Change is the word being used to explain Donald Trump's surprising victory. But the demand for change arises when people are dissatisfied, and identifying the source of the anger is key to understanding what happened. To this economist, it was all about too many people seeing their financial condition stagnate during the economic recovery. In essence, the Trump victory was a demand for greater income equality.
Trump ran on a populist platform that argued working-class people were not being treated fairly. That is an old liberal Democratic refrain, but with a twist. In this election, it was the elite, entrenched class of politicians (not the wealthy) who are holding people down by helping well-connected groups and foreigners at the expense of the average American family.
That message resonated for good reason: Measures of income distribution show a thinning of the middle class and a large increase in the share of income going to upper-income workers. The average employee worked harder and longer, yet wages stagnated, benefits were cut, and expenses, such as health care, rose. For them, the recovery has been largely nonexistent. Those left behind want their fair share.
If you examine each of Trump's major economic proposals, it doesn't appear they are structured so workers get a fairer or greater share of income. They may even exacerbate the problem.
Income Taxes: Trump has proposed a traditional Republican plan that reduces taxes for all, but especially upper-income households. According to the Tax Foundation, the top 1 percent would see a greater-than-10 percent increase in their after-tax incomes, while the bottom 80 percent of households would see theirs rise by only about 1.5 percent. His tax plan differs little from Ronald Reagan's or George W. Bush's, and those accelerated the redistribution of income.
Unless the Republican Congress passes tax cuts strictly targeted at lower- to middle-income households, the redistribution of income will continue.
Wage Policy: Other than tax cuts, the only way for the government to directly affect income is through legislation. The most obvious way is increasing the minimum wage. It is doubtful the Republican Congress will do that.
Spending: Trump also mirrors Reagan and Bush by proposing large spending programs. He wants to greatly increase infrastructure spending and add a child-care entitlement. While both may be laudable, as we saw during the Reagan and Bush administrations, tax cuts coupled with spending increases create sharp increases in the budget deficit.
Trump's tax and spending plans run counter to traditional Republican values of fiscal responsibility and pay-as-you-go budgeting. Will tea party members really vote for exploding budget deficits?
Meanwhile, Democrats can derail Trump's plans by filibustering the bills. Republican Senate leader Mitch McConnell wrote the playbook on that.
It is not clear that Trump's policies accelerate income growth of his lower- or middle-income followers. And, his proposals could face opposition, not just from Democrats, but also from Republicans who believe in controlling spending and reducing the deficit.
Trade: Free trade is one of the major bête noirs of Trump's followers. While free trade grows an economy, ask former factory workers if they think free trade is good. They lost their jobs while others benefited.
Trump wants fair trade rather than free trade. Is it really likely that countries will willingly reopen trade agreements they like? And if tariffs are placed on Chinese or Mexican goods, isn't it likely those countries will retaliate? A trade war could easily create a recession. That would hardly help Trump's followers.
Immigration: Given that American businesses need foreign laborers and immigrants, a mass deportation could devastate the economy. Will Trump's followers take the jobs of the deported? If not, how are they helped? A rational, growth-focused immigration plan would not include restricting immigration and mass deportations.
Obamacare: The Republican Party now owns the health-care issue. After years of voting to repeal the Affordable Care Act, they now have to do something.
Don't look for Congress to repeal Obamacare anytime soon.
Health-care reform is enormously complicated. What do you do with the millions of people who have ACA-subsidized health insurance? Without the subsidies, most couldn't afford coverage. You cannot just cherry-pick popular elements, as they are costly and must be paid for.
Replacing Obamacare means devising a new, comprehensive insurance program that doesn't greatly harm those already covered by the ACA, many of whom are Trump supporters. Good luck with that.
Change is a great campaign slogan, but actually effecting change in the real world is hard. Trump's political risk is that his economic proposals don't appear to greatly benefit his supporters.