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    Thursday, August 3, 2017

    Trump's White Nationalist Agenda Will Only Make US Weaker And Poorer

    A couple of weeks ago, I wrote that Bannon was taking back control of the Trump agenda as he became virtually the last man standing among Trump's inner circle who has remained untouched by the Russia investigation. With Bannon now in the driver's seat again, we would expect to see the revival of the white nationalist agenda with the added benefit of shoring up the Trump base. And that is exactly what's happened.

    Some of the actions to shore up the base will substantive and others will not. The transgender ban, for instance, was so typical of many Trump policies, an announcement followed by no concrete action at all. And, based on the negative reaction across the Washington political spectrum, from the military to Congress as a whole, I wouldn't expect any concrete proposals to actually appear.

    It is still too early to know whether anything concrete will arise from the attempts to reduce the number of legal immigrants and restrict affirmative action in universities or, again, whether they are merely morsels of red meat thrown to the base. In both cases, there will probably be ancillary negative effects even if there ends up being no change in either policy.

    Take the case of immigration. The Muslim ban and Trump's campaign rhetoric changed the view of the whole world about coming to America. I wrote back in February that Trump's immigration policies would be a drag on US economic growth going forward. According to a Goldman Sachs' study, "Reduced immigration would result in slower labor force growth and therefore slower growth in potential GDP—the economy’s 'speed limit'. In addition, academic studies suggest there could be negative knock-on effects on productivity growth. As a result, we see immigration restrictions as an important source of downside risk to our 1.75% estimate of potential growth."

    As we have seen with tourism and border crossings, rhetoric can have an impact even without any actual implementation behind it. And a NY Times article yesterday showed just how that rhetoric is already creating a negative impact. The tech hubs in Mexico, Canada, and China are all starting to attract foreign technology and entrepreneurial talent that would normally come the US under the H1-B program that Trump has specifically targeted. Yes, there are problems with the abuse of the H1-B program, but that is not what Trump is attacking, as his hotels are exactly the kind of abusers we should be cracking down on.

    In Jalisco, Mexico, the state's minister of innovation, science, and technology called Trump, "our best marketing." As the talent moves offshore, so will companies. The article provides examples of two firms that abandoned the US for Mexico and Canada. And it won't be long before Silicon Valley begins offshoring work to those entrepreneurial centers. And one last absurdity of the legal immigration reduction is that it says it will favor applicants based on skills, education and language ability, But, as Vox points out, current legal immigrants are already actually better educated than native born workers.

    This one chart alone shows what a farce the latest immigration bill really is. And the chances of it actually becoming law are also pretty slim as the majority of both the Republicans and Democrats in Congress will oppose it under enormous pressure from the business community. But, as the increased interest of foreign workers to go to Mexico and Canada instead of America shows, the impact of this proposal will still be negative for the US economy even if the bill does not pass.

    Once again, Trump's stated policies will actually hurt his base in the real world that we live in, while providing the pretense that he is protecting them. In the end, however, we will all suffer as economic growth stagnates even further.

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