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The President as Businessman

Trump's gigantic tax cuts will only benefit the rich. State indebtedness increases on account of neoliberal fiscal policy, not through infrastructure investments. Revenue losses of over six trillion dollars are expected for the first decade. In his symbolic politics, Trump sells the illusion that the old order can be restored. Only market efficiency counts for this system, not social justice. Cancelling food, housing and health care benefits is sadism, not public policy.

Donald Trump and America-First Imperialism

By Rudolf Hickel

[This article published in Blaetter 6/2017 is translated from the German on the Internet, www.blaetter.de.]

To many observers, Donald Trump's motto "Make America great again" and the related nationalist-protectionist line are regarded as temporary election campaign behavior. Once in office, they hope, Trump will find the usual opportunist political pragmatism. Now after more than 100 days in the Oval Office, another future is emerging. Trump seems resolved to offensively counter the alleged aggressive "raid of foreign countries." This is directed against China and Germany whose economic policy he blames for the continuously negative trade balance and the general economic descent of the US.

This mono-causal argument of a predatory economic attack follows a naïve problem-management. With a large number of instruments no longer regarded as possible, the former real estate tycoon relies on nationalist screening - according to the motto "Buy American, Hire American." However, this new nationalism should not be misunderstood as a provincial withdrawal of the US from the world markets. Quite the contrary! With "America First," Trump wants to ring in a new phase of US imperialism - as a new era of economic hegemony.


The US has actually experienced a massive economic descent in the last decades. This started in the middle of the 1970s and impacted dependent workers. Until 1973, real wages developed in harmony with labor productivity. [1] The distribution of income growth between capital and labor was largely neutral. Therefore real wages doubled between 1947 and 1973. Afterwards, the growth was reduced and only amounted to 22% in the years up to 2007. Simultaneously the average annual productivity growth between 1979 and 2001 at 1.1% was twice as fast as the growth in real wages. The winners of redistribution were businessmen and owners of capital. In addition, a reduction of jobs and often the total loss of working income strained dependent employees through loss of work incomes. The world economic crisis from 2007 did the rest. Registered unemployment since the crisis peak in 2010 fell from 9.6 to 4.6% in the first quarter of 2017. Still, the social situation of the poor, unemployed and precarious workers did not improve. This "collapse of the white working class" (Paul Krugman) forced the change of mood toward Trump.

At the same time, the prevailing political elite and dominant economists obscured the dramatic social division and followed a deregulating economic policy. An illuminating controversy over the economic consequences of globalization only flared up briefly in 2004. The dean of macro-economics, Paul A. Samuelson, vigorously criticized the supposed increased prosperity of everyone through free trade. [2] Rather, Samuelson said, the competition unleashed through global free trade created many income- and job-losers alongside the few winners of businessmen and wealthy persons - through outsourcing jobs. Denying these effects, politics renounced on social equalization measures. Then Trump attacked the ignorance of the political establishment in Washington that he blamed for the malformations. He reproached established politicians for snatching the wealth of the middle class and "then giving it to the whole world." The Obama administration together with the majority of the media actually treated the thesis of the prosperity-giving effect of globalization as an iron law.

Retrospectively, the question is raised whether the US could have been spared the worst excesses of social division through a politically-organized globalization - not left to corporations. Trump's election success cannot be understood without the growing doubt in the ideologies of justification. The questions are raised all the more what are the goals of the new administration and what will be the social consequences of its politics.


Trump wants to ring in a renaissance of protectionism and offers a broad catalog of measures. So he threatens rival foreign countries with punitive duties, sanctions, import restrictions and cross-border taxes. US businesses that shift operations offshore should be rewarded with tax gifts for moving subsidiaries back. Pushing back the international competition is complemented by a fundamental change of course in domestic policy. The central goal is creating jobs by revitalizing large needy regions, particularly the "Rust Belt," the oldest and largest industrial area of the country extending from the northeast of the US to the east coast and also includes West Virginia, the former center of coal mining. Reversing the decline of this prosperity-region once praised as a "manufacturing belt" is considered a symbolic project of the Trump presidency. To that end, he announced a trillion-dollar program to rebuild the ailing infrastructure.

