These days, America’s recovery looks vulnerable to a lot of scary economic shocks. Most of these come from abroad: Britain’s potential exit from the European Union, for instance, or a “hard landing” from years of rapid economic growth in China.
But right now, the single biggest threat to the U.S. economy is the risk of a President Donald J. Trump.
That is one implication of a report released Monday by Moody’s Analytics. The report forecasts the consequences of several of Trump’s major economic policy proposals. It finds them — in no uncertain terms — catastrophic.
Taken at face value, Trump’s policies would likely push the United States into a two-year recession, which would be the longest downturn since the Great Depression. They also would cost the country millions of jobs.
And the biggest victims? The working-class families Trump claims to champion.
Among the proposals analyzed in the report are Trump’s unprecedentedly huge tax-cut proposals, which would increase federal deficits by about $10 trillion over a decade, according to the Tax Policy Center. Trump has offered few offsetting spending reductions.
Such plans make even a traditional tax-and-spend liberal such as Hillary Clinton look like a fiscal conservative, given that the net fiscal impact of her own platform is close to zero. More important, such plans would massively destabilize the U.S. economy.
That’s because — as Moody’s explains — government borrowing at this scale would cause interest rates to increase. Higher interest rates in turn would crowd out private-sector activities such as housing, consumer spending and business investment. The negative consequences of these higher deficits and interest rates would vastly outweigh whatever minor benefits we might get from lower tax rates.
And this is hardly the only set of Trumpian economic proposals that would scathe the economy.
As I’ve previously written, Moody’s economists earlier found that the trade war Trump is likely to instigate through tariffs on Chinese and Mexican imports would put millions of export-dependent U.S. jobs at risk.
This new report argues that Trump’s immigration policies would further harm the U.S. economy. It predicts, for example, that the knock-on effects of his mass-deportation drive would in fact result in fewer jobs available to native-born Americans. (Arizona saw similar results after its own crackdown on undocumented immigrants, Moody’s found.)
By 2021, if Congress were to give Trump almost everything on his wish list, the U.S. economy would be 6.5 percent smaller than it would have been under current policies, Moody’s estimates. It would also have 9.4 million fewer jobs.
Over the next decade, the economic damage inflicted would be greater under Trump’s plans than it would be under either of two other frightening financial shocks: a “Brexit,” or even a global currency war induced by a Chinese economic crash.
And in one sense, these forecasts may actually understate the fallout of a Trump presidency.
That’s because Moody’s did not try to model the consequences of Trump’s two riskiest (read: dumbest) economic proposals, because too little detail was available: his flirtation with a default on U.S. debt and his desire to bring back the gold standard. (On the other hand, his policies look a little less dire, but still very bad, if you assume negotiations with Congress would water them down a bit.)
Overall, the picture painted by these forecasts is terrifying. It suggests voters here — not so unlike our friends across the Atlantic who favor Brexit — may voluntarily bring a Category 5 economic hurricane upon themselves. And for what? To “shake things up”? To give the middle finger to “the establishment?” To make Washington a little more entertaining, or a little less politically correct?
Are 9.4 million fewer jobs and the longest recession since the Great Depression really worth those meager rewards?
While the Moody’s report is, to my knowledge, the first attempt to quantify the comprehensive effects of Trump’s suite of economic proposals, it’s not as if voters are unaware of the risks. Economists, political scientists and historians on both left and right have repeatedly warned about the dangers of a trade war, international isolationism, mass deportation and federal debt explosion.
Nor is the United States the only country imperiled. A Trump presidency is considered one of the top 10 risks facing the world, according to the Economist Intelligence Unit. It’s rated above an armed clash in the South China Sea, a fracturing of the European Union and even the rising threat of jihadist terrorism.
In fact, perhaps the only person guaranteed to come out of a Donald J. Trump presidency better off than before is Donald J. Trump himself.
Lawrence Summers: Trump is a much worse threat than Brexit
Catherine Rampell: Donald Trump’s trade policies are dangerous
Catherine Rampell: Republican candidates are out-Reaganing Reagan on tax cuts
Robert J. Samuelson: U.S. presidential candidates shouldn’t put globalization in retreat
Catherine Rampell: Actually, Hillary Clinton is a fiscal conservative — look it up