USA

The Shortcomings in Trump’s Foreign Policy

Donald Trump has been a very unique presidential candidate, to say the least, and his uniqueness stretches all the way to his positions on foreign policy issues. His position on foreign policy involves: building a wall on US Mexico border and making Mexico pay for it, defeating ISIS, and establishing new immigration controls to boost American wages. At face value all of these ideas, except maybe building a giant wall on the southern border, may seem like good ideas. After all, boosting American wages would mean that Americans can buy more stuff, right? Well, this is actually not true.

Boosting American Incomes

Trump’s plan to boost American wages would actually hurt the US’ economy and cause American incomes to decline. The reason for this unexpected outcome is that limiting the possibilities of immigrants to gain employment means that lower wage positions will go to Americans. These Americans will demand higher pay than the formerly employed immigrants. Since business owners will be forced to pay employees higher wages, the cost of goods will increase. This means that all Americans will be paying higher prices for goods. As a result, Americans would have less discretionary income. This would lead to demand for higher cost services declining and could further lead to a decrease in employment among higher salaried careers.

Building a Wall

Trump’s proposal to build a wall along the Mexico border would be incredibly costly, costing around $15 billion to $25 billion. Mexico’s president, Enrique Peña Nieto, has also said that Mexico is not paying for a wall at the US border. Despite President Nieto’s statements, Trump continues to say that Mexico will pay for the wall. However, Trump actually has no way to effectively force Mexico to pay for the wall. Additionally, Trump’s plan does not take into account the many underground trafficking tunnels, which could be used to smuggle drugs and people. These underground tunnels are at times very sophisticated and large. For example, US law enforcement officers found a tunnel that ran all the way from Tijuana, Mexico to San Diego, California.

Defeating ISIS

Trump’s plan to defeat ISIS is even worse than his plans to “boost American wages” and stop illegal immigration. This is because his plan to defeat ISIS is largely non-existent. The only thing it says on Trump’s website about defeating ISIS is that Trump will:

Work with allies in the Middle East and “pursue aggressive joint and coalition military operations to crush and destroy ISIS, international cooperation to cutoff their funding, expand intelligence sharing, and cyberwarfare to disrupt and disable their propaganda and recruiting.”

The big problem here is that Trump’s statement is not very specific; he does not explain how he will do any of the things he outlines. Trump claims that he isn’t being specific because he doesn’t want the enemy to know his plan, but I’m not buying this. I think Trump isn’t being specific because he does not actually have a plan to defeat ISIS, which is understandable since Trump does not have much experience, if any, in developing international policy. His experience is in business, not international politics. Additionally, if Donald Trump actually had a plan, then one would think that he would at least give a little outline or sneak peak of his plan, but he has yet to do this.

Overall, when looking at foreign policy, Trump does not seem to be well suited for the position of President of the United States of America. His foreign policies would not only hurt the US economy, but they also seem to be vague and not well thought out.

Image Source: IB Times

Why Federal Deficits Are Not Always Bad

The federal government’s balance sheet is not like that of a private citizen’s, it shouldn’t always be balanced. There are certain times when running a deficit may be the best course of action. As a matter of fact, running a deficit is often a part of fiscal policy.

Federal deficits can help the government deal with the business cycle. The business cycle consists of four phases — growth, peak, recession, and trough/depression. In order to ease the economic tensions that occur during the business cycle, governments use deficits as a part of fiscal policy. The government runs the deficit by increasing expenditures either through buying goods, providing the public with subsidies, decreasing taxes, or some sort of combination of the three. The government’s increase in expenditures causes an increase in demand. This increase in demand leads to businesses experiencing increased profits. As a result, businesses do not lay off as many people during the recessionary phase.

On the other hand, if the federal government tried to always have a balanced budget, the business cycle would create larger fluctuations in the economy. For example, during the recessionary phase a larger numbers of workers would be laid off. However, federal deficits do have consequences. If the debt to GDP ratio is large enough then this could lead to problems like the ones seen in Greece. Additionally, there is actually not much reason to run a deficit when the economy is not in or near the recessionary phase.

So what about the US’ current debt situation. Although the US government does have debt, even when the US is not in the recessionary phase, the US has been able to handle its debt due to the strength of the US economy. The high revenue to debt ratio also allows more developed states, such as the US, to maintain higher levels of debt. Additionally, the US has been borrowing money at record lows, as a result the debt to GDP ratio should decrease over time. This means that the US may be able to wait longer to address its debt problems.

But how do we know when a state has too much debt? Investor confidence is one measure. Investor confidence often has a strong impact on the economy of states and can be a good way to determine how much debt is too much debt. For example, since interest rates, which have a relationship with investor confidence, on US treasury bonds are relatively low it would be reasonable to say that the US’ stability and developed economy outweigh the US’ high debt levels. However, this does not mean that the US can just racket up debt. The US debt will have to be addressed. If it continues to rise without being addressed then eventually the debt will get too large and lead to problems for the US economy, such as decreased employment and decreased levels of investment.