Donald Trump's Three Problems

Donald Trump has three big problems, two of his own creation, one created by a ticking time bomb that Obama is leaving for him.

The first is his deal with Carrier—keep in the U.S. some although not all of the jobs the company was planning to move to Mexico, and we will arrange tax subsidies by the state of Indiana, repeal regulations you don't like, keep in mind your "cooperation" when doling out government contracts, and who knows what else. Carrier is to keep in Indiana about 800 of the 2,100 jobs it was planning to move to Mexico, in return for a subsidy of seven million dollars from Indiana's taxpayers. To make the deal look good— "1,000 jobs saved" is a lot better headline than "more than 60 percent of Carrier jobs to move to Mexico"—Carrier agreed to leave in Indiana 300 R&D jobs that it had no intention of taking south. Seven million dollars to buy 800 jobs comes to less than $9,000 per job, not a bad deal as these things go, especially since some of it will be recovered from taxes on the wages of the workers whose jobs are saved. Better still, the beneficiaries know who they are, and are publically and appropriately thankful to Trump, while the taxpayers bearing the cost won't hardly notice. And if they do, Mike Pence's successor will have to explain it all to them.

A decent deal but a rotten precedent. Trump threatened other companies with "consequences" if they take jobs abroad. Board rooms around the country are being entertained with Power Point presentations, "How To Turn A Credible Threat Of Plant Closure Into A Nice Subsidy." That long-time opponent of government interference in free markets, socialist senator Bernie Sanders, commented in a Washington Post op-ed, "He has signaled to every corporation in America that they can threaten to offshore jobs in exchange for business-friendly tax benefits and incentives." Indeed. But conservative Republican Mike Pence had a response to his socialist adversary, "The free market has been sorting it out and America's been losing," to which Trump added his amen, "Every time, every time."

Trump's second self-made problem comes from the combination of his plan to cut taxes, increase military spending, maintain spending on key entitlements, spend $1 trillion on infrastructure, all the while reducing the deficit. It would take a fudge factory running full out to generate enough footnotes to his budget proposal to demonstrate that this combination will not blow the deficit. Unless ….

Unless the tax cuts do stimulate growth and generate offsetting increases in tax revenues. Unlikely, although the cuts will do some of that. Unless the private sector comes forward to finance the entire infrastructure program. Unlikely, privately financed infrastructure projects will be designed to serve real needs by real consumers: private sector funders have no reason to build bridges to nowhere. And few reasons to fund a massive expansion of a network of toll roads: only 6,000 of the nation's four million road miles are tolled, and toll roads are no magic bullet with which to slay the deficit dragon: toll-road operators in Indiana and Texas are filing for bankruptcy.