A Kleptocrat with a Predilection for Protectionism

Donald Trump’s foolish predilection for protectionist/isolationist policies has been my main substantive complaint of him, other than my complaints that he’s an unabashed kleptocrat and all-around despicable human being.

A certain amount of domestic steel and aluminum production is necessary for national security interests. That production can be subsidized without negatively impacting broader aspects of the economy.

These tariffs, however, will have a deleterious effect on our economy. Things like cars and buildings will cost more to produce and build, which will needlessly increase their prices. Manufacturers will also move to outsource production to avoid the more expensive tariff-laden steel and aluminum.

Trump will surely place an “America First” spin on this decision, but in implementing these tariffs he is actually placing America’s economy last.

Net Neutrality

Net neutrality benefits innovation and the greater good by limiting the ways in which Internet service providers (ISPs) can take advantage of their power over the Internet, an increasingly important utility. The Internet has become even more crucial since the FCC reclassified broadband access as a telecommunications service in 2015, thus effectively enforcing the principle of net neutrality.

The Trump Administration has made it a priority to rollback regulations, ostensibly, to allow market forces to nurture innovation and competition. The FCC’s repeal of net neutrality, however, will instead stifle real innovation while allowing ISPs to merely innovate ways to divide and re-package bandwidth in ever more profitable ways.

Regulations are meant to protect the pubic from market conditions that heavily favor one entity or industry so that the greater good is served. The regulation that enforces net neutrality accomplished that goal. The FCC’s decision to repeal it is misguided and will have deleterious economic effects until net neutrality is restored.

A Practical Issue Facing the United States

One of the concerns I have for the future of the country is the public debt, which is $19.6 trillion as of September 30, 2016. Donald Trump rarely touches on issues of practical consideration, and I don’t know of any well-defined ideas he has for addressing the public debt. His political naiveté and perceived lack of genuine curiosity is a concern regarding this issue, and many others.

Using debt to fund the government usually doesn’t cause problems when the economy is expanding and interest rates are low and involatile. Economic growth also fuels tax receipts (currently about $2.2 trillion), which fuels the ability to service increasing debt, especially in a low interest rate environment.

Market interest rates and the Federal Reserve’s managed Federal Funds target rate, however, have increased recently. A shock to interest rates and/or inflation will greatly increase the government’s borrowing costs. I don’t see any imminent danger on the horizon, but it’s not hard to imagine the problems that debt can cause in adverse conditions.

Real wages and real personal income have steadily increased for over thirty years, but the hard-fought organic growth in GDP and personal income pales in comparison to the growth in the government’s public debt outstanding (see the chart below). (It’s also worth noting that the debt has increased under both Republicans and Democrats.)

Real Personal Income, Real GDP, and Real Public Debt
The graph shows the changes in GDP, personal income, and public debt outstanding over time compared to their respective baseline levels in 1984.

Over the past 15 years, the government has paid for several wars, spent its way out of The Great Recession, and passed into law the heavily subsidized Affordable Care Act (Obamacare). We’re passing the invoices for all that spending on to future generations because most politicians are reticent to advocate for higher tax rates and/or reduced spending, one or both of which are necessary to reduce the debt.

I don’t expect the fiscal health of the government to become a focus in Washington, D.C. any time soon because addressing it requires nuanced discussions and, ultimately, compromise. Rather, the political climate today calls for staunch partisans to exert their will over political opponents in an effort to claim absolute victory. This political climate is counterproductive to getting things done, and until the political climate improves, the public debt will continue to be the elephant in the room that no one wants to talk about—until it’s too late.