Screen shot from last night’s final Presidential Debate
As aired by C-SPAN

Donald J. Trump is certainly not an articulate man,  a weakness that is especially troubling for an aspirant to the highest political office in the United States. His many broken sentences, interrupted thoughts, uses of rhetorical phrases that do not add to the thought he is trying to express, and a sometimes inappropriate choice of words lead one to suspect he is not a man of great learning, but instead just an “ordinary Joe”. An ordinary Joe who is also a billionaire.

The Weaknesses of Donald Trump

All of this was on display last night in the third and final presidential debate for campaign 2016. Nevertheless, his performance still represented a great improvement over his previous two boxing matches with Hillary Clinton, particularly since he did not take the bait of insults offered by Clinton quite as often as in the previous two debates. Every time he has taken such bait in the past, his bruised ego led him to defend his character and waste time that could have been used on issues. Every minute he spent defending himself was a minute taken away from explaining his views of the issues, and people would have to wonder just how much a command he had of our serious and increasingly dangerous problems.

He was not perfect last night. Hillary really pushed his button when she described him as Vladimir Putin’s “puppet.” Rather than simply shrugging off a patently ridiculous accusation, Trump repeatedly interjected while Clinton spoke, “You’re the puppet! You’re the puppet!” Trump’s reaction was to answer a patently ridiculous accusation with one that was equally bizarre. I had the feeling I was witnessing an event on an elementary school playground.

Nevertheless, Trump was somewhat better and did spend an increased amount of time discussing the issues. I believe this was partially because of the expert performance of moderator Chris Wallace from Fox News, who constantly tried to steer the discussion back toward the substantive issues. I particularly found the exchanges on economic policy informative and useful. In his preface of a question to the candidates, Wallace noted

Secretary Clinton, in your plan government plays a big role. You see more government spending, more entitlements, more tax credits, more tax penalties. Mr. Trump, you want to get government out with lower taxes, and less regulation. … In this overview please explain to me, why you believe that your plan will create more jobs and growth for this country, and your opponent’s plan will not.

Clinton then proceeded to advocate the status quo, progressive vision of a continued and more intensive government management of the economy.  For all the good it has given us over the past eight years. She gave her usual laundry-list for additional government spending programs such as providing free college education for everyone, rebuilding infrastructure, jobs programs, creating clean energy, pre-school education, etc, etc. Particularly revealing was her explanation about how her administration would pay for all of this new government economic activity. That explanation revealed a great deal of economic ignorance about how capital for investments creating growth is raised and allocated.  She stated she wanted almost all the financing for this new government spending to come from the richest, the fabled “1%” ( or 2% or 5% or whatever), because that is where most of the income gains since the end of the Great Recession have gone. She says the wealthy would finally pay their “fair share.”

Really? As I discussed in my post Do the Rich Pay Their Fair-Share of Taxes?, the wealthiest 2.4% paid fully 48.9%, almost half, of all income taxes in 2014, according to the IRS. The top 40% in income paid 83.9% of all income taxes, while those in the bottom 40% on average had negative income tax as the government paid them money! Can the wealthiest then be said not to be paying their “fair-share”?

What Hillary Clinton does not seem to understand is what such a large increase of taxes would do to the economic health of the nation. Because the income of the very rich  is far more than what they actually consume, most of the excess goes to either investments or to charitable donations. Because this is the case, if Clinton were to raise their taxes by x%, one would expect them to reduce their investments by x% rather than reduce what they consume. The ability of the U.S. economy to grow would be stunted. The more individuals earn, the more they save, which goes directly to investment one way or another. This is a proposition supported by a Federal Reserve research paper entitled Do the Rich Save More?. By saying she believes taxes should be greatly increased, Clinton is saying she believes the federal government would do a much better job of allocating scarce economic resources than private companies would. This is a proposition refuted by history. (Take a look at the history of socialist nations, such as the Soviet Union.)

