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Moody's: Trump would isolate and diminish economy

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Staff writer ▼ | June 20, 2016
Donald Trump's economic ideas would hurt the U.S. economy and send the country into a recession, according to a report by Moody's Analytics.
Donald Trump
Predictions   "The U.S. economy suffers a lengthy recession"
Economists reviewed Trump's proposed tax cuts for individuals and businesses, his calls to deport undocumented immigrants and build a southern border wall, and his threats to impose large tariffs on goods imported from China and Mexico.

The analysis found that if all of Trump's proposals were implemented, "the economy suffers a lengthy recession and is smaller at the end of his four-year term than when he took office. The upshot of Mr. Trump’s economic policy positions under almost any scenario is that the U.S. economy will be more isolated and diminished."

The economists drew four basic conclusions about the impact of Trump's plans: a less global economy, larger government debt, a weaker economy with higher unemployment, and benefits mostly for high-income Americans.

Trump has proposed significant tax cuts without proposing spending cuts to offset the reduced revenue, which the Moody's report found would cause interest rates to rise and weaken the economy. The analysis also found that high-income households would benefit most from Trump's economic plan.

"Everyone receives a tax cut under his proposals, but the bulk of the cuts would go to those at the very top of the income distribution, and the job losses resulting from his other policies would likely hit lower- and middle-income households the hardest," the report reads.

"Broadly, Mr. Trump’s economic proposals will result in a more isolated economy. Cross-border trade and immigration will be significantly diminished, with less trade and immigration, foreign direct investment will also be reduced," the report reads.

"While globalization has created winners and losers in the U.S. economy in recent decades, it contributes substantially to the ongoing growth of the U.S. economy. Pulling back from globalization, as Mr. Trump is proposing, will thus diminish the nation’s growth prospects."

The economists argue that employers, such as farms, who lose immigrant employees would likely struggle to fill those spots with American workers, which will cause labor costs to go up for those positions. This could also prompt the cost of products to increase.