By Dave Gardner
Investigation of a few key details reveals that President-elect Donald Trump will undoubtedly face some tough financial challenges involving his domestic spending promises and Washington’s availability of cold, hard cash.
During the campaign, Trump promised to, transform America’s crumbling infrastructure. He has pledged to massively increase defense spending and fix the Social Security system without cutting benefits.
One of Trump’s most popular pledges involves building a 1,200-mile-long wall along America’s southern border. it. In addition, he will round up and deport the almost 11 million immigrants illegally living in the United States.
Satyajit Ghosh, Ph.D., professor of economics and finance at the University of Scranton, noted that mass infrastructure spending usually flows from the Democratic side of the political aisle. This spending is popular with economists because infrastructure improvements have a great “multiplier” effect among tax expenditures.
However, in view of Trump’s multiple pledges to raise spending on infrastructure and national defense while also cutting taxes, massive budget deficits would occur. According to Ghosh, all of Trump’s spending promises would raise the cumulative national debt by at least $30 trillion.
“I have no idea what congressional reaction to these proposals will be, with both houses now dominated by Republicans,” Ghosh said.
Fred Croop, MBA, dean of the college of professional studies and social sciences at Misericordia University, sees trouble coming for Trump with his immigration-related proposals. Croop said the vast majority of Latino immigrants he has encountered are hard workers with a religious faith and a history of survival in tough times.
This survivor mentality is the reason these immigrants will do difficult jobs, such as farm harvesting, for very low pay. Replacing immigrants with American workers would require vastly higher pay and in the process destroy farm profitability.
“I picked when I was younger, and believe me it is hot and hard work,” Croop said. “Excluding Latinos from these types of jobs is not the solution to employment problems for our citizens, who need family sustaining work in large numbers.”
Leonard Champney, Ph.D., professor of political science with the University of Scranton, noted that virtually all domestic commerce flows through the nation’s infrastructure, and problems with roads, bridges and rail inhibit business. He believes congressional Republicans will fall into line with Trump’s spending plans, and with the 2018 midterms looming big deficits from infrastructure improvement will become acceptable.
Champney has also noticed that Trump appears to be backing off on almost every campaign promise he made. The huge wall may wind up being simply a fence and other challenges remain such as the fact that most of border land where the fence would be located is private and often held by anti-Trump landowners who would legally fight seizure by eminent domain.
“I suspect Trump just threw red meat to his base and it wouldn’t surprise me if he never believed in the wall concept,” Champney said. “He’s smart and pragmatic and backing off the immigration roundup because he must know how expensive it would be to identify and deport these people.
According to Champney, Trump has another related challenge he will be forced to deal with. His campaign legitimatized racism from the private to public arenas and the consequences for American society, and its costs, are unknown.
According to Christopher Stevens, Ph.D., assistant professor with the department of history and government at Misericordia University, Trump has promised to be less of an internationalist than predecessors and gives the impression he is only interested only in American security and not its global implications. The Trump campaign featured an undefined agenda in rhetoric, but Stevens forecasts that the presidency will force the real Trump to stand up and reveal his true belief systems.
“Everything he speaks about seems to be a cost-benefit analysis from business,” Stevens said. “Business and politics are very different, and I have suspicions about Trump’s longevity.”
The financial costs for Trump’s plans, such as the illegal alien roundup and the wall construction, could be Trump’s undoing. Business interests will also fight back because hotels and agriculture all depend on the work they do, for profitability.
“Trump may find himself blaming all his problems on Congress, creating a very bad spot for himself,” Stevens said.
Kyle Kreider, Ph.D., associate professor of political science with Wilkes University, said it is not yet clear what Trump will actually push for. Many congressional Republicans have gerrymandered safe seats on long leashes and their voters will give these representatives lots of room to comply with Trump’s supply-side economics and resultant deficits.
“The massive tax changes will undoubtedly create new cash reserves for business, and if Trump is successful in obtaining private dollars for his infrastructure spending he may remain very popular,” Kreider said. “However, legislation such as the ban on Muslim immigration will require heavy congressional support.”
Rodney Ridley, Ph.D., director of the Allan P. Kirby Center for Free Enterprise and Entrepreneurship at Wilkes University, called Trump a true follower of Ronald Reagan-era supply-side tax cuts for business. In theory, making business rich with cash will inspire management to expand the company and create jobs.
“Nobody I know has ever created a job from a tax cut,” Ridley said. “There is no evidence this works. Jobs are only created as needed. Even if a mom-and-pop store added a job from a tax cut it would be a mid-to-low wage position.”
William Parente, Ph.D., professor of political science with The University of Scranton, sums up Trump’s domestic situation by noting that he has already backed down on many campaign promises and the public should never have taken him seriously. Trump was simply pandering to conservative voters and as president he’ll be accommodating and compromise.
Some problems will call out for attention. Parente identifies the upcoming social security fiscal problems to be among these, because Americans are living longer and therefore taking out more than they paid in, while fewer numbers of young people are available to submit revenues.
“The people surrounding Trump will also discourage the campaign rhetoric,” Parente said. “Nothing extreme is going to happen.”