Donald Trump is the classic rent seeker. He made his fortune out of property speculation. He is not in the business of adding value to the wealth of the United States. His business is extracting the value created by others. His monumental buildings, his name plastered across frontages for all to see, are merely the tools for extracting the pure rents created by the people of the United States. So what’s in it for him, if he were elected President of the United States?
In his Gettysburg address on October 22, Trump laid out his plans to boost the value of his property empire. He sold the program as being a contract with the people. It was a contract, he claimed, that would deliver on the mantra of the nation’s founding fathers: governance of, for and by the people. In fact, the big winner would be Donald Trump and his ilk.
First, he plans to cut corporation tax from 35% to 15%. That would immediately raise the value of the land beneath his buildings. Land owners would capture the net gains from the tax cut in the form of higher rents. And the flow of mobile capital into real estate would give a further upward twist to prices in the current cycle of property speculation.
Second, Trump promises to curb international trade, which is supposed to create 25m new jobs over 10 years. On the contrary, if the US really did pursue such a program, trade would contract along with economies around the world. Don’t worry! The US government would then have to resort to deficit financing. This would suppress the rate of interest and deliver a further upward twist in the capital value of rent-generating assets.
Whichever way we look at it, Donald Trump would be the big winner and the people of the United States would lose Big Time.
Trump’s appropriation of Brexit
Trump claims that his victory on November 8 will be the American version of Brexit. But British Prime Minister Theresa May should not be deluded by the Republican candidate’s attempt at appropriating what the majority of people in Britain decided when they voted to withdraw from the European Union.
Sane voices need to prevail in these dangerous times. The global economy is in serious trouble, but we should not treat globalisation as a scapegoat for the failure of governments. The havoc in global markets can ultimately be traced back to the way the tax system is rigged to enrich people like Donald Trump and prejudice the interests of the people who work for their living.
None of this is explored in the US media. Why not? Because it raises a question which is taboo in political circles. Hillary Clinton would not use my critique of Trump’s economic plans because it leads to one awkward question: if cutting a bad tax like the one on corporations reduces government revenue, how can public spending be maintained without increasing America’s sovereign debt (heading for $20 trillion)? The answer is contained in my new book, Beyond Brexit: the Blueprint.
If the UK government restructured its revenue system, affordable housing would quickly become one prize. Location rents would level off. That would affect the selling price of land-based assets. And Donald Trump, who owns land in Scotland, would definitely not be happy with that outcome!