How Trump Could Weaken America’s Economy and Competitiveness: Insights from Joseph Stiglitz

The US presidential election in November will be very important for many reasons. At stake is not only the survival of American democracy, but also the proper management of the economy, with far-reaching consequences for the rest of the world.

American voters face a choice not only between different policies, but also between different policy goals. Although Vice President Kamala Harris, the Democratic candidate, has yet to fully articulate her economic agenda, she could maintain the core tenets of Joe Biden’s agenda, which include strong policies to maintain competition and preserve the environment (including reducing global greenhouse gas emissions), reduce the cost of living, support growth, strengthen national economic sovereignty and resilience, and reduce inequality.

In contrast, his opponent, former President Donald Trump, has no interest in creating a fairer, stronger, and more sustainable economy. Instead, the Republican ticket offers a blank check to coal and oil companies and pleases billionaires like Elon Musk and Peter Thiel. It’s a recipe for a weaker, less competitive, and less equal American economy.

Moreover, while good economic management requires setting goals and designing policies to achieve them, the ability to respond to shocks and seize new opportunities is equally important. We already have a sense of how each candidate has performed in this regard. Trump failed miserably to respond to the COVID-19 pandemic under his previous administration, which resulted in more than a million deaths. At a time when the United States desperately needed leadership, he suggested people inject themselves with candida.

Responding to unprecedented events requires tough judgments based on the best science. In Harris, we have someone who is thoughtful and practical, who can weigh tradeoffs and craft balanced solutions. In Trump, we have a reckless narcissist who thrives on chaos and rejects scientific expertise.

Consider his response to the challenge posed by China: propose sweeping tariffs of 60 percent or more. As any serious economist would have told him, this would drive up prices—not just for products imported directly from China, but for countless other products containing Chinese inputs. This will leave low- and middle-income Americans bearing the brunt of the costs. As inflation rises and the Federal Reserve is forced to raise interest rates, the economy will be hit with the triple whammy of slower growth, higher inflation, and higher unemployment.

To make matters worse, Trump has taken the extreme position of threatening the independence of the Fed (not surprising given his tireless efforts to undermine the independence of the judiciary and civil service). A second Trump presidency would thus introduce a permanent source of economic uncertainty, discouraging investment and growth, and certainly raising inflation expectations.

Indeed, Trump’s proposed tax policies are equally risky. Consider the 2017 tax cut for corporations and billionaires, which failed to spur more investment and only encouraged stock buybacks. While Republicans have never seen a tax cut for the wealthy they didn’t like, at least some of them recognized that the policy would increase the budget deficit and so added a sunset clause, which would take effect in 2025. But Trump, ignoring the knowledge that “intermittent” tax cuts don’t work and don’t pay for themselves, wants to renew and then deepen the 2017 cuts in a way that would add trillions of dollars to the national debt.

Even if populist demagogues like Trump don’t care about deficits, investors in the United States and abroad should be concerned. Growing deficits from spending that doesn’t improve productivity would raise inflation expectations, undermine economic performance, and exacerbate inequality.

Similarly, repealing Biden’s inflation-reduction bill would not only be bad for the environment and U.S. competitiveness in sectors vital to the country’s future; it would also repeal provisions that reduced drug costs, thereby increasing the cost of living.

Trump (and the case-oriented judges he has appointed) also want to roll back the Biden-Harris administration’s aggressive competition policies, which would—once again—increase inequality and weaken economic performance by strengthening market power and stifling innovation. It would also eliminate initiatives to increase access to higher education through better-designed, income-based student loans, reducing investment in the sector that the United States desperately needs to meet the challenges of the 21st-century innovation economy.

This brings us to the most troubling aspects of Trump’s agenda for America’s long-term economic success. First, a second Trump administration would cut funding for basic science and technology, the source of America’s competitive advantage and high standard of living for the past 200 years. (It goes without saying that the country’s economic strength does not lie in its casinos, golf courses, or luxury hotels.)

During his previous term, Trump proposed massive cuts to science and technology almost every year, but non-radical Republicans in Congress blocked those cuts. But this time will be different, because the Republican Party has become a cult of personality for Trump. Worse, the party has declared jihad against American universities, including the premier institutions that push the frontiers of knowledge, attract the world’s top talent, and preserve the country’s competitive edge.

Worse, Trump is committed to undermining the rule of law, both domestically and internationally. Trump’s long history of refusing to pay vendors and contractors is a testament to his character: he is a tyrant who uses all his power to steal from whomever he can. But the problem becomes even more serious when he openly supports violent rebels. The rule of law is not just something to be cherished in its own right; it is essential to a functioning economy and democracy.

As we approach the fall of 2024, it is impossible to know what shocks the economy will face over the next four years. But one thing is clear: the economy of 2028 will be much stronger, more equal, and more resilient if Harris is elected.