Economists Debate Trump's Economic Vision For The U.S.
STEVE INSKEEP, HOST:
Let's ask how President-elect Trump's transition moves clarify his economic plans. The president-elect has been promising big change, though he will inherit an economy delivering better results than many had predicted. So let's talk it through. Peter Morici teaches at the University of Maryland. He's a conservative economist. Welcome back.
PETER MORICI: Nice to be with you.
INSKEEP: And he's here once again with Jared Bernstein, who was chief economist to Vice President Biden and also wrote the book "The Reconnection Agenda." Glad to reconnect with you, Jared.
JARED BERNSTEIN: Thank you.
INSKEEP: Glad you're both here. So, Peter, let me let you start. Unemployment is the lowest in years - 4.6 percent. Wages are finally climbing, but the president-elect described the situation as a disaster. Does the country really need drastic economic change right now?
MORICI: Well, the country does need economic change. We've only been growing at a slow 2 percent. And the reason the unemployment rate is so low is because so many people have opted out of the labor force. It would be beneficial if we could get wages moving a little bit more quickly and we could create, say, 250,000 jobs a month instead of 170.
INSKEEP: And do you feel you see how the president-elect is going to do that?
MORICI: Well, I know how he's going to try. We're going to get a Republican-style tax cut. We're going to roll back regulation. And in some vague way, we're going to get tough on trade. It's going to be very interesting to see how he quite does that, but more to be written.
INSKEEP: Jared Bernstein, can this work?
BERNSTEIN: Well, first of all, I think the economy is doing much better than the word disaster would imply. I mean, the 4.6 percent unemployment rate, a 9-year low, is as Peter suggested somewhat depressed by low labor force participation. But in fact, we've been creating jobs at a healthy clip, such that the Federal Reserve is getting ready to raise interest rates because they think the economy's growing too quickly. I think that would actually be a mistake, but we definitely are closing in on full employment.
So will it work? Look, tax cuts and the deregulatory agenda, we've tried that before. And all that does is exacerbate this inequality problem because these tax cuts give, in the Trump case, 300,000 in tax cuts to the top 1 percent and $900 to the middle class. So they do that. Meanwhile, the deregulatory agenda is just the type of thing that inflates these bubbles we've been having trouble with.
INSKEEP: Peter Morici, you look skeptical as he's giving these points.
MORICI: Well, I mean, we have to look at the cycle of tax cuts we had. Reagan cut taxes on everybody and Clinton raised them mostly on upper-income individuals. Bush, the second Bush, cut taxes for everybody and Obama raised them mostly on upper-income individuals. So we have a tax structure that is much more skewed towards taxing the wealthy than we did, say, 30 years ago. It's hard to avoid if you're going to have tax cuts to create growth, giving wealthy people more of the benefits.
Now, we have been through this before, right? And we cut taxes, we deregulated all that business, right? And with Reagan we had 4.5 percent growth. From Reagan to Clinton, we had 3.5 percent growth. Obama Bush, - 2.2 we Do need a change in direction.
INSKEEP: Well, let me ask about the regulatory side of this because the president-elect has let it be known that his choice for the Environmental Protection Agency is the Oklahoma Attorney General Scott Pruitt. He's a skeptic of human-caused climate change. He's a harsh critic of regulations on carbon emissions and so forth. So he's against regulation, I get that part. But before...
MORICI: Well, he's against foolish regulation.
INSKEEP: ...Before the election I was in the poorest county in North Carolina. And it's a place that is regularly flooding now in ways that may very well be linked to climate change. And it's not good for people to be constantly flooding. I mean, I have to ask if setting aside concerns about climate is really going to be good for people on the bottom economically.
MORICI: Well, I think we have to have a reasonable climate change program. And what we're seeing here is a course correction. The EPA got very extreme and now the pendulum is swinging back.
INSKEEP: Is it a course correction or just saying climate isn't a problem and going to ignore it? I mean, is that...
MORICI: I don't - I cannot apologize for that for you. I'm not going to support that position. And asking me to do so is silly 'cause it's never been a position I've embraced.
MORICI: A change is a real problem. However, cutting back CO2 emissions in the United States with China adding another Japan every two years, I mean, not having meaningful...
INSKEEP: You mean in terms of the amount of climate...
MORICI: ...Commitments really isn't going to solve the problem. Until we really have a China policy that requires them to toe the line on climate change among a plethora of other issues, we're not going to get much by cutting down fossil fuel use in the United States.
BERNSTEIN: I think this is way - I think you're this much too complicated. If you look back at what George W. Bush did when he got elected - by the way, the last guy to win the presidency without the popular vote. What you see there is a deregulatory...
INSKEEP: I see how you dropped that in there, by the way. Go on.
MORICI: He had to get that...
INSKEEP: He got it in, got it in.
BERNSTEIN: Well, the reason I do that, it's not just arbitrary. It's that this is - these folks are acting on a really - an illegitimate mandate in my view. And...
MORICI: No, it's legitimate. It's not illegitimate.
BERNSTEIN: ...Hold on, wait, let me finish, Peter. So and what you see in the George W. Bush years was these very big high-end tax cuts and a deregulatory agenda including climate and financial markets. Now, what did you end up with? In the case of financial markets, you ended up with a massive housing bubble inflated by this deregulated finance and our budget deficit was massively disadvantaged by these high-end tax cuts. We're looking at precisely the same economic policies now. And the thing about Trump which is interesting is he's dangling the keys over here with things like the Carrier plant and now, you know, the Air Force One being too expensive and getting lots of attention for these, you know, sort of sideshows and these optical things, where this is a very damaging economic agenda and let's not overlook that.
INSKEEP: Is this a fact that that cutting taxes and spending more infrastructure and other things that the president-elect wants to do will explode deficits? Is that just basic math? Peter.
MORICI: Well, I think it depends on how much you cut taxes. I don't think we can have the kind of tax cut package that he campaigned on. However, I think we need to reform the tax structure so it's more reasonable and people spend less time gaming it and more time focused on being productive.
INSKEEP: I want to give you each about 30 seconds to answer one other thing. We had the libertarian economist Tyler Cowen on the other day who complained about crony capitalism by the president-elect, calling out individual companies, demanding things from them that he wants in a way that has - have no rules to it that seem to reinforce his power. Is the president-elect engaging on his way to crony capitalism? Jared, you get 20, 30 seconds here.
BERNSTEIN: Sure. This is - yeah. I mean, it is in the sense that this is not a systemic kind of approach to the downsides of trade or globalization and thereby it won't work. If you essentially go around and cherry pick this company that gets a check and that one that gets a check to bribe them to keep jobs here, that's not a systemic approach.
INSKEEP: Peter, you get the last word.
MORICI: We need systemic change. I agree with Jared on that. And I think the Carrier issue we don't want to see repeated over and over again. It's not crony capitalism. It's just selective incentives. But rather, what it is is a signal. You know, companies like Apple know if they don't do - invest in China, China will violate their intellectual property, make it difficult for them to sell their phones and so forth. Now what the president is saying is if you don't invest in America, you're going to have problems here, too.
INSKEEP: Peter Morici, thanks very much for coming by. He's with the University of Maryland. Also Jared Bernstein of the Center on Budget and Policy Priorities. Thanks to you as well.
BERNSTEIN: Thank you.
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