US elections: 23 Nobel laureates can't be wrong about Donald Trump

Economists mostly shun politics in favour of policy. We prefer to be aloof soothsayers giving voice to data and research rather than our own beliefs. A luminary in the profession once told me that “the only political party economists support is whichever is willing to be smart,” before adding, “and a smart economist would never join a political party.” And yet, in a stunning turn — at least for us in the profession — 23 Nobel Prize-winning economists, from Columbia University professor Joseph Stiglitz to Massachusetts Institute of Technology’s Daron Acemoglu, released a letter endorsing Kamala Harris for US president.

 

 

“Simply put, Harris’s policies will result in a stronger economic performance, with economic growth that is more robust, more sustainable, and more equitable,” the Nobel laureates wrote in the letter. Donald Trump’s policies, they added, would “lead to higher prices, larger deficits, and greater inequality.” As for Ms Harris, they wrote that she “has emphasised policies that strengthen the middle class, enhance competition, and promote entrepreneurship.

 

Individuals can struggle to sort out the nuance of their own economic experience over the past eight years in weighing Ms Harris versus Mr Trump, but professional economists of all stripes have little to be torn about.  It’s not a toss-up: Mr Trump’s policy agenda gives much for economists to condemn. Any one of these policies on their own would be enough to disqualify a candidate, but that Mr Trump has proposed them all is a clear enough indicator of just how much the economy would be at risk if he were reelected.

 

Interfering in the Federal Reserve: Mr Trump and his running mate, Ohio Senator JD Vance, have proposed ending the Fed’s independence and giving the President a say in such monetary policy as setting interest rates. Central bank independence is a foundational component of stable economies. Researchers have found a clear, causal relationship: The more independent the central bank, the lower the rates of inflation. Interfering in statistical agencies: The Trump administration interfered in the 2020 census by ending the count early and pressuring bureaucrats at the Census Bureau to change their methodology. Those workers, protected civil servants, resisted, as emails revealed by Freedom of Information Act requests show. But Mr Trump has proposed replacing many civil servants with political appointees through Schedule F, a tactic he tried at the end of his presidency, and Republicans are already attacking the Bureau of Labor Statistics. At stake is the reliable reporting of economic data. 

Excessive tariffs: Mr Trump has advocated for a 20 per cent import tax on all goods from all countries, but higher rates for China and cars from Mexico. The tariffs from Mr Trump’s time in office are a good proving ground. Economists universally agree that tariffs increase prices for consumers because it’s domestic companies that are importing the goods that pay the tariffs and then attempt to pass those costs to consumers. The larger and broader tariffs are, the higher the prices for US consumers. History and the Smoot-Hawley Tariff Act provide another warning: The most likely outcome would be retaliation against US exporters by our trade partners.

 

Mass deportation: Mr Trump has promised the largest deportation in the history of the US, and Republicans rallied at their convention this summer by waiving signs that read “Mass Deportation Now!” Researchers at the centre-left Brookings Institution estimate that more immigration than expected has been a windfall for the economy, propping up consumer demand and job growth. Further, deportation would hurt US-born workers, affecting critical industries such as child care and construction where immigrants are employed and lowering aggregate demand.

 

Wider budget deficits: The federal government is running trillion-dollar deficits and the non-partisan and non-profit Committee for a Responsible Federal Budget determined that Mr Trump’s policy proposals are twice as expensive as those from Ms Harris. The vice-president proposes less new spending and wants increases in tax revenue to pay for spending. Additional pressure on fiscal health comes from social security, which doesn’t directly add to the deficit but Congress does owe the programme a few trillion dollars, currently held in a trust fund. The Committee for a Responsible Federal Budget found that Mr Trump’s social security proposals would cause the programme’s shortfall to swell by an additional $2 trillion and deplete the trust fund three years sooner than is currently projected in 2035.

 

In their letter, the Nobel laureates stressed the importance of the rule of law, economic certainty and political certainty, which they said are “among the most important determinants of economic success.” The fact that many of the CEOs who are making parlays to Mr Trump are doing so out of concern for his open plans of retribution for enemies only proves the point of these high-minded economists.