Keynes Would Have Loved Trump’s Economic Plan

by | Nov 22, 2016

Keynes Would Have Loved Trump’s Economic Plan

by | Nov 22, 2016

Trump’s plan is what Keynes would have prescribed!

Most economic commentators such as a Nobel Laureate Paul Krugman should be delighted with the US president-elect Donald Trump’s economic plan for it is going to be along the lines of Keynesian economics.

One of Trump’s promises is a massive infrastructure spending program. According to Trump,

We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We’re going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it.

Mr. Trump said at one point in the campaign that he would double the $275 billion infrastructure plan that Hillary Clinton proposed. According to Trump’s plan he is also promising to create 25 million jobs over 10 years.

Trump Doubles Down on Deficit Spending

Trump has also promised tax cuts for all Americans. His plan includes lowering the rate on the highest earners from its current 39.6 percent to 33 percent and also lowering the corporate income tax rate from 35 percent to 15 percent.

Various estimates have put the cost of his tax cuts at some $6 trillion over 10 years. In addition to this Trump has also promised to boost US military spending.

It is not possible to lower taxes and raise government spending at the same time

Nothing in Trump’s plan suggests that he is aiming at generating more real wealth. His entire focus is to generate an increase in employment regardless of whether this increase in employment is in response to wealth generating activities or not.

This is quite disappointing, given Mr. Trump’s business credentials one would suppose he would understand the meaning of profitable versus non-profitable activities.

Note that Trump’s plan also suggests a lowering of taxes and a corresponding increase in government outlays. Obviously, this is a contradiction since it is not possible to effectively lower taxes without a corresponding reduction in government outlays.

The plan is likely to boost the money supply growth rate.

Read the rest at the Mises Institute.

About Frank Shostak

Frank Shostak's consulting firm, Applied Austrian School Economics, provides in-depth assessments of financial markets and global economies.

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