Trump needs some pro-growth voices in the White House.
The real reason the Keynesian tong dislikes Mr. Kudlow is that he disagrees with their assumptions. He thinks tax cuts that change incentives produce more growth than do government transfer payments. He thinks the Keynesian “multiplier” model that $1 in spending produces $1.70 in growth is nonsense, as do most people who didn’t get a Ph.D. at MIT or Princeton.
This is precisely why Mr. Trump could use Mr. Kudlow on his economic team. So far the President-elect has chosen economic and financial advisers who are blank policy slates or best known for their ardent anti-trade and immigration views. His selection Wednesday of economist Peter Navarro to run a new White House National Trade Council puts another protectionist in the senior ranks. Mr. Kudlow is a free trader, and it would be useful to have at least one inside the White House.
Mr. Trump’s liberal critics don’t mind appointees who agree with them on trade and spending. They dislike Mr. Kudlow because they fear his pro-growth policies, like Reagan’s, will succeed too well.
Donald Trump’s New Appointments Shake Up Trade, Regulation
“What Trump is trying to achieve is to show business in a lot of this country they aren’t going to be ruined by absurd regulation by bureaucrats.”
.. Mr. Icahn was an early backer of Mr. Trump and urged him to support efforts to let U.S. corporations bring home offshore cash and to end the carried-interest tax break that benefits many on Wall Street.
.. Mr. Icahn, who has spent the past four decades battling big companies as an activist investor, already has been wielding influence in the president-elect’s transition team. He is playing a central role in selecting the next chairman of the Securities and Exchange Commission, said people familiar with the matter
.. “Trump seems to want to run a flat organization with no real hierarchy, which leaves open the possibility of a lot of poles of power and tug-and-pull within the administration,” said Jeb Mason, a Treasury Department official in the George W. Bush administration. “This may leave everyone guessing about who holds ultimate sway.”
.. Several liberal economists said although they oppose many of Mr. Navarro’s policy ideas, he deserves credit for challenging both Democrats and Republicans to think differently about the costs of globalization.
.. He has written several books with provocative titles, including “The Coming China Wars” in 2008 and “Death by China: Confronting the Dragon—A Global Call to Action” in 2011, and struck up a correspondence with Mr. Trump several years ago after he saw an interview in which the New York businessman spoke approvingly of Mr. Navarro’s China analysis...Mainstream economists have taken a dim view of recent articles by Messrs. Navarro and Ross that characterize U.S. trade deficits as a drag on growth, which economists say present a flawed and confused view of elementary economic principles.“Peter Navarro, a friend, is just wrong,” Lawrence Kudlow, the CNBC commentator who advised Mr. Trump earlier this year on taxes, posted on Twitter before the election.
Responsibility for Lost Manufacturing Jobs to China
Sometime during the Clinton Administration, it was decided that an economically strong China was good for both the globe and the U.S. Fair enough. To enable that outcome, U.S. policy deliberately sacrificed manufacturing workers on the theory that a.) the marginal global benefit from the job gain to a Chinese worker exceeded the marginal global cost from a lost US manufacturing job, b.) the U.S. was shifting toward a service sector economy anyway and needed to reposition its workforce accordingly and c.) the transition costs of shifting workers across sectors in the U.S. were minimal.
As a consequence – and through a succession of administrations – the US tolerated implicit subsidies of Chinese industries, including national industrial policy designed to strip production from the US.
When Presidents Defy Economic Gravity, Gravity Usually Wins
Donald Trump is going to learn what his predecessors did: strong-arming a job revival is easier said than done
In fact, it’s become 10% cheaperto manufacture in Mexico thanks to the plunge in the peso that followed his election.
.. when Mr. Obama imposed tariffs on Chinese tires in 2009: Chinese imports plummeted while other countries’ jumped. The action saved at most 1,200 jobs, a study by the Peterson Institute for International Economics found, at a cost to consumers of $900,000 per job because of higher prices.
.. The gas furnaces Carrier builds in Indianapolis are a low-tech product in which the U.S. has no comparative advantage, in contrast to the sophisticated aircraft engines that Carrier’s affiliate, Pratt & Whitney, builds in Connecticut for which it plans to add 8,000 jobs in coming years.
.. “I was born at night but it wasn’t last night,” Chief Executive Greg Hayes told CNBCMonday. When United Technologies bids for its next Pentagon contract, wouldn’t it want last week’s deal weigh in its favor? And if a competing bidder has outsourced jobs, wouldn’t United Technologies want that to count against it?
.. Virtually every business that locates in Puerto Rico gets its own tax break, with the result that the effective corporate tax rate is a pitiful 5%
.. If Mr. Trump really wants to boost manufacturing employment he would figure out how to train workers to fill some of the 334,000 manufacturing jobs that are now vacant. If he doesn’t have the patience for that, he should just raise tariffs across the board. It would hurt consumers and could start a trade war, but at least they’d be transparent.