Trumponomics: Part 1

"America First" is Not America Great

Since the election, I’ve been itching to writing to analyze the Trump economic plans, but one thing has been holding me back - I’m not sure if I have any idea what that plan is – nor does anyone else. Certainly, there have been public proclamations by Trump, which tend to change every time he speaks. From what we know now, here are the main tenets of Trumponomics:

1. Mass Deportation

2. Tariffs

3. Tax Cuts

4. Energy Policy

Today, I want to focus on the first two of these: Tariffs and Mass Deportations. The rest will be covered at a later date. All four of elements relate to economics, but Tariffs and Mass Deportations are front and center in the America First Movement.

Nationalism vs. Patriotism

In today’s world, the term “America First” is what MAGA and other extreme right wingers that have taken over the Republican party equate to patriotism. But what we’re seeing is not patriotism, it’s Nationalism. Patriotism is an emotion felt by citizens involving love and pride in their country. Nationalism is a political ideology that is as much about hatred of other countries than about love of one’s own. It involves allegiance beyond anything rational, including at times, completely checking your humanity at the door. It has more in common with fascist regimes of the 1930s than to most modern democratic systems.

Mass deportations are an obvious manifestation of Nationalism. I know the pushback on that. Some immigrants are here illegally, and by law they should be sent back. No one is saying we shouldn’t have rules for entering the country, and that we shouldn’t enforce these rules. However, there is an element of cutting off one’s nose to spite their face in this policy. When criticized, Trump and his allies say they will focus on deporting criminals first. A policy that I’m sure has widespread support, but many of the thoughts Trump has been sharing about illegal immigrants have no basis in reality.

“…Trump repeated his bizarre and farcical claim that migrants are “coming from prisons and jails, from mental institutions and insane asylums, and terrorists at levels never seen before,” before once again pledging “the largest deportation operation in the history of our country—even larger than that of President Dwight D. Eisenhower many years ago.” This latter bit is an explicit reference to Operation Wetback (yes, that was its real name), a 1954 initiative to round up and deport hundreds of thousands of presumed Mexican immigrants that not only violated their civil and human rights but, historians agree, also targeted U.S. citizens of Mexican descent. That was a military-style operation using an armed Border Patrol, but Trump seems enthusiastic to go whole hog and just use the military.”

Felipe De La Hoz – Slate Magazine - “The Supreme Court supercharged the scariest part of Trump’s 2025 agenda.”

The level of vitriol toward illegal immigrants has been astounding in recent years and perfectly illustrates the ugly side of Nationalism. Consistent efforts to vilify and dehumanize these people have gone past any reasonable norms, and in a better time would have been seen as vile and obscene. The actions of MAGA politicians look increasingly performative, with many on the right seemingly trying to outdo one another. Trump’s insane weeks long rant during his campaign about deporting Haitian immigrants who were “eating peoples’ pets” is destined to fall by the wayside like many similar statements he has made in the last 8 years, but the disgustingness of such statements should never be forgotten. This is not what America is about, nor has it ever been, and there is absolutely nothing “great” about what is happening, nor is it a path to greatness.

The Price of Nativism

The economic cost of Trump’s proposed mass deportations should be jarring to anyone who bothers to investigate. Without knowing specifically how large and how long these mass deportations will be, a true estimate isn’t possible - but using some basic assumptions, we can come to a good guess. Some proponents have floated the idea of a million deportations a year. Over the course of a decade, the cost for that is believed to approach $1 Trillion!

Donald Trump has claimed that illegal immigrants cost the country somewhere between $200 Billion and $275 Billion per year, depending on his mood at the time. Not surprisingly, that number seems to be made up out of thin air. Besides that, the caricature of the lazy immigrant sitting around collecting welfare checks is not at all accurate. Illegal immigrants have no access to many of the programs they are alleged to receive.

“Undocumented immigrants are incredible contributors to our economy and are not eligible for public benefits that people think they come here for," Wiehe said. An estimated half of the nation's undocumented immigrants are believed to be working under fake Social Security numbers, which means they are paying taxes and into Social Security. The ITEP estimates that state and local governments take in $11.74 billion a year from undocumented immigrants for Social Security benefits they have no right to receive. Wiehe added that undocumented immigrants are also not eligible for the federal earned income tax credit, so they're taxed at higher rates than similar low-income Americans.”

