STACEY VANEK SMITH, HOST:
Hello, and welcome to PLANET MONEY. I'm Stacey Vanek Smith.
JACOB GOLDSTEIN, HOST:
And I'm Jacob Goldstein. We are working on a few shows about the election of Donald Trump. For today though, we wanted to capture a little bit of what's happened in the economy just in the past 24 hours. It has been a, you know, it's been a crazy day - right? - a very surprising 24 hours.
So for the show today, we are bringing back the PLANET MONEY indicator. This is something we used to do on the show. It's where we take a number from the news and try and unpack it a little bit.
VANEK SMITH: Today's show is three indicators. That is three numbers that tell part of the story of what a Trump presidency will mean for the U.S. economy and for the world.
So, Jacob, our first economic indicator - 5 percent. That is how much the S&P 500 dropped last night when it started to look like Donald Trump had won the U.S. presidency.
GOLDSTEIN: Yeah. And so the S&P 500, that's the U.S. stock market. The stock market itself is closed in the middle of the night, but there's this overnight futures trading. But the bottom line is this measure that tracks the stock market, it was tanking.
VANEK SMITH: Michael Farr was watching this all go down from his house in Florida. He is the head of investment firm Farr, Miller & Washington.
MICHAEL FARR: When it started to become clear that we were not going to have President-elect Clinton and we were going to have President-elect Trump, the markets and futures markets fell. And at midnight last night, the sentiment was sell everything you ever owned and moved to Canada.
VANEK SMITH: There are a couple reasons this was happening. The first thing is just that the markets don't like it when something unexpected happens. Clinton was expected to win. And a Trump victory meant all kinds of things the market hadn't really planned on.
GOLDSTEIN: Trump had said all of these really extreme, just erratic things during the campaign. You know, at one of the debates on national TV, he threatened to lock up Hillary Clinton. And, of course, he talked about dissolving trade deals with other countries and starting something like a trade war with China.
VANEK SMITH: So it's 3 o'clock in the morning, and all around the world people are kind of panicking. Futures markets are way down.
GOLDSTEIN: And then Trump comes on TV to give his victory speech. And Michael is watching.
(SOUNDBITE OF ARCHIVED RECORDING)
DONALD TRUMP: Hillary has worked very long and very hard over a long period of time. And we owe her a major debt of gratitude for her service to our country. I mean that very sincerely.
FARR: It was conciliatory. It was statesman-like. It was gracious toward Secretary Clinton. It was inclusive. It was a very good moment for him, where he actually appeared presidential. And the futures, as he was speaking, started to rise.
(SOUNDBITE OF ARCHIVED RECORDING)
TRUMP: Now it's time for America to bind the wounds of division, have to get together.
GOLDSTEIN: And Michael says, for investors, there was one other line in Trump's speech that was especially important.
(SOUNDBITE OF ARCHIVED RECORDING)
TRUMP: I want to tell the world community that while we will always put America's interests first, we will deal fairly with everyone, with everyone - all people and all other nations.
VANEK SMITH: Michael says that speech changed everything. By the time trading started this morning, the markets were up. The entire drop had been erased. But there is still this question hanging over everything.
GOLDSTEIN: So is the question now, like, is President Trump going to be the statesman he appeared to be in the victory speech last night, or the candidate he was that was less statesman-like and that made the markets drop?
FARR: Please answer that question for me and everybody else in America. 'Cause we're all on the edge of our seats, aren't we? I mean, that's the question. That's what we all want to know. Will the real Donald Trump please stand up?
GOLDSTEIN: So I think this could mean that we may be just one erratic speech away from another huge drop.
(SOUNDBITE OF MUSIC)
VANEK SMITH: Jacob, you have our next indicator?
GOLDSTEIN: I do. Our next indicator is 20. As of right now - it's Wednesday afternoon - it takes 20 Mexican pesos to buy one U.S. dollar. We talked about this with Ana Aswada (ph). She's an analyst at a bank in Mexico called Banco BASE.