While this may sound social, "America First" does not mean the mastery of the social division in general or the rescue of the "white working class" in particular. Quite the contrary! Trump's policy concentrates on business-friendly deregulations of the financial markets and climate policy as well as massive tax cuts in favor of owners of capital and simultaneous revocation of social state achievements. So the budget plan presented in March for the 2018 budget year shows that all those who chose Trump in the hope of improving their social situation have to expect new burdens. Trump's administration plans to cancel social projects of the Obama years in the areas of housing and health care. Paradoxically, Trump succeeds in uniting the socially frustrated in this way under the mantle of fighting job losses while actually strengthening the power of businessmen.


Trump's ideas on politics are marked by his economic origins. The former speculative real estate tycoon understands the United States as a mega-corporation and himself as its Chief Executive Officer (CEO), as the managing and authoritarian member of the board. He rejects any functioning control over CEOs and regards democratic business structures for the rational settlement of conflicts of interest as damaging to business interests. There are no fair rules for the just distribution of production gains between capital and labor. In this corporate model, any critical reporting about internal malformations should be prevented. Not surprisingly, the US president stamps the media as the "enemy of the people." Trump understands himself as an "ideal capitalist" (Marx). Therefore he discusses relevant projects to rebuild the US primarily with the most important corporate representatives, not with all the social groups. So he is advised by the big US banks on the planned dismantling of financial market regulations. Only the top representatives of the economy were included in the discussion before deciding on the envisaged tax reform.

This understanding of politics fundamentally distinguishes Trump from his predecessors. Ideally the state should protect the framing economic conditions for private competition and compensate with measures against profitable system risks. However Trump's orientation in the leadership model of a big speculative business leads to massive fallacies on the relation of state and competition. As a result, the functions of the state necessary for the overall economy are systematically dissolved.

The short-circuit from the individual- to the total economy is based on the fatal misunderstanding that rational individual economic conduct inevitably culminates in an overall economic optimum - assuming absolute competition. Breakdowns only occur because of interventions by the state or unions according to the neoclassical doctrine, not because of the profit economy. This absolution of capitalism from causing instabilities and crises has long been empirically and theoretically refuted.

Trump's administrative experiences in dealing with the 2008 financial market crisis are fundamentally different from the trauma endured by many political economies since then. In these years, his real estate empire posted considerably more profits through speculation than losses. Therefore Trump does not understand the latest crisis as a consequence of highly speculative and hardly regulated businesses with financial market products. Thus it is only consistent in a certain absurd way when he urges withdrawing the legally anchored regulations of financial markets in the US.

Another fallacy is imagining the highly monopolized competitive system would justly pass on the growth gains to employees. Here Trump would recommend the works of the ultra-liberal Milton Friedman. According to Friedman, the results of the capitalist competitive system should not be judged according to social criteria because only market efficiency counts for this system, not social justice. Market efficiency can be very anti-social. On the other hand, Trump together with neoclassical economics starts from the trickle-down theorem that wealth-creating effects trickle down to low-income persons. Therefore Trump rejects a redistribution policy guided by the social state and a socially-inclusive economic growth.

Trump is also wrong with his central thesis on the loss of the economic relevance of the US in relation to foreign countries. He interprets the increasing job losses and production shifts to non-American locations with simultaneously growing export surpluses of other nations compared to the US as a causal relation. This mono-causal worsening ignores other relevant causes of the loss of economic significance and rising unemployment in the US, for example, the relevance of economic structural change and productivity development for the decreasing need for workers in industry. In the last years, work productivity has developed faster in the industrial sector than economic growth and leads to a reduction of industrial jobs. Thus the share of gainful industrial employment in the total work volume fell from 20.8 to 12.7% between 2004 and 2014. Since 2007, 1.5 million fewer people are employed in industry while 1.7 million jobs arose in the service realm including many precarious jobs. This structural change marks those regions that earlier prospered through classical industrial production and coal mining. For decades, jobs were lost through mine closures. Given these long-lasting mine closures, it is astonishing that an above-average high share of voters there supported Trump. His promise, "my administration will end the war against coal," cannot ultimately hold its ground to reality.

For Paul Krugman, this is symbolic politics. "Coal is not really central. Coal is symbolic for a social order that does not exist anymore. [... ] Trump sells the illusion that the old order can be restored and his seemingly material promises of creating jobs in a certain branch are only a shell." [3]


What overall pictures result from all these measures, attacks and ventures? Is Trumponomics coming after Reaganomics? What distinguishes Trumponomics? Three points are important. Firstly, higher tariffs, sanctions and a completely new system of net-profit taxation - in the long-term - should screen the US from international competition and lead to a reduced trade balance deficit. Increases up to 20% in the general import duties are earmarked. For certain kinds of steel, the Trump administration announced punitive duties or sanctions up to 22.9%. Furthermore, it distanced itself from planned or existing trade agreements like TPP and NAFTA since these would weaken US interests. Altogether such a protectionist course would harm the US in the long-term because screening from international competition impedes necessary innovations.

