A Rebuttal To Moody’s Attack On Donald Trump’s Economic Policies

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A Rebuttal To Moody’s Attack On Donald Trump’s Economic Policies

Prepared by: Peter Navarro, Professor, Paul Merage School of Business, University of California-Irvine. Contact: pn@peternavarro.com http://crouchingtiger.net (The opinions expressed are his own and not those of UCI)

On June 20, 2016, Moody’s Analytics released a report  predicting recession, significant job losses, stagnant income, and a massive increase in government debt should Donald Trump be elected president.   Professor Peter Navarro of the Merage School of Business was asked by the Trump campaign to independently review the report’s methodology, findings, and credibility.  He offers these findings:

The Moody’s report lacks credibility on its face.  Its lead author is a registered Democrat, major campaign contributor to Trump’s rival Hillary Clinton, and long time partisan of the failed Keynesian policies of President Barack Obama.  

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The Moody’s report is based on flawed assumptions the authors admit “are our own.” (p.1)   These assumptions grossly misrepresent the Trump campaign’s policy statements on the economy, trade, tax reform, and immigration.   The result is a “garbage in, garbage out” set of results that an undiscerning media reported without appropriate skepticism or scrutiny.  These results have no relation to the reality of a Trump presidency.  

  • On tax reform, the analysis ignores a cornerstone of Donald Trump’s plan, revenue neutrality.  Instead, it assumes a “static cost” of “$9.5 trillion over the next decade.” This sets in motion a spurious domino effect of recessionary forces that would not exist in the real world of a Trump presidency.
  • On trade reform, the analysis simply slaps a 45% tariff on Chinese exports and then assumes China retaliates with its own tariffs while consumer prices rise.   The far more likely scenario is that, under the threat of Trump’s countervailing tariffs, China ceases its unfair trade practices, America’s trade deficit comes back into balance, and both China and America prosper.
  • The analysis ignores the substantial fiscal and social costs of illegal immigration in its calculations.  It also falsely assumes unemployed American citizens won’t be willing to do the wide range of jobs now taken by illegal immigrants and thereby simulates a stagflationary world of labor shortages and rising wages “as employers struggle to fill the open positions.”  This is counterfactual.

Professor Navarro’s analysis of the Moody’s report may be accessed at this link.  He is available for comment at 949-357-9330, navarrop@uci.edu

FUll report below

Moody’s Rebuttal FINAL June 25, 2016

 

 

 

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