VANEK SMITH: And she told us a few months back people started noticing something. The peso was tracking the polls of the U.S. election.
ANA ASWADA: When Donald Trump started to do well in the polls, then the Mexican peso started to get weaker.
VANEK SMITH: And when Hillary Clinton did better in the polls, the peso got stronger.
GOLDSTEIN: That's because people were looking at Trump's trade policies like getting rid of NAFTA, the trade deal between the U.S. and Mexico.
VANEK SMITH: Right. In one of the debates I think he called it the worst deal ever.
GOLDSTEIN: Yeah. So people heard him say this and they thought, oh, if Trump wins, this is going to be bad for Mexico. And, you know, the fact that the peso was falling clearly means that people believed that Trump would do what he said he was going to do.
ASWADA: Everything he has said about the NAFTA, it's bad for the economy. So, yeah, I mean, there's foreign money but it's going to just get out of Mexico.
GOLDSTEIN: And when that foreign money gets out of Mexico, the peso gets weaker.
VANEK SMITH: Last night, Ana left the office, went home and watched the U.S. election results roll in on her TV. She saw that Trump was going to win. And she felt like millions of other people in Mexico who were watching the results.
ASWADA: I was feeling disappointed and worry about the future, that's what's going to happen.
GOLDSTEIN: What's going to happen to Mexico?
GOLDSTEIN: Unlike millions of other people in Mexico, Ana also pulled out her phone to check the currency markets.
ASWADA: And then I saw how the Mexican peso was getting weaker on my cellphone.
GOLDSTEIN: As Ana's sitting there watching TV and checking her phone late at night in Mexico, traders in Asia are frantically selling pesos. In fact, the value of the peso fell by about 10 percent overnight. That is the biggest fall in 22 years according to Reuters. Ana says if Trump does everything he says he's going to do, Mexico may fall into a recession in the next year.
(SOUNDBITE OF MUSIC)
VANEK SMITH: Robert Smith, you have our final Trump indicator.
ROBERT SMITH, HOST:
I will take over Jacob's seat and deliver it to you. Our Trump indicator number four today - and I'm cheating a little bit here because it is not actually number for today, it's a number that is weighing heavy on the hearts and minds of investors today. And that number comes from Alan Cole, an economist from the Tax Foundation.
ALAN COLE: $1.5 trillion over 10 years.
SMITH: One-and-a-half trillion dollars over 10 years.
VANEK SMITH: And, Robert, I love this number because it represents an ongoing mystery about Donald Trump's tax plans that nobody has been able to solve.
SMITH: Not even a trained tax economist like Alan Cole, a man, I should say, who has shown the rare ability to intimidate Donald Trump a little bit, just a little bit.
VANEK SMITH: The story goes back to a simpler time - 2015. Donald Trump is a candidate that no one is taking very seriously, except the Tax Foundation.
SMITH: They are a nonpartisan group that basically runs the numbers on the candidates' tax plans.
COLE: I got assigned to Donald Trump 408 days ago.
SMITH: Not that he's counting.
VANEK SMITH: And at the time, Donald Trump was promising to cut taxes. Everyone gets a tax cut. You get a tax cut and you get a tax cut. The richest people in the country were going to get their taxes cut by more than a third.
SMITH: And Alan Cole's job was to add up how much all this tax cutting would cost the federal government. So he took all of everyone's income in the United States that you would expect over the next 10 years. He rejiggered the tax rates and looked at it, did the numbers. And - whoa - his final number looked like the biggest tax cut in history.
COLE: That number was $12 trillion.
SMITH: Did you recheck your math?
COLE: Oh, yeah. I looked at this - you know, I saw that number and I thought, well, that's really, really big.
SMITH: (Laughter) You thought maybe you added a zero somewhere?
VANEK SMITH: (Laughter) There's a lot of zeros.
