The Trump administration’s economic ignorance at times seems like quackery. Unlike virtually every credible economic source and policy maven, it asserts that trade and immigration are bad, protectionism is good and gigantic debt doesn’t matter. It perpetuates long-ago debunked tax myths (e.g. tax cuts pay for themselves) and postulates ridiculous levels of growth from a plan that will increase the debt by trillions. But nothing quite tops the latest revelation.

White House officials working on trade policy were alarmed last month when a top adviser to President Trump circulated a two-page document that alleged a weakened manufacturing sector leads to an increase in abortion, spousal abuse, divorce and infertility, two people familiar with the matter said.
The documents, which were obtained by The Washington Post, were prepared and distributed by Peter Navarro, director of the White House Office of Trade and Manufacturing Policy. They were presented without any data or information to back up the assertions, and reveal some of the materials the Trump administration reviewed as it was crafting its trade policy.

Navarro, a longtime opponent of free trade, has pushed for less nutty but nevertheless harmful positions such as tariffs on China and opposition to multi-lateral trade. The administration’s extreme positioning on the North American Free Trade Agreement certainly reflects Navarro’s handiwork, and so far has been soundly rejected by Mexico and Canada.(“[Canadian] Foreign Affairs Minister Chrystia Freeland accused the United States of deliberately trying to undermine the North American Free Trade Agreement, calling its list of unconventional proposals ‘troubling,’ CBC News reported. Her remarks came during a tense joint news conference as the fourth round of NAFTA talks wrapped up in Arlington, Va. … As Freeland delivered the rebuke of the U.S. approach, her counterpart U.S. Trade Representative Robert Lighthizer silently looked down.”)

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On the tax front, the Trump administration’s assertions are routinely ridiculed, sometimes in embarrassing fashion. The New York Times reported:

Mr. Trump’s Council of Economic Advisers said in a report released on Monday that reducing corporate taxes could raise average household incomes by as much as $9,000 a year. The top end of that estimate was based on work by a trio of researchers, and on Tuesday one of them, Mihir Desai of Harvard, said Mr. Trump’s team had misread the research. The actual income gain implied by his study, he estimated, would be $800.

To say that the administration lacks intellectual rigor would be gross understatement. It seems that the boss’s contempt for facts and willingness to misstate and distort reality to fit political objectives have set the tone for an administration run on hokum and fables. Instead, the impression among ordinary voters and tax gurus alike is that Trump is relying on big tax cuts for the rich and for corporations to justify his pitch that all this redounds to the benefit of the middle class. It’s supply-side economics on steroids.

Trump’s tax hype has disturbed many honest conservative policy wonks and economists. Ramesh Ponnuru of National Review writes:

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The problem with [the supply side] case is that it assumes a strongly positive effect of tax cuts on economic growth that does not appear to exist. Bill Clinton raised tax rates and the economy sprinted ahead. George W. Bush cut them and the economy limped. Barack Obama’s second term featured higher tax rates than his first one, and a better economy. This evidence does not prove that tax cuts are harmful. It is consistent with the possibility that tax cuts have a mildly positive effect that other factors can defeat. It is not consistent with the idea that it makes an enormous difference whether the top tax rate is closer to 30 or to 40 percent.
The supply-side argument itself implies that cutting tax rates has diminishing returns. Reducing the top tax rate from 70 to 50 percent, as the initial Reagan tax cuts did, meant that making an additional pre-tax dollar netted someone in the top bracket 50 cents instead of 30. The incentive to make that dollar was 67 percent higher. The House Republican plan, by cutting the top rate from 40 to 33 percent, would increase the incentive by just 12 percent.

Ponnuru reaches a conclusion familiar to Right Turn readers, namely that “the likely returns for the economy from cutting the top income-tax rates are modest. Neither the economic nor the moral arguments for doing so are compelling.”

Likewise, Michael Strain of the American Enterprise Institute has thrashed the administration for cutting taxes for the rich rather than pursuing changes in the code to benefit middle- and lower-income taxpayers. Henry Olsen of the Ethics and Public Policy Center also warns Republicans that the politics of their plan stinks:

This is because the plan’s immediate benefits heavily tilt toward corporations and the rich. Large corporations would get more than a 40 percent cut in their tax rates, from 35 percent to 20 percent. Smaller, privately held businesses would see a similar decline, from as high as 39.6 percent to 25 percent. Economists argue about the effect of these changes on the national economy, but the political import is clear: Combined with a proposed cut in the top rate on labor income from 39.6 percent to 35 percent, liberals will enjoy saying that the well-to-do will fare well under the GOP plan. . . .
The plan raises the lowest rate of tax from 10 to 12 percent, meaning some working-class workers will see a slight raise in their tax rates. Middle-income workers will at best see a modest drop in the tax rate they pay, from 15 to 12 percent. Compared with what the wealthy get right away, that’s small beer.
The plan’s authors point to a near doubling of the standard deduction most taxpayers take. However, the plan also eliminates the personal exemption all taxpayers currently take for each member of their household. If you have two or more children, the increase in the standard deduction is smaller than the amount of the exemptions you will lose. Taxes for big families may go up.

He also warns that doubling the standard deduction will lead to less itemizing and therefore the irrelevance of the mortgage deduction. “The result: Upper-middle-income families will see their taxes go up. Most people making less than $50,000 a year will see little or no change.”

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His conclusion should be required reading for all Republicans: “Republicans have always suffered from the perception that they care more about the rich than the common man. Their tax plan might help the common man in the long run by increasing investment and business activity. But the current plan looks like a much better deal for the rich than for the average people who put Donald Trump in the White House. In politics, perception can quickly become reality. Republicans should deal with this problem before it’s too late.”

Unfortunately, with a Cabinet full of Goldman Sachs millionaires and billionaires, the administration doesn’t seem interested in hearing hard economic and political truths that might undercut self-serving arguments for tax cuts for the rich. Let’s just hope it doesn’t claim that tax cuts will lead to reductions in “abortion, spousal abuse, divorce and infertility.” We’re already suffering from crackpot overload.

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