WASHINGTON ― In late August, the private equity firm chaired by billionaire Wilbur Ross agreed to pay a $2.3 million fine and return $11.8 million that regulators said it had bilked from its own clients ― which included pension funds and universities. On Wednesday, Ross co-authored an economic analysis for Donald Trump.
The Securities and Exchange Commission had alleged that WL Ross & Co. failed “to disclose its fee allocation practices” for more than a decade in some private equity funds it managed. In human-speak, the SEC was accusing the firm of fudging its numbers to steal from its investors. This week, Ross was attempting to rebut calculations from a conservative think tank that Trump’s economic plan doesn’t add up. To do so, he relied on magic numbers and fantastical thinking.
Analyzing Trump’s tax policies, The Tax Foundation concluded that they would cost $2.6 trillion over the next decade. This was a low estimate ― when the group ran the numbers without relying on assumptions about tax cuts for the wealthy stimulating economic growth, the hit to the national debt would have been as high as $5.9 trillion.
Ross, writing with University of California-Irvine business professor Peter Navarro, declared the Tax Foundation analysis incomplete. Their number-crunchers hadn’t accounted for the offsetting effects of Trump’s deregulation agenda, his energy plan or his trade platform. Put together, these three would generate $2.37 trillion, giving Trump room to close the gap with more than $200 billion in unspecified spending cuts.
This new revenue, Ross and Navarro argued, could be divided into $487 billion in benefits from (again, unspecified) deregulation efforts, $147 billion from promoting fossil fuels and $1.74 trillion from his trade reforms.
Leave aside whether the health and environmental costs of gutting the EPA and boosting coal will actually generate a net benefit for the Treasury. It’s pretty easy to hear politicians in Washington bemoan the economic costs of regulations while ignoring the economic benefits ― particularly among Republicans ― and trade is doing the lion’s share of the budgetary work, anyway.
How will Trump get $1.74 trillion from trade reforms? By eliminating the trade deficit. How will he do this? By renegotiating American trade deals and threatening to leave the World Trade Organization, the international body that adjudicates many international trade disputes.
It’s true that the United States doesn’t exercise all of its leverage over the WTO system. And it’s true that the North American Free Trade Agreement, normalized trade relations with China and a host of other NAFTA-style trade pacts have cost the U.S. millions of good-paying manufacturing jobs. What is not clear is how Donald Trump would single-handedly reshape the entire global financial order through sheer force of will.
Even Ross and Navarro acknowledge that the U.S. ability to shape WTO policy is limited by the group’s “one country, one vote” structure. It’s not obvious exactly what the U.S. can extract by threatening to leave (and by extension, threatening to crash global financial markets). Beyond WTO, the United States has trade agreements in force with 20 nations. If the Trans-Pacific Partnership goes through by the end of this year, that number will increase to 31. Which would be more important ― Mexico or Japan? Or will we tackle them at the same time? Would the U.S. have more leverage with these major geopolitical allies if it leaned on smaller, less-powerful allies first? Nice country you got there, Panama. Be a shame if something happened to it.
The point here is not that the U.S. can’t improve conditions for its own workers (or in many cases, those of its trading partners) by rethinking and renegotiating its trade policy. It’s that doing so will be very complicated, and involve a host of dependent national security issues. Our trade pacts don’t look the way they do solely because U.S. negotiators are corrupt or stupid. In some cases, the government decides that giving away part of the American economic pie is a useful way to create or maintain political alliances.
This is not the sort of thing that can be glibly quantified with a promise to “renegotiate.” It’s much, much harder to reshape the global economic order than it is to get a bill through Congress.
But who knows. If the company Ross chairs can trick its investors for 10 years, maybe the candidate he advises can pull one over on the world.
WL Ross was not immediately available for comment.
Editor’s note: Donald Trump regularly incites political violence and is a serial liar, rampant xenophobe, racist, misogynist and birther who has repeatedly pledged to ban all Muslims — 1.6 billion members of an entire religion — from entering the U.S.
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