Donald Trump's Bad Policies May Result From Too Much Reading

The conventional wisdom among pundits and media members is that Donald Trump's highly limited policy knowledge renders him totally unequal to the job of President of the United States. As a recent op-ed explained it, "Trump is epically unprepared to be president. He has no realistic policies, no advisers, no capacity to learn." A Google search of "Donald Trump" and "Policy knowledge" gifts the sleuth with over 26,000 results; most of them sneering headlines from media members seeking to outdo one another when it comes mocking The Donald's apparently limited knowledge of just about everything.

So while Trump's views on trade, currency policy and immigration surely leave a great deal to be desired, it says here that Trump's policy naiveté is possibly a result of the presidential hopeful having read too much. In particular, Trump's much commented on know-nothingness is arguably a function of his having read all too closely the economic analyses of some of the media and economics profession elites who ironically view him with aggressive disdain.

To see why it's all a bit ironic, consider the "trade deficits" that have Trump so spooked. He says they're a sign of the U.S.'s declining economic prospects. But so does Ben Leubsdorf of the Wall Street Journal. In an article last week titled "Trade Seen Weighing on Growth," Leubsdorf wrote of a "widening trade gap holding down broader growth." More specifically, a 2.6% increase in the "trade deficit" will in Leubsdorf's analysis "act as a break on the U.S. economy." J.P. Morgan economist Daniel Silver apparently agrees with Leubsdorf; Silver telling Leubsdorf that "We're still seeing a trade drag" on overall economic growth.

Back to reality, an economy is just a collection of individuals. For individuals the "trade deficits" that discourage Leubsdorf, Silver and Trump are the rewards we individuals all pursue in our daily lives. The bigger our individual trade deficits the more prosperous we are. Figure we run "trade surpluses" with our employers who pay us for our toil, and then as a reward for our hard work we run "trade deficits" with our favorite restaurants, clothiers, and carmakers.

Rich cities full of the world's most talented and successful people like London, Hong Kong and New York City import enormous amounts on the way to some of the world's largest trade "deficits." Conversely, poor cities like Port-au-Prince, Quito and Kinshasa suffer trade surpluses thanks to a lack of production that doesn't rate much in the way of imports at all. Among individuals, all trade balances. Those who produce a lot import a lot. To import - from across the street and around the world - is the purpose of our individual production.

Why the "deficits" in trade that have so many so confused? The answer there is fairly simple. Americans are so incredibly productive that their daily work is a magnet for investment from around the world. More specifically, one of the biggest American exports is shares in U.S. companies. Importantly, our voluminous export of company shares (a bullish signal of a "winning" U.S. economy if there ever was one) doesn't count in the calculation of the worthless trade balance, while our import of low-margin goods like shoes, socks and t-shirts does. Still, all of this balances by definition. Not only are trade "deficits" a sign of individual prosperity, the imbalance that has Trump (if he's as rich as he says he is, Trump runs massive trade deficits) and others so others so up in arms is a bullish sign that the U.S. is the most popular investment destination in the world.

On the subject of currencies, Trump sees devaluation as the path to prosperity. So does Greg Ip at the Wall Street Journal. "As Dollar Falls, Global Economy Perks Up (Thanks Fed)" was the title of his column last week. In it Ip pointed to the "dollar's slide" as a sign that the "worst threats" to the U.S. and world economy have receded. Considering the views of actual economists, the IMF is full of credentialed theorists who regularly tout devaluation as a driver of growth. The IMF's near-constant answer for a country struggling economically is currency devaluation. Economists almost unanimously support devaluation as a cure given the broad view inside the profession that devaluation lowers the prices of exports, thus making them easier to sell.

Who cares that investment in productivity enhancements is easily the biggest driver of lower prices, but that devaluation logically makes investment much less likely? Who cares that devaluation renders the imported inputs that go into manufacturing any good much more expensive, not to mention the impact of devaluation on labor and shipping costs that must rise as the currency falls? To economists, economics reporters and candidates like Trump, currency devaluation is the pre-requisite for economic growth.

What about immigration? According to Trump's website, "The influx of foreign workers holds down salaries, keeps unemployment high, and makes it difficult for poor and working class Americans - including immigrants themselves and their children - to earn a middle class wage." Translated, Trump decries extra "hands" that allegedly hold down wages. Yet so do top economists if the Wall Street Journal is once again to be believed. As the newspaper reported in February of 2015 about the rise of robots, some of the U.S.'s top economists "wonder if automation technology is near a tipping point, when machines finally master traits that have kept human workers irreplaceable."

Lest we forget, washing machines, ATMs, cars, computers, and the internet are robots of a different kind. Each has rendered all sorts of work obsolete for electronic hands replacing human ones, but the rise of automation has hardly consigned Americans to bread lines. Quite the opposite. The replacement of work by automation and immigrants frees up labor and investment on the way to the creation of new forms of work. Whether human or robotic, the more the merrier in terms of job growth and wages. Figure wages are a function of investment, so if immigrant workers and robots hold down some labor costs, they as a rule boost the profits that are a magnet for the very investment that creates higher-paying new jobs. Yet Trump and at least some top economists view extra human and work-replacing automation capital as an enemy of the existing labor pool.

What this hopefully reminds Trump's most vocal critics is that while his economic policy ideas tend to be really bad, he's generally spouting the same nonsense that any reader can pick up each day from economists and columnists in some of the world's most prominent newspapers. The media would give the reader the impression that Trump's confused about policy, and while true, those same media members might look in the mirror when trying to divine the source of his confusion. His misunderstandings arguably spring from him reading their work too closely, along with the economists they quote.