Thursday, September 13, 2018

Interview from the Archive: Brad DeLong says he is glad Donald Trump has "less power over the economy than a CEO has over a company"

Editor's note: This article was originally published on March 17, 2017.

This is the final article of my discussion with J. Bradford DeLong. The first and second pieces are available. 
Story by Joseph Ford Cotto
"A strong majority of Americans say the U.S. economy is running strong, and most believe the upward trend will continue under President Trump, according to a Harvard-Harris poll," The Hill's Jonathan Easley wrote last month. 
He went on to mention that this "survey found that 61 percent view the economy as strong, against 39 percent who say it is weak.
"A plurality, 42 percent, said they believe the economy is on the right track, versus 39 percent who said it is on the wrong track." 
The economy was viewed largely along partisan lines; with Trump voters optimistic about it and Clinton supporters feeling quite different. Regardless of whichever side one should fall on, or perhaps neither, it is difficult to deny that great discord over our nation's economic future led to our present political quagmire.
Support for Bernie Sanders and the Donald did not rise out of nowhere, after all.In such turbulent waters as these, it is important to seek the guidance of a wise, seasoned captain. Insofar as the sea of dollars and cents is concerned, J. Bradford DeLong is just that fellow.
He is "a professor of economics at UC Berkeley, a weblogger for the Washington Center for Equitable Growth, a research associate of the National Bureau of Economic Research, and former deputy assistant secretary of the U.S. Treasury in the Clinton administration .... He also writes the weblog "Grasping Reality":," as DeLong's U.C.B. biography explains. 
Dr. DeLong recently spoke with me about many topics relative to our nation's economy. Some of our conversation is included below.

Joseph Ford Cotto: In small, prosperous places such as Bermuda and the Cayman Islands, there is no income or fair tax. Rather, taxes are levied on imports and -- generally speaking -- personal assets (though it should be noted that the Caymans tax not even these). Could America seriously replicate their policies and apply them across the fruited plains? 

Dr. J. Bradford DeLong: Bermuda and the Caymans are places that make their money by supplying financial services to the rich that allow them to "avoid" taxes (i.e., it's legal in the eyes of other governments) or "evade" taxes (i.e., it's not legal in the eyes of other governments). Bermuda and the Caymans can prosper this way. Larger countries cannot. Such countries are not producing wealth, but rather enabling upward redistributions of it—not positive sum but zero sum, or less than zero sum.

Cotto: The Donald Trump Administration promises many changes to federal politics. Do you believe that his economic proposals, generally speaking, will bring typical Americans higher wages?

DeLong: The value of the shares of DJT went from $15 in 1995 to $1.60 in 2005, when it declared its first bankruptcy. Losing essentially all of your shareholders money while running part of a government-sponsored casino oligopoly in New Jersey is a performance that is amazing on many levels. 

Now all Americans--including not just the 60 million of you who voted for Trump but the 63 million of us who voted for Clinton--are along for the ride, just as the shareholders of DJT were. We should expect to be treated the same, and for the outcome to be the same. Fortunately, a president has much less power over the economy than a CEO has over a company.

Cotto: A few years ago, certain political forecasters claimed that the future of America's center-right belongs to free traders. Since the 2012 presidential election, protectionism has surged in both major parties. Now, in the age of Trump, free trade's once-ascendant nature seems a distant memory. Would you say that free trade has any serious potential under Trump?

DeLong: Trade in goods will be--probably--a little bit smaller as a share of goods production in the future than it has been in the recent past. But trade in services and ideas will be a larger share--the technological tide making it easier to talk across national borders is still roaring forward. And international investment will be an even bigger deal: more and more, the world's rich will be desperate to spread their money out in order to reduce the risks of being caught and bankrupted by some clown's trade, business cycle, immigration, or nationalistic policies. And the U.S. as a financial hub will get a very large share of the business of making that happen. Think of the future as being one of less-free trade but freer and larger finance.

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