Implications of Trump’s Presidency for the U.S. and the World: Part II

Donald Trump has been the President of the U.S. for only less than two years, but the consequences of his presidency for our country and the world could be profound and scary.  From the perspective of the environment, harmony with others, economy, American competitiveness, tax cuts and budget deficit/national debt, world stability/democracy/rule of law, his impacts have been grave and significant.

This article is in two parts.  Both parts are posted in this same December 2018 release.  Part I is posted in the “Political/Social Commentary” page.  Part II is this article posted in the “Other” page.

The article has six sections:

I.   Environment

II.  Harmony with Others

III. Economy

IV. American Competitiveness

V.  Tax Cuts, Budget Deficit and National Debt

VI. Summary – World Stability/Democracy/Rule of Law

Sections I-III are in Part I, and Sections IV-VI are in Part II.

 

IV. American Competitiveness:  American competitiveness relative to the rest of the world is really the crux of the matter.  To be the world’s economic leader, a country needs to be at the top in terms of several important categories, such as:

  • New ideas and new products
  • Efficient production/manufacturing/distribution processes
  • Educated work force to generate new ideas and produce the products
  • Government leaders who can provide a vision and the ability to implement that vision

Starting with the beginning of the 20th century and continue for several decades after the end of WWII, our country has been the world’s economic leader because we were able to lead, or at least share in the lead, in the above categories.

Our country has been the most innovative in terms of technological inventions, such as airplane, automobile, telecommunications, transistors, computers, search engines, etc.  We have also been among the leaders in developing efficient production/manufacturing/distribution processes, such as the assembly line [12], transportation infrastructure like the national network of highways, and online shopping [13].  Since the end of WWII, the U.S. greatly expanded its higher education system by establishing many good state colleges and universities in addition to the many well-known established private universities, as well as community colleges, producing a large number of educated work force.  It also attracted the top foreign students for colleges or graduate schools, thus infusing the best young talents from the world to our country.  This massive education system has produced the large number of scientists, engineers, business professionals, doctors, teachers, as well as many other professions that staff the backbone of our economy.  This was a key reason for the U.S. becoming the leading economic power in the world in the second half of the 20th century.  Complementing that, we also had competent and dedicated government leaders to provide a vision and the ability to implement that vision on projects such as the Manhattan project, the national transportation infrastructure of highways, airlines, and ports, the space program, and the massive expansion of higher educational systems.

However, perhaps with success, we have been complacent.  Not only that a lot of our manufacturing is now done overseas, the talent that leads to innovations is slowing down significantly.  For example, according to a 2011 Population Reference Bureau (PRB) report [14], in 1994 there were 6.2 U.S.-born workers for every foreign-born worker in science and engineering occupations.  By 2006 only 12 years later, the ratio was 3.1.  Furthermore, this report says that more than 60 percent of foreign-born scientists and engineers in the U.S. in 2009 were from Asia, and nearly one-fourth were from India, with another one-fifth from China, the Philippines, and Taiwan.  This shift to dependency on foreign-born talent is so obviously reflected in the percentage of Americans as compared to foreign students who are in our graduate school engineering and science programs.  As a matter of fact, the statistics are downright frightening.  Here are the data from a 2017 Inside Higher Ed report [15]:

Field of Study Percent International Number of Full-Time International Graduate Students in 2015 Number of Full-Time U.S. Graduate Students in 2015
Electrical Engineering 81% 32,736 7,783
Petroleum Engineering 81% 1,258 302
Computer Science 79% 45,790 12,539
Industrial Engineering 75% 7,676 2,539
Statistics 69% 4,321 1,966
Economics 63% 7,770 4,492
Mechanical Engineering 62% 12,676 7,644
Civil Engineering 59% 9,159 6,284
Chemical Engineering 57% 5,001 3,834
Pharmaceutical Sciences 56% 1,931 1,502
Metallurgical/Materials Engineering 55% 3,723 3,103
Agricultural Engineering 53% 726 654
Agricultural Economics 53% 881 796

For example, the percentages of international graduate students in Electrical Engineering and Computer Science in 2015 are respectively 81% and 79%!  If we don’t do anything to change this, it will not be long before the U.S. becomes a second-tier player in innovations leading to new ideas and new products.

