In front of a boisterous crowd at the Detroit Economic Club, presidential hopeful Donald Trump put policy specifics to broad goals as he laid out his vision for an economic plan.
He advocated for three tax brackets, rather than the current seven. They would top out at 33 percent after deductions. The corporate tax rate would drop from 35 percent to 15 percent, and he said he would eliminate the inheritance tax.
“What Mr. Trump did today was he laid out a total economic package, the goal of which is to double our economic growth rate, basically create trillions of dollars in new tax revenues and millions of jobs,” said Peter Navarro, a professor of economics and public policy at the University of California, Irvine and a member of the official economic advisory council for Donald Trump’s campaign.
Calling it a “second ‘Reagan Revolution,’” Navarro said that Trump’s plan would increase the GDP growth rate from its 15-year average of 1.8 percent to around 3.5 or 4 percent, which would lead to new tax revenue sizeable enough to offset revenue loss from tax cuts.
Jared Berenstein, senior fellow at the Center on Budget and Policy Priorities and an informal economic adviser to the Hillary Clinton campaign, wasn’t buying these figures. He argued that similar trickle-down policies enacted by presidents George W. Bush and Ronald Reagan drained the Treasury of revenue and disproportionately benefitted the wealthy.
“I very much enjoy dessert, and I wish I could just eat ice cream sundaes all week long and never gain a pound,” Berenstein said. “But it just doesn’t work this way. We’ve tried this supply-side trickle-down business for decades now, and the result is extremely consistent.”
Navarro emphasized that focusing only on taxes ignores the synergy of Trump’s plan, which Navarro said will create a “pro-business, pro-economic climate” in the United States. He pointed to what he called “the four points on the compass” of Trump’s economic strategy to demonstrate how the Republican nominee would begin to create this environment.
- Energy policy: “Trump wants to revive our energy sector and make it a key competitive advantage while putting people back to work.”
- Regulatory policy: “Trump will put a moratorium on new regulations and ask his agencies to review every regulation and streamline them.”
- Taxes: “When you lower the corporate tax rate, you basically have more assembly plants being built in Michigan than Mexico.”
- Trade: “Trade deficits sap the lifeblood out of our economy.”
Navarro explained how he sees two of these points — taxes and trade — working in tandem.
Navarro: We have the highest corporate tax rate in the world. What does that high corporate tax rate do? In places like Michigan, where Donald Trump gave his speech today, it pushes companies like GM and Ford to Mexico for a tax break. We’ve seen in the last two years those two companies basically send to Mexico over $5 billion of new investment that should have stayed in Michigan. What Trump does with his tax plan is to try to create incentives to bring jobs back to America.
While Berenstein agreed that persistent trade deficits are harmful to American workers, he saw a very different solution to reforming the corporate tax rate.
Bernstein: We already have a massive tax avoidance industry, and one of the ways you stop that is you start closing some of the loopholes that so many of those folks take advantage of. I think you have to be mindful of the limits on how far you can go with that, but if you look at America in terms of its international taxation comparative to any advanced economy, we’re way at the low end. Our statutory rate is too high — 35 percent percent. The thing is, very few corporations actually pay that, because of all the loopholes. Start closing the loopholes, make sure the IRS is adequately funded to implement the tax policy, and there is no doubt in my mind that we could raise revenues.
Hillary Clinton will unveil her jobs plan Thursday, also in Detroit.
These interviews have been edited for clarity.
John (Jack) Pitney, professor of politics at Claremont McKenna College
Louis DeSipio, Director, Center for the Study of Democracy, UCI
Peter Navarro, professor of economics and public policy at the University of California, Irvine and a member of the official economic advisory council for Donald Trump’s campaign; he is the author of “Crouching Tiger: What China’s Militarism Means for the World” (Prometheus Books, 2015)
Jared Bernstein, Senior Fellow at the Center on Budget and Policy Priorities and an informal advisor to the Hillary Clinton campaign
Marilyn Thompson, editor at the Washington Post; she recently worked on a piece about Clinton’s failed job efforts as Senator of NY
This story has been updated.