SMITH: In order to pay for a $12 trillion tax cut, you would either have to borrow a lot of money, increase the national debt. Or you would have to cut government spending, something close to a quarter of the federal budget. Just 25 percent of the budget, just slashed right off the top.
VANEK SMITH: So Alan publishes this number. It is a huge news story. And first Trump tries to argue with it. Then he tries to ignore it. And then...
COLE: After getting criticism on that, he started to consider new things and throughout 2016 there were rumors of a smaller, more compact tax cut.
SMITH: You may be one of the few people in the world who has changed Donald Trump's mind on something.
COLE: I do think about that. But I think one thing about this is that on policy, he is perhaps more flexible than he gets credit for. And it's only when someone tells him something like his businesses are bad or his buildings are bad, then, you know, he will be very adamantly defending himself.
SMITH: He gets super upset with that, yeah, yeah, yeah. He gets personal.
VANEK SMITH: And goes on Twitter.
COLE: Yeah. I don't think he takes policy personally.
SMITH: And so Donald Trump came up with a new tax plan. A plan that would also make sure that he had the last laugh on Alan Cole.
VANEK SMITH: Just like the first plan, this new plan also cut taxes for just about every taxpayer. It is still very large. But the rich don't get quite as big of a tax cut. I mean, the richest people in the U.S. still do benefit the most from the Trump tax plan.
SMITH: Oh, yeah. I mean, the upper incomes are going to do very well under the Trump tax plan. But overall the cost of the plan is about half of the plan that he initially proposed.
VANEK SMITH: Although we're not entirely sure because Trump made it so that Alan Cole could not add up the total cost of the plan and publish one big number again. And he did this by starting to say two contradictory things.
SMITH: Yeah. When he would talk to small business groups, Trump would say, oh, I am going to cut the corporate tax rate. But not just for corporations, also for small businesses like you, mom and pop places that file very simple tax returns. He said you, you are going to get a big break just like the big corporations.
VANEK SMITH: And obviously small business people were really excited about this. But when asked about it later by reporters and tax analysts. Trump's team was like, no, no, no, we're not going to do that, not at all. Why would you even think that?
SMITH: We've been calling it Schrodinger's tax cut. It exists but it also does not exist at the same time. If you pick one or the other, it makes this huge difference in the budget. So tax revenues could go up or go down by that number that we picked as the indicator at the very beginning.
COLE: $1.5 trillion over 10 years.
SMITH: And that's a big gap.
VANEK SMITH: References to small business tax cuts were quietly removed from Trump's website a couple of months before the election. And reporters had a hard time getting a straight answer about whether or not it was still being considered.
SMITH: We are still watching for it. And if you want to watch for it too, you should know that these small businesses affected by the cut are technically called pass-through entities. Which is a weird saying, I know. It's about how their income gets taxed, passed through entities. But you might start to hear this term now that Trump is the president-elect.
VANEK SMITH: Or not, no one knows. Eventually if Trump wants to change the tax code, the idea will have to go through Congress. And Republicans control both houses so they might be open to the bigger tax cut option. Or they might decide to go with the smaller plan.
SMITH: Eventually someone is going to have to make a decision on Schrodinger's tax cut. They're going to have to pick one of the two options and actually write it down on paper.
COLE: Once things are written down in legislative tax, you can't have that ambiguity anymore. And that's something that they're going to have to wrestle with.
SMITH: And then finally, finally Alan can sit down and he can do the math.
VANEK SMITH: Thank you, Robert.
SMITH: You're welcome.
VANEK SMITH: We're guessing that you might have a lot of questions right now. Send them to us - email@example.com. You can also find us on Facebook and Twitter.
If you're looking for something to listen to that does not have to do with politics, check out All Songs Considered. It's a music podcast from NPR. They share the best new and upcoming music every Tuesday on the NPR One app or wherever you get your podcasts.
Today's show was produced by Sally Helm, with help from Elizabeth Kulas, Rayna Cohen (ph) and Alex Goldmark. I'm Stacey Vanek Smith. Thanks for listening.
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