Secondly, Trump now orders by decree canceling the rules issued under Obama after his aggressive election campaign criticism of the alleged hindrance of the banks by state regulations. The Dodd-Frank Act passed in July 2010 that made possible a stronger regulation of the financial sector is targeted. Trump wants to cancel the stress test for financial houses, the sharp separation of speculative investment banking and customer-oriented commercial banks and government management for transgressing banks. The new agency for consumer protection in public finance intensely criticized in the election campaign, the Consumer Financial Protection Bureau, is on the hit-list.

In addition, monitoring systemically dangerous hedge funds and private equity funds that form the core of the shadow banking system today should be abolished. One proposal from the Trump environment goes even further. Speculative investment banking should be spun off into a holding of the whole bank. The consequences would be a hardly controlled war craft of speculative businesses like the Lehman Brothers investment bank several years ago. On this background, Trump will probably enter history as the causal agent of the next financial market crisis.


Thirdly, Trumponomics is characterized by gigantic tax cuts. In April, US Treasury Secretary Steven Mnuchin and Trump's chief economic advisor Gary Cohn presented the tax concept of the new administration. Lowering the nationwide corporate tax from 35 to 15% and the complete abolition of the estate tax (disparaged as a "death tax") are urged. Moreover, the seven income tax rates should be reduced to three, 10, 25 and 35%. The top tax rate affecting a couple with a taxable annual income of $470,000 was lowered almost 10 percentage points while the deductions or allowances are doubled.

The tax cuts will only benefit the rich - including the investment legend Warren Buffet. The revenue shortfall resulting from the lower tax rate should be compensated by higher economic production. In 1728, Jonathan Swift described this kind of self-financing in his "sardonic looking-glass." According to this cynicism, a lower tax rate leads to higher net profits of businesses which could then be used for investments. The growth of the economy would lead to more tax revenue than lost through the tax reduction.

In the 1980s, Ronald Reagan posted an enormous explosion of state debts at the end following a similar vow to self-financing. The error of Reagan and Trump is that the height of the tax rate is not determinative for investment readiness. Consequently, the additional growth impulse does not arise. State indebtedness increases on account of the neoliberal fiscal policy, not through infrastructure investments. Revenue losses of over six trillion dollars are expected for the first decade after the Trumpian tax cuts start. [4] The distribution effect will also be catastrophic. The rich at the top of the income pyramid win through the tax cuts while the state indebtedness soars.

At the same time, Trump in no way accepts combating tax fraud of US firms as urgently necessary. According to the latest estimates by Oxfam and the "Institute for Taxation and Economic Policy," the 50 largest US corporations including Alphabet and Apple channeled over $1.6 trillion in profits to tax havens in the year 2015 alone. $2.5 billion in lobbyist expenses facilitated this tax fraud that is not legally prosecuted. This lobbyism is successfully dismantling ecological and fiscal regulations along with implementing the tax cuts.


The first budget draft for 2018 was presented in the middle of March under the characteristic title "America First: A Budget Blueprint to make America great again." The "Washington Post" reacted with the headline: "This budget will shake the government to the core." The budget plan makes strengthening the military and homeland security clear priorities - at the expense of health care, publically subsidized housing and help for the poor. An exit from all energy- and climate commitments is earmarked.

Military spending will increase $52.3 billion to $574 billion; spending for homeland security and veterans will be raised 7 and 6%. On the other side, programs for local development and relief projects will be canceled. 21% of the funds in the budget of the Labor Department alone will be saved. Spending for housing will be cut twelve percent according to the budget plan, particularly in subsidized rents. Experts calculate that millions of citizens will lose their social housing or be forced to live with reduced government subsidies. $178 million will be taken from the health care program Medicare. Obamacare, the great health reform of 2010, is again in the focus. With a narrow majority in Congress, Trump could severely cut back health care after the original decree was stopped by a court. This will cost millions of US citizens their health care. Altogether 52 million US citizens will not have health insurance in 2026 without Obamacare according to predictions.

