Stevenson: The Trump Economic Agenda

By Jon Stevenson

Note: This is an opinion-editorial article offered and written by Jon Stevenson, a DeSoto County resident, businessman, and concerned citizen. The article reflects Stevenson’s opinion and not necessarily that of this publication.  

Last week I listened to a podcast sponsored by the Free Press, a great new news site.  Bari Weiss, the former New York Times reporter and founder of the Free Press, and Peter Theil, the billionaire private equity fund manager and supporter of Donald Trump, were discussing the election of Donald Trump and the policies and issues around the election.  The discussion inevitably came around to economic policy, and that’s when the light bulbs went off in my head!

Traditional Republican/Conservative Economic theory has been built around two guiding principles: Free Trade and Free Market Capitalism.  Since Ronald Reagan was elected in 1980, that has been the guiding principle of Republican candidates and then eventually embraced by the Democratic administrations of Clinton and Obama.  The theory being if we allow free trade and unlimited competition, we will lower the cost of living for our consumers when low skilled jobs go to where low wage workers live in 3rd world countries.

This theory, in principle worked, sort of.  Our trade relationships did produce a lower cost of living for all of our citizens.  The lower labor costs that we had access to depressed the labor cost of products so much that we essentially had 40 years of near zero inflation.  But this came at a cost. Rural areas, where most lower wage manufacturing jobs were located, were decimated when the factories closed up.  But not just economic activity left; hope left as well.  If you have no hope for prosperity, things like drug and substance abuse multiply, and it did.  People leave for cities to find opportunity, which hollows out the rural population base and decimates rural culture, which has been a traditional bedrock of American values.

Did we receive the benefits?  Yes, sort of, but we also learned some negative lessons.  While our rural areas were incurring the costs and economic destruction of the trade policies, the areas of the country engaged in trade and finance prospered enormously.  You know that free trade isn’t working as it’s supposed to due to the massive trade imbalance that the country has maintained over the last 30 years.  This system is not working because we have a trade deficit of hundreds of billions per year.  

We finance this by paying for our products in dollars; the foreign suppliers then take these dollars and buy US Treasury bills and notes.  When they want to get rid of the Treasury bills, they take them and purchase assets in the United States like businesses and real estate.  At each step in the process, US financial companies help these foreigners to complete their transactions and make fees for doing so.  This has allowed an enormous amount of wealth to flow to businesses engaged in financial products and to businesses that were able to increase their profit margins at the expense of rural areas or in political terms – Red States.

With the election of Donald Trump, we have the opportunity to reassess our trade relationships.  We need to quit looking at trade as an unalloyed good and instead examine each trade relationship individually to see if it makes sense.  We need to invest in infrastructure in areas that have the potential to bring back manufacturing businesses to the US, and more importantly we need to bring hope back to these areas by committing to balancing our trade relationships.  

We will know if this new policy is working in two ways: first, when we see a reduction of the trade deficit into more of a balance, and second, when we see mid wage manufacturing jobs begin to be sourced back to the United States.  Once these things happen, we will be a more balanced country, both economically and morally.