I’ve commented before that economists are lousy forecasters.
But when I make that point, I’m referring to economic predictions.
It turns out that economists are also lousy political forecasters. Or, to be more specific, I’m a lousy political forecaster. I predicted Trump would lose and he instead won a convincing victory.
Since I was in Palm Beach for a baseball tournament, I decided to crash the Trump victory party. It was a very happy crowd as you can imagine, especially once Fox News said Trump won Pennsylvania.
And you can see I had a pretty good view when Trump came out for his speech.
But let’s set aside politics.
I have five observations about the potential policy implications of yesterday’s elections.
- Since Republicans won the Senate (and by a bigger margin than anyone expected), everyone will need to see whether the GOP holds the House. If Republicans manage to emerge with control of both ends of Pennsylvania Avenue, it’s quite likely that the Trump tax cuts will be extended for another 10 years.
- But I worry that “border-adjustable taxation” will rise from the grave. We managed to kill the idea back in 2017, but I imagine both the Trump people and some congressional Republicans will want to enact that tax (bad) to finance extension of some tax cuts (good). My big concern is that it is a stalking horse for a value-added tax.
- I am terrified about the prospect of more protectionism. If Trump merely targeted China, it might be possible to justify his actions because of national security. But he wants to be “Tariff Man” for all cross-border commerce. Didn’t work for Hoover. Won’t work for Trump.
- I desperately hope Trump will be better on spending in his second term. It would be hard to be worse, so maybe I’m setting the bar too low. I’m not demanding (or expecting) Reaganism, but perhaps there is a chance that Republicans might push for Medicaid reform (an issue where Trump basically was on the right side during his first term). Oh, and I will once again try to convince GOPers to defund the OECD.
- I am hopeful on regulatory issues. Trump did a reasonably good job of slowing the onslaught of red tape in his first term. Perhaps he can actually roll back the level of regulation in his second term. I expect environmentalists will not be happy when the dust settles.
The election will probably have profound consequences in other areas. Trump presumably will have the opportunity to replace Justices Thomas and Alito with younger versions, and he may get to replace Sotomayor as well. If he does a good job picking replacements, as he did during his first term, there will be a conservative Supreme Court for a generation (in my dream world, we get a libertarian court that restores economic liberty).
My last comment is about immigration. For better or worse, voters (in America and elsewhere) do not like open borders. Libertarians (like me!) are going to have to figure out how to deal with this issue. Amnesty is obviously off the table. At the very least, there should be efforts to restrict government benefits so America is not a welfare magnet while also reorienting the rules to attract more people like to increase per-capita GDP.
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Image credit: Gage Skidmore | CC BY-SA 2.0.
