Presumptive Republican presidential nominee Donald Trump appears to be in the midst of a major campaign shakeup, but according to a recent analysis by Moody’s Analytics, his campaign structure isn’t the only thing Trump needs to rethink.
A detailed analysis by a team led by Moody’s chief economist Mark Zandi found that the Trump economic plan would be disastrous for the U.S. economy, leading to a prolonged recession and causing slower growth, higher unemployment and declining asset values.
Trump’s plan includes a deep cut to income taxes, which would primarily benefit the very wealthy, elimination of the inheritance tax, and the elimination of a tax on investments of the very wealthy. His trade policy appears to involve tearing up existing and prospective trade deals and slapping tariffs on many imports. His immigration plan would slash the number of new workers coming into the U.S., something economists almost universally agree is a bad thing.
“Quantifying Mr. Trump’s economic policies is complicated by their lack of specificity,” Zandi’s team wrote. “The publicly available information is not sufficient to fully quantify all of his proposals.”
However, working with the Trump team and making certain assumptions outlined in the report, they modeled what they expect would happen if Trump’s proposals were fully implemented. It’s not a pretty picture.
“[T]he economy will be significantly weaker if Mr. Trump’s economic proposals are adopted,” the report says. “Under the scenario in which all his stated policies become law in the manner proposed, the economy suffers a lengthy recession and is smaller at the end of his four-year term than when he took office.
“By the end of his presidency, there are close to 3.5 million fewer jobs and the unemployment rate rises to as high as 7%, compared with below 5% today. During Mr. Trump’s presidency, the average American household’s after-inflation income will stagnate, and stock prices and real house values will decline.”
The analysis does not limit itself to an unlikely scenario in which Trump’s proposals are adopted uncritically by an obedient Congress. They also model out a “Trump Lite” scenario, in which Congress tweaks some of the real estate mogul’s more costly proposals, as well as a “Mr. Trump Goes to Washington” scenario, in which he is forced into significant compromise with a recalcitrant Congress.
Neither of the alternative scenarios is particularly desirable either, with only the “Mr. Trump goes to Washington” version actually avoiding a recession and both predicting extremely slow growth and high unemployment.
Even granting Trump the benefit of the doubt and assuming he will self-moderate to some degree, Zandi and company find little to give them hope that Trump would push ideas that would be anything short of ruinous for the economy.
“He has suggested that he might be willing to bend his position on taxes and perhaps tariffs,” they note. “He has even intimated that his policy statements are simply a negotiating stance — he is asking for a lot more up front than he ultimately expects to get.
“Having said this, what he is asking for is fiscally unsound. His tax and spending proposals will result in very large deficits and a much higher debt load. A future Congress may be able to rein in this profligacy, but it will not be easy, as there is a gulf between what he says he wants on taxes and spending and what it will take to make the budget arithmetic work.”
Bottom line, they say, “The upshot of Mr. Trump’s economic policy positions under almost any scenario is that the U.S. economy will be more isolated and diminished.”