The Dangers of a Trump-Musk Economy

As the crucial US presidential election approaches, the campaign has reached a fever pitch, with Donald Trump and his cronies making increasingly radical promises about what they would do with power. But such promises, for example regarding fiscal policy, will inevitably be broken. After all, it is mathematically impossible to cut taxes for corporations and billionaires, maintain basic programs like defense and Social Security, and reduce the budget deficit at the same time.

Some of the Trump campaign’s more absurd promises come from Elon Musk, who claims he knows how to cut $2 trillion from the federal budget. This is pretty rich coming from someone whose companies are so dependent on government contracts and bailouts (without the $465 million loan it received from the Obama administration, Tesla might have gone under).

Musk’s claims reveal a surprising ignorance of both economics and politics. His proposals amount to cuts of about a third in all government spending – eight times more than what the General Accountability Office (the government’s internal watchdog) estimates as waste or fraud.

Among other things, the US should cut all “discretionary” spending, including defense, health care, education, and the Treasury and Commerce departments, as well as Social Security, Medicare, and other established, overwhelmingly popular programs.

While America’s economic strength rests on the foundations of science and technology, Trump has repeatedly proposed massive cuts in federal research spending that would be devastating to advances in basic science and have knock-on effects across many key economic sectors.

Such brutal cuts imply that Trump would try to convince Congress to make major changes to these programs. But don’t hold your breath. Trump already had four years to dismantle the “administrative state” when he was president, and he failed to do so. Now he is making populist promises that will widen (not shrink) the budget deficit – more than $7.5 trillion over the next decade.

Such drastic cuts would have devastating consequences for the American economy and society. The slash-and-burn policy inevitably fails. Just as the strategy of US Treasury Secretary Andrew Mellon under Herbert Hoover contributed to the Great Depression, austerity policies in Britain under fourteen years of Conservative rule have led to a decade and a half of stagnation.

The contrast between the economic programs of Trump and Kamala Harris could not be greater. Harris’ agenda would lower the cost of living – building on the provisions of the Inflation Reduction Act (IRA) to reduce drug and energy costs – and make housing more affordable, while Trump’s tariffs (a tax on imported goods ) would make everything more expensive for Americans, especially middle- and lower-income households.

In virtually every area where the country faces a challenge, Trump’s policies would only make matters worse. Even before the pandemic, life expectancy in the US – already the lowest among advanced economies – fell under Trump. By seeking to repeal the Affordable Care Act and the IRA provision that lowers prescription drug prices, Trump would make the situation worse.

Likewise, America tops the list of advanced economies when it comes to inequality, and Trump’s tax cuts for the wealthy would widen the gap even further. Harris’s policies, on the other hand, would be aimed directly at improving the living standards of the middle class.

In addition to health and inequality crises, climate change is costing Americans many lives and property damage.

Yet Trump has joined forces with fossil fuel magnates for campaign contributions, promising to reduce pollution regulations in return. Not only would he leave America behind many other countries in the transition to a clean energy economy; he would also make the US (again) an international pariah.

These are some of the many reasons why 23 American Nobel laureates recently signed an open letter supporting Harris. It’s hard to get two economists to agree on much of anything, but we came to the conclusion that “overall, Harris’ economic agenda will improve our country’s health, investment, sustainability, resilience, job opportunities and fairness and will be vastly superior to the counterproductive economic agenda. of Donald Trump.”

Pocketbook issues play a major role in this election, and we Nobel Prize economists concluded without hesitation that “Kamala Harris would be a much better steward of our economy.”

Many Americans understandably want to forget all the chaos (and excessive Covid-19 deaths) that occurred during Trump’s presidency. But we shouldn’t do that. Now that Trump is openly seeking retaliation against what he calls “enemies at home,” and now that the Republican Party is nothing more than a personality cult, there is little doubt that a second presidency would be even worse than the first.

While America’s economic strength rests on the foundations of science and technology, Trump has repeatedly proposed massive cuts in federal research spending that would be devastating to advances in basic science and have knock-on effects across many key economic sectors. When he was in power, even the Republicans understood the recklessness of his proposals in this area and voted them down. But now the party’s self-abasing servility towards him is total.

In another open letter, my fellow Nobel laureates and I were joined by Nobel laureates (more than 80 in total). Together we point out that: “The enormous increases in living standards and life expectancy over the past two centuries are largely the result of advances in science and technology.

Kamala Harris recognizes this and understands that maintaining America’s leadership in these areas requires federal government budget support, independent universities and international cooperation. Harris also recognizes the key role immigrants have always played in the advancement of science.”

Unfortunately, even Musk – whose companies depend on fundamental science from others – hasn’t fully considered what Trump would mean for his bottom line. Short-term greed – a fixation on tax cuts and lighter regulation – has lured many captains of industry and finance to join the Trump team.

Trump is offering crony interest capitalism, a kind of capitalism that, even if it does good for Musk and other billionaires, won’t be good for the rest of us. But at least Harris exudes hope that through reason and cooperation, Americans can create a more resilient, inclusive, faster-growing economy — one that outperforms crony capitalism and shares the benefits of growth more equitably.

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Joseph E Stiglitz, Nobel laureate in economics and professor at Columbia University, is a former chief economist of the World Bank, chairman of the US President’s Council of Economic Advisers and co-chairman of the High-Level Commission on Carbon Price.

Disclaimer: This article first appeared on Project Syndicate and is published through a special syndication arrangement.