Monday, November 14, 2016

Will Trump's Economic Plan Make America Great?

Larry Summers supports the use of fiscal policy to stimulate economic growth.  However, he points out that it must be done right or we will do more harm that it will do good.  Donald Trump will invest in infrastructure and he will increase defense spending.  He will also cut taxes.  That will produce budget deficits which stimulate growth.  Summers argues the Trump's infrastructure investment plan puts too much emphasis on the private sector's use of tax credits.  He also points out that eliminating the inheritance tax, and cutting taxes primarily for the wealthy, will not stimulate growth.  It will cause them to save rather than to increase their spending.  Summers is also skeptical of Trump's trade policies.  The value of the peso and other currencies have fallen in response to Trump's election.  That will make their exports less expensive to Americans and it will make our exports more expensive.  Populists usually make outrageous promises to win elections.  Summers hopes that Trump will avoid the mistakes that most populist governments have made after winning elections.

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