Republicans’ Closing Argument: We Will Wreck the Economy. By Matthew Yglesias

The former president’s allies have used the final days of the campaign to argue for sharp spending cuts that would harm millions of Americans.

November 3, 2024 at 1:00 PM UTC

By Matthew Yglesias

Matthew Yglesias is a columnist for Bloomberg Opinion. A co-founder of and former columnist for Vox, he writes the Slow Boring blog and newsletter. He is author of “One Billion Americans.”

In the closing days of the presidential campaign, Donald Trump’s allies suddenly have a new message: The US needs sharp, immediate and ill-defined spending cuts.

Elon Musk, who’s been talking about immigration for more than a year, now says he’s going to oversee $2 trillion in reductions. That’s a third of the federal budget, so you’d think there might be some kind of plan for what this involves, but all Musk would say last week is that “temporary hardship” will be involved. What kind of hardship? Well, House Speaker Michael Johnson let it be known last week that “health care reform’s going to be a big part of the agenda” if Trump wins, including a “very aggressive” attempt to repeal the Affordable Care Act. Hedge fund billionaire John Paulson, a Trump supporter, also weighed in last week about the need for steep cuts.

All of this amounts to an implicit admission that Trump’s policy agenda is an unworkable fraud, and that virtually everything he and his team have said or done over the course of the campaign has been about avoiding discussion of the concrete stakes at issue.

Start with the present. The US economy is performing generally very well, with GDP growth ahead of projections made before Covid happened and Joe Biden became president. Unemployment is low. Inflation has returned to a normal level. But interest rates are undesirably high, as is the current federal budget deficit. And it’s hard to reduce both of them at the same time, especially with an aging population.

Into this mix both Trump and Kamala Harris have offered proposals that would make the deficit larger rather than smaller. This is not ideal. But there’s a huge gap between the campaigns — Trump would add twice as much debt as Harris.

That’s a Lot of Debt

Even this understates the contrast. Not only do Trump’s proposals add trillions in new debt, they do so even though several of his tax ideas would mechanically force cuts in Social Security benefits. In fact, one analysis suggests that his tariff plans would lead to higher taxes for about 80% of the population. Cutting Social Security benefits and raising net taxes on most people and adding over $7 trillion in new debt — it is a genuinely reckless approach, reflecting the huge scope of the tax cuts Trump has promised the highest-income minority of Americans.

Trump’s Economic Plans Would Hurt the 99%

For most Americans, Trump’s proposed tariffs would erase any gains in income made from the extension of his tax cuts

Since announcing his candidacy two years ago, Trump has masterfully avoided any prominent discussion of the actual implications of these ideas. Instead, he has tossed out an endless stream of chaff about migrants eating pets and various low-content publicity stunts.

As Election Day approaches, however, Trump’s supporters in the business community seem to have realized that his proposals are unworkable and would wreak havoc on the financial system. The only way to make the numbers add up is to pair higher taxes on the bottom 80% with big cuts in programs such as Social Security, Medicare, Medicaid, food stamps, federal aid to education, and so forth. The exact balance of such cuts is unclear, though Johnson is clearly interested in cutting health programs.

In short, the Trump agenda involves higher taxes on the working class and lower spending on the very programs they rely on, both in order to finance huge tax cuts for the likes of Musk and Paulson.

Openly admitting this a week before Election Day would be a mistake. But the political risk for Trump’s business backers was that the campaign was doing too good a job of hiding the ball. By making their comments at the last minute, they can have it both ways: Ensure that the dire consequences of Trump’s proposals don’t dominate the campaign, and then pretend to have secured a mandate for drastic change if Trump wins.

This gambit has been the central bait-and-switch of Trump’s campaign.

Throughout his third presidential run, Trump has promoted the idea that putting him back in office would restore the economic conditions of 2019. Those conditions had badly deteriorated, of course, by the time he left office: Covid happened. But Trump has managed to convince many voters that not only is he blameless for anything that happened in 2020, but that the pandemic is irrelevant to the higher inflation and interest rates the US has experienced since Covid.

This is just not true. The US economy rode out the pandemic, under both Trump and Biden, with a high degree of success. But the cost of that achievement was a significant increase in America’s debt.

The policy formula that Trump applied back in 2017— lower taxes plus higher domestic spending plus higher military spending — won’t work in 2025. Mass deportation would make it harder to finance this debt, not easier. There is no easy or painless solution to contemporary fiscal problems, but insisting on trillions of dollars in tax cuts for the richest Americans makes all the remaining options much more dramatic and painful.

Even Musk is admitting that Trump’s policies would result in living standards for most people going down, not up. This “temporary hardship,” he advises, will lay the groundwork for stronger long-term growth.

But why? The basic growth trajectory of the US economy has improved over the five years. The grumpy mood in the electorate is about the genuinely painful short-term dislocations of first the virus, then the post-Covid inflation, then the Federal Reserve’s interest rates hikes.

All of these problems are currently getting better. Say what you will about Trump’s moral decrepitude — and I have — but from an economic policy standpoint, the biggest defect of Trump’s campaign is simple: He is proposing shock therapy on a patient who is thriving.