walrus51

Donald John Trump was one of 366 student members of the class of 1968 who was  awarded a Bachelor of Science degree in Economics from the Wharton School of Finance and Commerce at Pennsylvania State University (Penn State).

Other than his bachelor’s degree and some experience working in the family real estate business, there is no evidence that Mr. Trump has pursued additional education, credentials or capabilities in the field of economics.

Trump’s paucity of bona fides in the world of economic theory and practice has not deterred him from taking an active role in testing new economic concepts.

From an economic perspective, the presidency of Donald Trump will likely be remembered primarily for his America First posture, which has influenced immigration, tariff and tax policies.

Immigration:  Trump administration policy decisions focused on immigration have dramatically hurt domestic agriculture, food processing, hospitality, tourism and other low-wage, entry-level service occupations.

Tariffs:  Tariffs imposed on imported goods and materials are nothing more than a tax paid by the end user, in many cases, the American consumer.

Tariffs can be effectively used as a component of a strategic long-term plan to reposition the competitive position of American manufacturers on the world stage.

There is no known evidence that tariffs have ever brought any long-term value-added when arbitrarily and capriciously applied.

Trump administration subjective tariffs on imported steel and aluminum (justified as a means to “protect our country and our workers”) have proven to be a financial burden on several high-wage value-added U.S. industries, including: Automotive; Aerospace; Construction; and Manufacturing.

Tax Cuts:  The signing of the Tax Cuts and Jobs Act in December 2017 was lauded as landmark legislation which would: (a) lower taxes on businesses and individuals; (b) stimulate higher wages and more jobs; and (c) result in a larger and more dynamic economy as a result of dramatically increased domestic business investment in plant and equipment.

Almost two years after the passage of TCJA, it seems clear that some near-term economic stimulation was achieved, but the long-term impact on gross domestic product (GDP) will be modest, if at all. The impact will be smaller on gross national product (GNP) than on GDP because the law generated net capital inflows from abroad that must be repaid in the future.

The expectation touted by elected officials in their frenzy to pass the TCJA envisioned some $4 Trillion being repatriated, generating new and potent investment and jobs in the U.S.

Most recent estimates reflect $3 Trillion (or more) in profits that U.S. companies have left parked overseas, with about $465 Billion in “repatriated” cash returning to the U.S. to enjoy a tax rate of 15.5% (vs. the 35% prior tax rate) on profits returned to the U.S. from overseas.

A good outcome?  Sure, in the short term.  Capital investments? Plant and equipment? Not so much.  There is virtually no evidence that any of the repatriated cash was invested in job creation.  It was invested in executive bonuses; stock buy-backs; debt repayments; and some dividend enhancements.

Please stay tuned, there is more to come…..