Along with the attacks concerning costs of having illegal immigrants in our country in terms of federal programs, there are constant complaints on the criminal element within the illegal immigrant community as well. Of course there are criminals within this population, but they are a tiny percentage of those crossing the border. The vast majority of illegal immigrants come because they need work, or they are fleeing dangerous circumstances, such as a drug cartel taking over their community, or political repression.

Pretty much every study done shows similar numbers in regard to illegal immigrants and crime. Those immigrants commit crime at a lower rate than natural born citizens. Having been bombarded with disinformation for decades, I’m sure your average MAGA supporter would guffaw at such a comment, but it’s basic common sense. If you are here illegally, with the purpose being to make a living, and to provide for your family, the last thing you’d want is attention from law enforcement, which could cause you to immediately be deported. For that reason alone, you would expect a lower percentage of these individuals to commit crimes in every category, and that is what the data says.

This doesn’t even consider that the stereotype from which the premise originated is simply wrong. The notion that most immigrants are here for any other reason than to better their lives is something MAGA proliferates with impunity, and weaponizes at every turn. After years of labeling illegal immigration as an “infestation” or an “invasion” and making statements calling it an “existential crisis”, the rhetoric has reached a point where Trump is talking about declaring a national emergency and deploying the military at the border!

"On Day 1, I will launch the largest deportation program in American history to get the criminals out," he said during a rally at Madison Square Garden in the closing days of the presidential race. "I will rescue every city and town that has been invaded and conquered, and we will put these vicious and bloodthirsty criminals in jail, then kick them the hell out of our country as fast as possible."

Donald Trump

The absurdity of this is that the “bloodthirsty criminals” represent a tiny fraction of border crossers. Besides that, the extraordinary conditions that caused a massive surge in border crossings last year have largely subsided. In chart 1 below, you can see a complete collapse in border crossings back to the average levels in the previous decade. Much of the surge can be explained by migration being contained by the expiration of Article 42, which allowed for streamlined deportation procedures during the Covid pandemic.

As well, along with the extreme economic and sociological pressures brought about by the pandemic, illegal migration has been fueled by economic crises, drug cartels, and political persecution. Efforts have already been made on both sides of the Mexican border that are helping get the situation under better control. Had congress been able to pass the bipartisan border security bill earlier this year, we can imagine the numbers might have dropped even faster.

This is not to say we don’t have a problem with the border that must be addressed. I’m merely making the point that there is no need for such draconian policies to be enacted at this time. Furthermore, the demonization of marginalized people for the purpose of political gain has no place in American society. Surely there have been similar anti-immigrant sentiment in the past, but our history is as a nation of immigrants. It’s apparent that there has been a severe deterioration in the basic core values on which the country founded, with MAGA so confused as to believe they are the ones trying to preserve it. The methods being employed are malicious, but what’s most important is to realize that cruelty may be the primary political objective.

Labor Shortage

I’ve made my view clear about the inefficacy of Trump’s mass deportation plan, and what I see as the wholesale moral bankruptcy behind the premise. But what it boils down to is just ignorant economic policy. Assuming the conservative estimate of 1 million deportations costing roughly $1 Trillion over the next decade or so is fairly accurate, what sort of rate of return will the U.S. reap from this policy? Well, that depends on who you ask.

In MAGA world, the assumption is that the U.S. will be saving money by not having to support these “lazy foreigners”. First, I’ve had occasion to interact with Mexican laborers a great deal through the years. Now - I don’t know which, if any, were here illegally, but my impression has been that they work as hard, or harder than, any native-born Americans I’ve ever known. Also, they tend to do jobs Americans don’t want to do.

Chart 2 below shows the U6 Unemployment Rate. This measure is the most comprehensive measure of unemployment. It includes those who have given up looking for a job due to the difficulty of finding one. As can be seen, we have been near the lowest levels on this measure since the series began 30 years ago. The labor market has rarely been tighter, and the present level would meet the definition of “full employment” as most economists measure it.

Chart 2: U6 Unemployment Rate

Almost half of agricultural workers are believed to be undocumented workers. Many farmers say they can’t function without immigrant labor, and that the nation’s food supply chain could collapse if too many agricultural workers were lost in a short period of time. The enormous cost of such a chain of events barely seems to have been considered.

A main argument of the Trump position on lost agricultural workers is that Americans will now have opportunities to work those jobs. Chart 2 shows the U6 series of unemployment data, which is the most comprehensive measure available, and is sitting near the lowest levels in 30 years. This shows that Americans don’t have a need for those jobs, and experience shows they don’t want them anyway.