In Trump’s answer, he initially noted that federal tax revenue would have to greatly increase to pay for all of Clinton’s spending programs, perhaps doubling taxes.Then, overlapping a previous discussion about U.S. alliances, he said we would have to require our allies to pay their share of our joint defense bill, an insistence he said was misunderstood by Clinton as meaning he advocated getting out of those alliances. Not that reducing our defense expenditures by having allies pick up part of the bill would affect total  government expenditures by much. Defense only accounts for about 16% of the total federal budget. Mandatory entitlements take up fully two-thirds of the budget, and is also the fastest growing part of the budget.

He then focused his attention on the North American Free-Trade Agreement (NAFTA), and other free-trade agreements, which have facilitated the exporting of jobs to other countries. He declared we would renegotiate NAFTA more to our advantage or we would walk away from it. However, the villain in the piece causing the loss of jobs is not primarily the free-trade agreements, but the federal government, whose economic regulation and high taxes restrict corporations’ ability to rapidly move freed labor and capital to new production of other goods. By substituting foreign suppliers for domestic, the U.S. obtains those goods at lower cost than if the U.S. produced them. In addition foreign trade frees up the capital formerly used to produce the substituted product for investment elsewhere. Absolutely any free-trade agreement would cause displaced workers, a fact that could not be changed by any amount of renegotiation. It would be much better to criticize how the federal government limits the rapid redeployment of displaced labor and capital to new industry.

Trump was on much sounder ground when he next said he wanted to greatly reduce both individual and corporate taxes. Just as Clinton’s increased taxes would reduce total investments, Trump’s reduced taxes would release more assets for investment. Clinton then tried to make the argument that all the new government spending she wanted would in fact be investments in the economy that would generate new growth. Yet all of history screams that, due primarily to the complexity of the economy and to the fact politicians tend to “invest” for other than economic reasons, large government direction of investment flows tend to be disastrous. (Also see my post The Dirigiste Mind.)

What I wrote above is what I believe is the core of the economic argument between Trump and Clinton: Clinton wants more government control of the economy and Trump would depend more on free-markets. Clinton is very much a representative of the status quo who, at least domestically, would continue Barack Obama’s domestic policies. Concerning all of our formidable foreign policy problems and the differences of the two candidates on those, I will write on those in a future post.

Unfortunately, Donald Trump was not capable of pouncing on all of Clinton’s misapprehensions about the nature of economic reality. He has a few of those himself, especially concerning foreign trade. It would seem that Trump himself has a severely underdeveloped ideology that is catastrophic for any would-be politician, let alone one who would be the President of the United States. The only thing that is keeping him in the game is that Hillary Clinton is (1) a habitual, inveterate liar (William Safire as far back as 1996 noted that she “is a congenital liar”) whom very few trust, and (2) an individual who has seriously damaged the security of the United States as Secretary of State.

Does Trump Have a Chance?

Republicans would have to admit at this point in time that Donald Trump is a long shot for president. The RealClearPolitics average of major polls currently has Clinton over Trump by 6.4 percentage points, 48.5 to 42.1 as of October 19. Will Trump’s debate performance last night change the odds? We will have to wait a day or two to find out, but right now the outlook does not look favorable for Trump. He has particularly been condemned for saying he would not necessarily accept the results of the November election, that he would tell us at the time whether he would or not.

Nevertheless, there may be some basis for Trump to hope yet. Consider the reactions to the debate in the Fox and Friends coverage of reactions early this morning, as shown in the video below.

Fox & Friends early morning report, October 20, 2016

If Clinton should be elected, the event will be dripping with the irony that an electorate so rebellious toward the status quo would confirm its hold on power with their votes. At the present time I have only one certainty: with Clinton in the presidency, Republicans had better retain the House and hold any Democratic gains in the Senate to below what would give them 60 votes. For in that case the only hope for those who hate the status quo is legislative gridlock to check Hillary Clinton.

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