We also need to keep in mind that the living standard and cost of living in the U.S. are significantly higher than other countries outside of Europe.  This means that the U.S. needs to constantly move up in the product “food chain” because we cannot compete based on labor cost.  That is why the statistics just presented are so frightening because it means that we are moving down the product “food chain.”

We agree that more products should be made in the U.S. and more U.S. workers should be hired to produce these products, and the U.S. should be exporting more of our own products and import less of the foreign-made products.  However, we also live in a competitive world.  We cannot just dictate this to other countries of the world.  We have to make it so that it makes economic sense for the other countries, as well as for the U.S., for that to happen.  In order to achieve that objective, we have to reverse the trend and produce more of our own innovators, a highly educated work force, more efficient and cost-competitive production, manufacturing, and distribution processes, and government leaders who can provide a vision and the ability to implement that vision.  Trump is not providing that vision and leadership, but just issuing orders both domestically and internationally with wishful thinking that things will change for the better.  As a matter of fact, Trump has not shown any signs that he even understands the problem.

V. Tax Cuts, Budget Deficit and National Debt:  One of Trump’s signature acts as president was the tax cut act that was passed on December 22, 2017.  It generally reduces personal income taxes, at least until 2025, but the reduction will be significantly more for higher income than for lower income.  For example, a household earning $1 million or more would get an average tax reduction of $69,660, equivalent to 3.3% income increase, while a household earning $50,000 To $75,000 would get a tax reduction of $870, equivalent to 1.6% income increase. [16]  For corporations, the maximum corporate tax rate is reduced from 35% to 21%, the lowest since 1939.  Furthermore, some of the individual tax reductions are only temporary and will be removed after 2015, but the corporate tax reductions are permanent.  It is clear that the Trump tax cut was aimed to benefit the rich and especially the corporations.

What are the implications of this December 2017 tax cut?  The most obvious and most important consequence is that the federal deficit will increase, and it has.  The federal deficits from the year of the last great recession, i.e., fiscal year 2008 (a fiscal year is from the previous October 1 to the year’s September 30) to fiscal year 2018 (October 1, 2017 – September 30, 2018) are shown in the chart below. [17]

Deficits in billions
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
$458 $1,413 $1,294 $1,295 $1,087 $679 $485 $438 $585 $665 $779

The federal deficit for the just completed fiscal year 2018 was $779 billion, or 3.9% of the GDP (Gross Domestic Product), which is $114 billion more than 2017.  To understand the significance of this, it is important to note that the federal deficit was $458 billion for 2008.  Because of the great recession around 2008, the federal deficit increased drastically to $1,413 billion in 2009.  Then during most of Obama’s presidency, it dropped significantly during the next six years, to $438 billion for 2015 before increasing to $585 billion for 2016.  Our government cannot keep on spending more than it receives; we must reduce the federal deficit.  However, the federal deficit has increased during Trump’s presidency for 2017 (although he is responsible for only eight months of fiscal year 2017) and for 2018.  The federal deficit for fiscal year 2019 is estimated to be $984 billion, an increase of over $200 billion over 2018!

In Sections III.A and III.B we mentioned that in 2018,  job growth was significantly better than what the Congressional Budget Office had projected and the unemployment rate dropped below 4%.  These results could be due to more people having more money to spend and corporations having more money to invest as a result of Trump’s tax cuts.  However, these positive results most likely will be only temporary because the tax cuts also led to significantly higher budget deficit and dangerous rapidly climbing national debt.  The fact that the stock market has cooled down significantly, and ending 2018 with a 6.2% loss, making it the worst year in a decade (as discussed in Section III.C) may already be an indication that people and corporations may not be that optimistic about the longer-term health of our economy.

Besides the federal deficit, we should also look at the cumulative consequence of federal deficits, i.e., the national debt.  The national debts over the last 19 years are shown in the table below [18]

Date National Debt ($)
09/30/2018 21,516,058,183,180.23
09/30/2017 20,244,900,016,053.51
09/30/2016 19,573,444,713,936.79
09/30/2015 18,150,617,666,484.33
09/30/2014 17,824,071,380,733.82
09/30/2013 16,738,183,526,697.32
09/30/2012 16,066,241,407,385.89
09/30/2011 14,790,340,328,557.15
09/30/2010 13,561,623,030,891.79
09/30/2009 11,909,829,003,511.75
09/30/2008 10,024,724,896,912.49
09/30/2007 9,007,653,372,262.48
09/30/2006 8,506,973,899,215.23
09/30/2005 7,932,709,661,723.50
09/30/2004 7,379,052,696,330.32
09/30/2003 6,783,231,062,743.62
09/30/2002 6,228,235,965,597.16
09/30/2001 5,807,463,412,200.06
09/30/2000 5,674,178,209,886.86

