What is your professional opinion of Donald Trump's proposed economic policies, which clearly embrace neoliberalism and all sort of shenanigans for the rich but oppose global "free-trade" agreements, and what do you expect to happen when they collide with Ryan's austerity budget?
Mr. Trump's plan for American economic revival is still vague, but, as far as I can tell, it has two main planks -- making American corporations create more jobs [at] home and increasing infrastructural investments.
The first plank seems rather fanciful. He says that he will do it mainly by engaging in greater protectionism, but it won't work because of two reasons.
First, the US is bound by all sorts of international trade agreements -- the WTO, the NAFTA, and various bilateral free-trade agreements (with Korea, Australia, Singapore, etc.). Although you can push things in the protectionist direction on the margin even within this framework, it will be difficult for the US to slap extra tariffs that are big enough to bring American jobs back under the rules of these agreements. Mr. Trump's team says they will renegotiate these agreements, but that will take years, not months, and won't produce any visible result at least during the first term of Mr. Trump's presidency.
Second, even if large extra tariffs can somehow be imposed against international agreements, the structure of the US economy today is such that there will be huge resistance against these protectionist measures within the US. Many imports from countries like China and Mexico are things that are produced by -- or at least produced for -- American companies. When the price of iPhone and Nike trainers made in China or GM cars made in Mexico go up by 20 percent, 35 percent, not only American consumers but companies like Apple, Nike and GM will be intensely unhappy. But would this result in Apple or GM moving production back to the US? No, they will probably move it to Vietnam or Thailand, which is not hit by those tariffs.
The point is that, the hollowing out of American manufacturing industry has progressed in the contexts of (US-led) globalization of production and restructuring of the international trade system and cannot be reversed with simple protectionist measures. It will require a total rewriting of global trade rules and restructuring of the so-called global value chain.
Even at the domestic level, American economic revival will require far more radical measures than what the Trump administration is contemplating. It will require a systematic industrial policy that rebuilds the depleted productive capabilities of the US economy, ranging from worker skills, managerial competences, industrial research base and modernised infrastructure. To be successful, such industrial policy will have to be backed up by a radical redesigning of the financial system, so that more "patient capital" is made available for long-term-oriented investments and more talented people come to work in the industrial sector, rather than going into investment banking or foreign exchange trading.
The second plank of Mr. Trump's strategy for the revival of the US economy is investment in infrastructure.
As mentioned above, the improvement in infrastructure is an ingredient in a genuine strategy of American economic renewal. However, as you suggest in your question, this may meet resistance from fiscal conservatives in the Republican-dominated Congress. It will be interesting to watch how this pans out, but my bigger worry is that Mr. Trump is likely to encourage "wrong" kinds of infrastructural investments -- that is, those related to real estate (his natural territory), rather than those related to industrial development. This not only will fail to contribute to the renewal of the US economy but it may also contribute to creating real estate bubbles, which were an important cause behind the 2008 global financial crisis.
