The story goes that President Truman assembled a team of economists to advise him. Each of them argued that “on the one hand” the government should do this, while “on the other hand” they should do something different. A frustrated Truman finally shouted in desperation: “Find me a one-armed economist!”
It is certainly the case that economists, on occasion, aren’t all that clear about the best policies. But many of us agree on a lot more than you may imagine. Here are some timely examples:
Tariffs are almost always bad. Sure, they might be strategically applied where trade imbalances arise from unfair practices, but the manner in which the Trump administration is going about instituting arbitrary tariffs on friends and foes alike is, to put it mildly, misguided. It will undoubtedly lead to higher prices, lower employment, and slower growth. Economists have understood for centuries that protectionism is harmful for everyone — including the workers and industries it purportedly is trying to help.
Governments can be inefficient and bloated. There are too many absurd regulations, and too many employees who spend more time holding back economic activity than facilitating it. But the “chainsaw” approach we have been witnessing jeopardizes both economic growth and our safety. I suspect that I am among a sizable number of economists who would support, say, a carefully considered 10% reduction in force — rather than the wholesale layoffs we have been seeing. And doesn’t basic human decency demand a modicum of empathy for those affected?
There is a point beyond which federal and other taxes are so high that they create significant labor disincentives. However, as a rule of thumb, if your take-home pay is close to half of your gross pay, you are unlikely to either work less or to move to a lower-tax state or country. For the richest Americans residing in high-tax states (the top tax rate in California, for example, is 12.3%), they are around that right now. Continuing the Trump tax breaks from 2017 (which lowered the maximum tax rate from 39.6% to 37%) isn’t a terrible idea, but to further reduce marginal tax rates for the most affluent would be unfair and inefficient.
The independence of the Federal Reserve Board is a cornerstone of our economy. While presidents have sought to intimidate the Fed into doing their bidding, Fed chairs have typically acted beyond politics. Chairman Jerome Powell has done a remarkable job navigating inflationary pressures and keeping us out of a recession. Should President Trump follow through on his threats to remove him, the recent chaos in financial markets will pale by comparison.
For 75 years, the partnership between the federal government and research universities has fostered economic prosperity, while enabling us to live longer and healthier lives. Schools spend a great deal of money to build and maintain laboratory spaces — around 60 cents for each dollar of a government research grant. But the government intends to cap its administrative contribution at just 15 cents per dollar, a level that would severely limit future investments in science facilities. If the intention is to undermine growth and innovation, this is an excellent start.
Imposing the Trump administration’s will on colleges and universities by withholding federal funds is a highly problematic proposition. I have been appalled by the way many institutions handled protests that clearly manifested Jew-hatred, and I have long lamented the “woke” mentality prevalent in certain academic disciplines that has served to impede the pursuit of knowledge while stifling genuine debate. But I can’t think of a single economist who would agree that shutting down research labs and threatening student financial aid is the solution. What’s more, President Trump has for decades made his distrust of “elite” higher education well known. To justify his actions in the name of “protecting the Jews” places us in an all-too-familiar scapegoat role.
The president likes to remind us that he graduated from the University of Pennsylvania’s fabled Wharton School. I taught there and know how exceptional their students are. They ask incisive questions and seek out the truth. President Trump has apparently forgotten much of what he studied at Wharton. Maimonides, the most extraordinary mind in Jewish history, extolled the virtues of lifelong learning.
It may be time for our president to go back to school.
Morton Schapiro served for more than 22 years as President of Northwestern University and Williams College, where he was also Professor of Economics.
