A demonstrator stands on a chair and yells as Republican presidential candidate Donald Trump delivers an economic policy speech to the Detroit Economic Club, Monday, Aug. 8, 2016, in Detroit. (AP Photo/Evan Vucci)
A fundamental difference between conservatives and liberals is how effectively they believe government manages resources. Conservatives tend to think the government is a poor steward; liberals take the opposite position.
These are oversimplifications, but they matter when it comes to analyzing Trump’s recent economic speech and help illustrate why conservatives like me who didn’t support him in the primaries are increasingly gravitating toward his campaign. In particular, Trump made several points that are worth highlighting.
The first was his review of the economic facts underscoring the election year: Inequality is high, policy uncertainty is high, labor force participation is low and economic growth is low.
In fact, we’ve seen the weakest “recession recovery” in recent history. Research by economists Lee Ohanian and Harold Cole showed how government policy (in particular price controls) prolonged the Great Depression. Could current government policy be similarly holding back a genuine recovery?
The second was his tax proposal, which would include a major simplification and reduction of marginal rates (from seven to four).
High corporate tax rates can deter existing companies from making profitable investments. The costs of these taxes are clear: They reduce firms’ physical and human capital investments – the latter of which is desperately needed at a time when there is potentially a “skills gap.”
Lowering tax rates provides individuals with more money to use as they see fit, rather than entrusting it to the government. In a similar vein were his proposals to decentralize education and make child care more affordable. Improving access to child care and parents’ ability to provide for their children is integral to a child’s development in the early years.
The third was his emphasis on doing more at home, in the U.S., which means producing more of our own energy and manufacturing things that we don’t need to trade for. The theory of comparative advantage, in which each country will tend to produce more of the goods and services in which it has the upper hand, is mainstream in economics. But it doesn’t always hold up when there are large distortions, as there arguably are today. The shale boom provides a glimpse of economic benefits when we can produce more stuff – energy or goods – domestically.
A demonstrator stands on a chair and yells as Republican presidential candidate Donald Trump delivers an economic policy speech to the Detroit Economic Club, Monday, Aug. 8, 2016, in Detroit. (AP Photo/Evan Vucci) 