Any fully industrialized nation in the 21^st Century will have developed an economy focused on higher value-added labor. That is, involving more education and training, and less physical labor. This is to be expected. There is no excess labor among native born Americans to fill that gap, and the notion that people will travel to fill jobs now filled by illegal immigrants is farcical. This would mean that the supply of some foods will fall significantly, and/or the labor costs will skyrocket. Higher grocery bills are the result, which would be an ironic twist, since high food bills were a major driver in reelecting Donald Trump.

Between the extraordinary cost of conducting mass deportations, and the higher food costs associated with removing a large portion of the labor force in the food sector, it’s most likely that mass deportation will become a net loser for the average American consumer. Much will depend on the relative size and quickness of the deportation policy. Slowing the process may mitigate some of the worst fallout, but unfortunately, that isn’t the campaign promise that was made.

Mercantilism - Out of the Dustbin of History

Working hand in hand in a destructive capacity with the ill effects of mass deportations is the prospect of higher tariffs. Mercantilism is an economic theory which promotes the idea that maximizing exports is the way to economic prosperity, and it was the prevailing economic policy approach from the 16^th to the 18^th centuries. There are two primary policies used to bring this about. One, you construct a system of high tariffs to keep out foreign goods. Next, you create a system that subsidizes the major industries in the domestic country to give them economic advantages over foreign firms.

It all sounds very commonsensical. Your MAGA uncle at Thanksgiving will tell you that any other viewpoint is stupid. Unfortunately, history shows it doesn’t work, which is why it was abandoned hundreds of years ago. When you place high tariffs on foreign goods, you inevitably will see high tariffs placed on your own goods. This causes the total amount of trade to shrink, which will slow economic growth for both countries involved. Besides the effect of lower trade depressing economic growth, there is the loss of comparative advantage. Based on the relative skillsets of each country’s labor force, and the natural resources each country holds, it can be shown that both countries benefit if they focus production in the sector where they have the largest comparative advantage.

Here’s a quick example. Country A is better at producing both goods X and Y than country B, but has the biggest advantage in good X. You can show mathematically that by Country A focusing on producing only Good X, and Country B producing only Good Y, both countries will be better off if the two countries trade freely. History has shown this to be true.

Of course, in the real world there is always fallout. I have written extensively about how the MAGA movement has largely been fueled by the application of free trade, and the subsequent offshoring of manufacturing jobs. When we talk about economic policy, we are typically focusing on how it will affect the country as a whole. In the purest economic sense, free trade is more efficient, and therefore results in higher economic growth. However, some will benefit more than others, and some may actually be hurt by it. Those who believe they have been disenfranchised by free trade will develop anger and resentment, which will eventually spill over into a populist movement. Certainly, there are social issues wrapped up in the MAGA worldview, but my premise is these issues alone would not be enough to win elections. It’s the economic issues that have the largest effect.

A One-Two Economic Punch

The two policy prescriptions I’ve chosen to analyze in this piece will both likely have a negative effect on the U.S. economy. Of course, we have no idea of the quickness or the size of the policies that will ultimately be implemented. If the numbers that have been bandied about by Trump and some of his acolytes come to pass, it’s difficult to see how the U.S. economy does not suffer. A substantial shock to the labor supply in our food industry, combined with large tariffs applied to many products cannot possibly end well. That doesn’t mean to say that if we see a much more watered-down version of these policies, then the economy won’t do okay. But the signals Trump has been sending since he was elected should not give us any comfort. If anything, we should be more worried.

Trump supporters want to dismiss all of this on the basis that there was much hand- wringing over Trump’s trade policies in 2016, and the economy did just fine. However, this misses the point that tax cuts took center stage at the beginning of Trump’s first term, and the Tax Cuts and Jobs Act of 2017 (TCJA) stimulated the economy (offsetting tariffs) by cutting taxes but not spending. Not to mention that the tariffs are now being proposed are much broader than before. In fact, he just threatened BRICs countries (a group of emerging markets) with 100% tariffs because of a plan to move away from the U.S. dollar for trade. Trump’s negotiation strategy is like a drunken bar patron standing up and challenging everyone in the bar to a fight. The world is becoming increasingly erratic. It may become very evident over the next four years that navigating the chaos is much easier when you have friends.