Note that it has continued to increase during these 19 years, with higher increases shortly after the great recession around 2008.  To understand the significance of these national debt numbers, it is useful to look at the ratio of the national debt over GDP (Gross Domestic Product, i.e., the total value of everything produced in the country).  This ratio was 55% in 2000, 68% in 2008.  It jumped to 83% in 2009 and 90% in 2010 during the great recession around 2008, and continued to increase to 103% in 2017 and 104% in 2018.  This means that the amount of money we owe now is more than what the country can produce in a whole year!  Politicians like to promise to reduce the budget deficit or the national debt.  But Trump went completely over the cliff when in a March 31, 2016 interview with The Washington Post, he promised that he will eliminate our country’s national debt (not just the budget deficit) of $19 trillion in eight years! [19]  Of course no one believed him, including Trump himself.  This is just another example that Trump’s promises are often completely meaningless, and many times he really doesn’t know what he is talking about.

There are several reasons that it is extremely important to eliminate or reduce the budget deficit, and especially to reduce the national debt. [20]   One is that “entitlement” programs such as Social Security and Medicare benefits will be at risk if the national debt continues to rise. [21]  This is because entitlement programs now already comprise about 14% of the federal spending.  Another reason is that other countries will stop buying our debt and the stock and bond markets will lose confidence in our fiscal policy causing prices to plunge.  Spending money now and asking our children and grandchildren to pay for it is just wrong and not workable because if we cannot solve the problem now, it will be even less likely for them to solve the problem since the problem will become bigger and bigger as we continue to accumulate debt.  We should also keep in mind that they will have to pay for rebuilding many of our outdated national infrastructures and many of them will also have to pay off their large college loans.

Therefore, we should address this problem as soon as possible.  Both parties must be willing to compromise to address this most critical problem.  We don’t want to run into an impasse as mentioned partially jokingly by the author of the referenced Forbes article [20] “Republicans haven’t met a defense budget they couldn’t increase and Democrats insist on comparable increases in domestic spending.”  It will be impossible to reduce the national debt if the defense budget and entitlement programs are allowed to continue to grow.  It is critical that the two sides must be willing to listen to each other and compromise for the long-term good of our country.  This is where we must have courageous leaders with a vision and ability to implement that vision.

VI.. Summary – World Stability/Democracy/Rule of Law:  The world has been changing with many formerly colonized or under-developed countries emerging to become competent competitors to the U.S. and other Western powers.  If the U.S, wants to remain to be the world’s economic leader, it also must change.  It must lead the world in innovations with new ideas, new products, and new processes.  This requires a highly educated workforce to create, produce, distribute, and market.  It also requires experienced, dedicated, and hard working government leaders who have vision, the ability to mobilize the nation to implement that vision, and the heart for the welfare of the people.

Unfortunately, as far as a highly educated workforce, as we discussed in Section IV “American Competitiveness,” we are actually moving backwards.  This is especially important because our cost of living is higher than almost all of our competitors, so we must move up the product “food chain.”  Our national debt has skyrocketed so high that just paying off the interest owed on our national debt will take a significant bite out of our national income.  Furthermore, what we now have in power are President Trump and his team who look at the world with their own make-up “facts,” govern by dictates and strong arms, do not understand the issues (and often do not even try to understand the issues), and cannot work with others whose opinions are not the same as theirs.  Our country is so polarized; there is so much mistrust on both sides that it is almost impossible to compromise and move forward in a positive way.  In addition, President Trump has alienated long-time allies, and created mistrusts with other world leaders because of his “my-way-or-the-highway” tactics and his ever-changing positions.