On the other hand, there has long been a striking quiet about the trillion dollars for investment in the public infrastructure announced in the election campaign - although the investment backlog up to 2020 in this area amounts to an estimated $3.6 trillion. The private financing of infrastructure projects desired by Trump would be absolutely disastrous. Then the financially weak will not be able to afford the user-fees. When private profits determine the investment projects, public funds will hardly meet the greatest needs in the crisis regions.

Gigantic state debts are already pre-programmed on account of the tremendous tax cuts. In 2016, the total state indebtedness rose to 107.5% of the gross domestic product. According to the old rules, the Trump administration will only be restrictedly solvent because of exceeding the legal debt ceiling since March 15, 2017. At the last moment, a compromise was reached between the democratic and republican negotiators in the Congress. To avoid the fiscally-related government shutdown, a budget ceiling of around a trillion dollars is now in force until September 2017. According to the agreement, Trump will spend $15 billion to strengthen the military and $1.5 billion for border security (The budgetary funds planned for building the wall at the Mexican border were not included in the 2017 budget). In the fall of 2017, the hour of budgetary truth will come for the Republicans after they harassed the Obama administration for eight years about observing the upper budget or debt limits,


Will Trump's politics be successful at the end? This question cannot be answered simply. The short-term and long-term effects on the economy have to be distinguished if the baseline promised in the election campaign remains.

In the short-term, Trump's attempt could bear fruits. His policy is celebrated with great euphoria on the stock markets. Surveys on the expected development sometimes turn out positive. This is not surprising. Businesses profit at least in the short-term from deregulations in the financial area, with the environmental policy, and from business-related tax cuts. The announced mega-infrastructure programs show positively in the books. The planned investment programs could stimulate growth since the possibilities for price hikes increase in the entrepreneurial economy with the expected full use of productive capacities in growing economic demand. The Fed, the US Central Bank, takes the expected increase in inflation as the occasion for raising the key interests in small steps. While Trump urges retaining the low-interest policy, the Fed positions itself prophylactically and tries to oppose the inflation-driving measures of the Trump administration.

In the long-term, Trump's policy may be less successful. Firstly, the strong upgrading of the dollar - driven by protectionism and deregulation of the financial markets - worsens the sales chances of the US export economy. Secondly, imports will be accelerated by cheap preliminary foreign works that dodge the planned reduction of the balance of trade deficit. In addition, a massive increase of state indebtedness could occur.

Moreover, the political promises in favor of the economy have triggered an "irrational exuberance" (R.J. Schiller). Stock prices driven upwards are far removed from the profitability realizable in the real economy. The danger of a Trump bubble on the stock exchanges is great. On the other hand, a boost in economic growth is unlikely because enormous exchange losses will occur as soon as this irrational exuberance slackens and production slumps arise.

Unemployment will not fall permanently. Trump deepens the social division again with less health care and social housing and the rise of precarious working conditions. Soon it will be obvious that Trump, the president seen as the "Deliverer" by past losers, disappoints his voters with his anti-social, divisive politics. The support of these followers in the next midterm election is doubtful.

The screening policy toward rival foreign countries will limit the competitiveness of the United States, decreases the innovation pressure and reduces the readiness to press ahead with the necessary structural change. Moreover, trade wars with weapons threaten protectionist screening - and a de-stabilization of the world market.

While Barack Obama sought to globally carry out minimum social and ecological standards - even if often unsuccessfully -, Trump fundamentally breaks with this attempt. The inconsistency of Trumponomics in view of the economic, social and ecological risks may permanently thwart or prevent an economic revitalization of the US. But Trump undermines every foundation for the economic hegemony that he desires.


[1] Vgl. Eduard N. Wolff, Inequality and Rising Profitability in the United States, 1947-2010, in: „International Review of Applied Economics", 6/2015, S. 741-769.
[2] Vgl. Paul A. Samuelson, Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization, in: „Journal of Economic Perspectives", 3/2004, S. 135-146.
[3] Paul Krugman, Es geht nicht um Kohle, sondern um eine Gesellschaftsordnung, www.welt.de, 31.3.2017.
[4] Vgl. James R. Nunns, Leonard E. Burman, Jeffrey Rohaly und Joseph Rosenberg, An Analysis of Donald Trump's revised Tax Plans, Tax Policy Center, Research Report, 18.10.2016.


Klaus Brinkbaumer, A Danger to the World: It's Time to Get Rid of Donald Trump, Spiegel.de, May 19, 2017
 link to www.spiegel.de

Daniel Leisegang, The Great Trump Show, blaetter.de, Dec 2016,

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