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Why President Trump Will Not Revive the US Economy

By: Iván Carrino - Nov 11, 2016, 7:37 am
Los Estados Unidos siempre se caracterizaron por tener una economía dinámica, empresarial e innovadora, lo que le permitió alcanzar uno de los niveles más altos de vida en el mundo (Flickr).
The United States has always been characterized by its dynamic, entrepreneurial,and innovative economy. Trump won’t bring it back to that. (Flickr).

After months of a grueling and hostile campaign, Republican candidate Donald Trump has finally been elected President of the United States.

Clearly, this result is a direct criticism of the political establishment, and proves the consolidation of populism throughout the First World.

Now the question is whether this eccentric business tycoon will be capable of reviving the US economy.

The United States has always been characterized by its dynamic, entrepreneurial and innovative economy that allowed the country to reach one of the higher standards of living in the world. However, excess spending, public debt and too many regulations have reduced its overall performance.

According to a study conducted by the Mercatus Center of the George Mason University, Barack Obama had imposed 105,602 new regulations on businesses through 2014, becoming the most regulatory president of the last 40 years.

In response, Trump said he will deregulate the economy and lower taxes — proposals that please many defenders of the market economy. However, Trump’s good ideas end there.

One of his most pretentious proposals is the commercial war on imports, along with his threat to abandon the North American Free Trade Agreement.

This proposal is a contradiction at best. He promises to reduce taxes and raise customs tariffs (which are also taxes), at the same time. Perhaps the worst thing about this measure will be the negative impact it will have on the economy.

Without as many cheap imports, US consumers are going to be impoverished. Producers in North America will begin to manufacture things that were previously imported, distorting the country’s production and reducing efficiency. Fewer imports implies less supplies at a low cost, which will hinder the production of companies.

More protectionism means more poverty, and less growth. This is not the way to “make America great again.”

The New Yorker asserted his government will carry out a gigantic infrastructure plan that will “rebuild freeways, bridges, tunnels, airports, schools and hospitals,” and that it “will put millions of people to work on that reconstruction.”

In other words, pure and hard Keynesianism.

The government spends and creates jobs to revive the economy. However, the question is how will they pay for all that expense if at the same time they are promising to cut taxes. The answer is simple: more public debt.

But debt is, as this article has already established, one of the reasons US has experienced a decline in economic growth. Explain again how borrowing more will make the US grow?

It is good news that the US has said no to the traditional political establishment, and that citizens are punishing the Democrats for their poor economic policies and corruption scandals. But Trump isn’t going to help either.

At best, this experience will serve to prove that populism is not the answer. It is not the plans of megalomaniac politicians that help the economy, but the entrepreneurs when allowed to produce freely.

Iván Carrino Iván Carrino

Iván Carrino holds a Master's Degree in Economics and a Bachelor's Degree in Business Administration. An economics professor at Belgrano University and at ESEADE in Buenos Aires, he also works as a consultant at Inversor Global. Follow him: @ivancarrino.

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