If we don’t change course quickly, there will be more instability in the world, more tensions, and the probability of war will increase.  The world cannot afford more wars, especially a war involving nuclear powers.  There is no winner in a nuclear war.  Our country prides ourselves as a democracy and a country ruled by law.  However, our president acts as though he is above the law, and there is not enough wisdom and courage to take him to task on this critical and fundamental issue that no one is above the law.  We should take to heart the conclusion reached by Christopher R. Browning, one of the world’s authorities on the history of the Holocaust and the author of the books The Origins of the Final Solution:  The Evolution of Nazi Jewish Policy, September 1939-March 1942 (2004) and Ordinary Men:  Reserve Police Battalion 101 and the Final Solution in Poland (2017).  In this latter book, he discussed how ordinary men were transformed psychologically into active participants in the most monstrous crime in human history.  With Trump’s intolerance, his high evaluation of himself, and his belief that he is above the law, our country could also be transformed into a dictatorship.

Since the large majority of evangelical Christians are strong supporters of Trump, and it was this strong support that sent Trump to the White House, it is important that evangelical Christians seriously reassess whether Trump’s behaviors and his policies are consistent with Christian teaching, and if not, then they should not only stop supporting Trump, but should work hard to get him out of office.  The future of our country, especially the future of our children and grandchildren, is in the balance.

—————————–

[12] Contrary to common belief, the automobile assembly line was not invented by Henry Ford, but the originator was another American Ransom Eli Olds, originator of the Oldsmobile, who invented the automobile assembly line in 1901, two years before Henry Ford.

[13] Although online shopping was invented by Michael Aldrick in United Kingdom in 1979. its boom is normally associated with Amazon.com, founded by the American Jeff Bezos in 1994.

[14] Mary Kent, “More U.S. Scientists and Engineers Are Foreign-Born,” Population Reference Bureau (PRB), January 11, 2011.

[15] Elizabeth Redden, “Foreign Students and Graduate STEM Enrollment“, Inside Higher Ed, October 11, 2017.

[16] Danielle Kurtzleben, “CHARTS:  See How Much of GOP Tax Cuts Will Go to the Middle Class,” NPR report, December 19, 2017.

[17] U.S. federal deficit chart.

[18] U.S. national debt.

[19] See, e.g., Manuela Tobias, PolitiFact, October 20, 2017, or Paul Brandus, MarketWatch, February 9, 2018.

[20] David Davenport, “Five Reasons Why You Should Worry About the National Debt,” Forbes, February 28, 2018.

[21] One may object to referring to Social Security as an entitlement program because the employee and the employer contribute to Social Security.  So it is not a handout from the federal government.

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5 Responses to “Implications of Trump’s Presidency for the U.S. and the World: Part II”

  1. Tim Zebo says:

    Don,

    Thanks for this terrific two part post! Since I have several relatives who are Evangelical Christians who voted for Trump, I especially appreciated your reference to “Ordinary Men”. I just ordered the audio version of it and am looking forward to understanding more about how such (normally) “good people” (as long as we’re not born GLBT 😉 can be so easily convinced to support such very bad government policies.

    Happy holidays!

    Tim

  2. Chinlon Lin says:

    Excellent analyses and comprehensive information. Thanks very much for your informative 2-part article on this very critical issue facing us and the world today.

  3. russ lowe says:

    Don,

    Will take time to read your writing and observations very
    carefully. All Chinese Americans, whether born here or
    not has been racially profiled like the Japanese Americans
    during WWII and Muslims today. This has been standard procedure
    of our government in the name of national security before Trump.

    Give him some credit for pulling the cover off this dark side
    of our democracy and society.

    The big question is: what are we going to do about it. I think
    everyone has an answer and none of them are going to end the division.

    Russ

  4. RUBY TSAO says:

    A lot of research went in these articles on US economy, statistics of higher education, etc. This should be published in newspapers or magazines, perhaps in condensed form for the average American attention span, for wider circulation among the public. Thanks for the excellent research!

  5. Jim Raevis says:

    Hey Don, all of the above continues to scare me…mainly for my children. I regularly referenced the national debt while working in the DOD…my colleagues didn’t like that. I’m also unsure as to what these “tax cuts” means to me with the SALT limitation. I won’t be surprised if I’ll incur a higher tax burden in 2018 even though there have been “cuts”. One hidden surprise that everyone will discover is that the fee you pay to have a professional tax preparer do you taxes…well, it’s no longer deductible…and many of us need a tax preparer because the IRS has created many forms that mere mortals simply don’t understand.

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