U.S. President Donald Trump’s economic policies risk creating growth that mostly benefits the rich and aggravates income inequality in the United States, Nobel Prize-winning economist Angus Deaton said.
Trump was swept to power on promises of help for poorer Americans but Deaton said his proposals to roll back regulations on finance and industry and cut healthcare benefits would mostly help corporate groups with political influence.
Trump’s plans to cut taxes and raise trade barriers, if enacted, might give a short-term income boost to some workers but would not deliver the long-term growth that is essential for mitigating the effects of inequality, he said in an interview.
“I don’t think any of it is good” for addressing income inequality, said Deaton, a Princeton University professor, who won the Nobel Prize for economics in 2015 for his work on poverty, welfare and consumption.
He was speaking on Friday after addressing a meeting in Italy of finance ministers and central bankers from rich nations at which inequality topped the official agenda.
The political shocks in 2016 of Trump’s U.S. presidential election victory and Britain’s Brexit vote have been linked to widespread dissatisfaction with stagnant living standards for many workers, forcing policymakers in many countries to grapple with ways to narrow the gap between the rich and poor.
Income inequality has grown sharply in the United States over recent decades and the World Bank says that at a global level the gap has widened too since the 1990s, despite progress recently in some countries.
The Trump administration says it will lift U.S. economic growth to more than 3 percent a year and bring more manufacturing jobs back to U.S. shores, helping workers.
But many economists say growth like that will be hard to achieve with employment already high and the baby boom generation retiring in large numbers too.
Deaton said restoring stronger economic growth, preferably through encouraging more innovation, would help reduce the anger among many people who feel they have been left behind.
“A rising inequality that probably wouldn’t have bothered people before does become really salient and troublesome to them (during periods of low growth). It poisons politics too because when there are no spoils to hand out it becomes a very sharp conflict,” he said.
Deaton said he did not think inequality was inherently bad as long as everyone felt some benefit from growth.
“But I do care about people getting rich at public expense,” he said, referring to political lobbying by business groups.
Source: Reuters (Writing by William Schomberg; Editing by Ros Russell)