent people in the United States from hiring the people they want to hire for the jobs that they create.
Yes, government should take appropriate action to keep violent people out of the country and to imprison or expel violent foreigners. But government ought not treat peaceable immigrants as though they were violent.
It is no more the proper role of government to “protect” the jobs of some from immigrants than it is to “protect” select businesses from foreign competition. Rather, it is the government’s proper role to protect the rights of Americans to do business with whomever they please (among peaceable persons). If we’re worried about some Americans falling behind, we should look to things such as education and job training (which I’d argue government should get out of rather than more deeply involved with), not call on government to restrict American producers and job creators.
Regarding Trump’s “great wall” along the Mexican border, if we had sensible immigration and drug policies, we could easily control our borders without such a wasteful display—a display which, by the way, can easily be thwarted by tunnels, boats, and planes.
The Drug War
Trump has given every indication that the U.S. government is going to ramp up drug-war enforcement. Paradoxically, this will almost certainly cause crime to go up (relatively), not down. As Jeffrey Miron writes in Drug War Crimes, “[H]igh rates of prohibition enforcement are associated with high rates of violence” (p. 55). Why? Part of the picture is that prohibition efforts often remove relatively stable and established leaders of drug gangs, resulting in violent competitions to take over distribution networks. Mexico probably will be hurt most by any such increase in violence, which (ironically) will drive more Mexicans to seek illegal entry into the United States.
There is a simple way to take the violence out of the drug trade that Trump almost certainly will not consider: legalize drugs. That’s a big issue that I won’t further pursue here. At least the Trump administration should not crack down on states that have legalized marijuana, as it doing so would breathe new life into drug gangs.
Donald Trump proposes an odd group of policies. On one hand, he says the American military has done too much overseas, and he calls for other countries to spend relatively more for their defense. On the other hand, Trump “calls for one of the largest increases in national defense spending in American history.” But isn’t a major point of Trump’s foreign policy that America is going to stop policing the world? I have to suspect that this new spending has more to do with “stimulus”—i.e., paying off special interests—than it does with genuine military need.
Notice that Trump uses America’s foreign-policy blunders as a pretext for more domestic spending. “We’ve wasted money abroad that we could have spent at home,” Trump essentially says. A fiscal conservative would point out that it’s not either-or; government could spend less on foreign adventurism and also less domestically. I’m sure that thought has never crossed Trump’s mind, but it is possible. Ah, but Trump is after “American greatness,” not fiscal responsibility.
What about Islamic State? “I directed the Department of Defense to develop a plan to demolish and destroy ISIS,” Trump says—which implies that he has no plan to defeat it.
Trump did not mention the following countries during the course of his speech: Syria, Russia, North Korea, and Saudi Arabia. He mentioned Iran briefly. To his credit, he did mention “our unbreakable alliance with the State of Israel.” But I don’t get the sense that Trump has gained any better grasp of foreign policy.
In all, Trump delivered the same mixed package of policies he’s known for with a more statesmanlike performance. That’s probably as good as we could have expected. What will matter far more than what Trump says is what he and the Republican Congress deliver.