Trump’s Economic Proposals and Catholic Social Teaching

By Michael D. Greaney*

The Fourth Estate by Giuseppe Pellizza de Volpedo depicts workers marching with peaceful demands at the end of the 19th century

The first principle of Catholic social teaching is respect for the dignity and sovereignty of the human person under God. The primary goal is to provide an environment within which people can become virtuous. People become virtuous (more fully human) by forming habits of doing good. As Pope St. John Paul II noted, this can best be done within “an economic system which recognizes the fundamental and positive role of business, the market, private property and the resulting responsibility for the means of production, as well as free human creativity in the economic sector.” (Centesimus Annus, §42.)

People act virtuously by properly exercising the natural rights God vests in every human person, principally life, liberty, and private property. Of these, the most immediate is private property, as John Paul II implied. This is because power is essential to the exercise of rights, and power follows property.

How closely, however, do President-elect Trump’s economic proposals conform to the first principle of Catholic social teaching, and would they create an environment encouraging virtue?

First, a caveat. Specific economic proposals can be consistent with Catholic social teaching. That determination, however, is a matter of human judgment and is not infallible. For example, that workers be compensated justly is an infallible teaching, but circumstance and prudence determine the form and matter of compensation, e.g., wages, profit sharing, co-ownership, or combinations thereof. It is therefore open to debate whether a specific proposal is consistent with Catholic social teaching. With that in mind, we can look at Trump’s economic plans:

1. Tariffs on All Imports

In theory, imposing tariffs raises the prices of foreign goods and services, makes American companies more competitive, creates jobs, and halts capital and job flight. Tariffs, however, are a two-edged sword, in addition to being contrary to free market principles. Other countries retaliate, impose their own tariffs, and make U.S. goods more expensive overseas. Consequently, tariff wars often have little effect except raising prices for consumers. This reduces demand and endangers the jobs tariffs are intended to save. Imposing tariffs does not appear to be consistent with Catholic social teaching.

It would be better to make U.S. companies more competitive by transforming the wage system into an ownership system as recommended by Pope Leo XIII in Rerum Novarum. Studies by the National Center for Employee Ownership have shown worker-owned companies with profit-sharing and participatory management are typically 150% more profitable than otherwise comparable firms.

2. Extension of Tax Cuts

Conventional wisdom dictates corporations must retain earnings to invest in new capital and create jobs. This, however, decreases demand by diverting consumption income to investment. At the same time, job creation allegedly restores balance by increasing demand through additional wage income. Lowering or eliminating corporate taxes presumably enhances this process.

Job creation does not, however, restore balance, as workers continue to produce goods for which there is no effective demand. This is why Keynes advocated production of useless goods to create surpluses, and inflationary government debt to increase effective demand and clear the market of such useless, sometimes harmful products to generate investment savings for corporations. The situation is aggravated because many corporations today are often not creating jobs with their earnings but purchasing labor-displacing technologies.

As Leo XIII suggested, it would be better for workers to own the machines displacing them and replace labor income with capital income. Workers could purchase the companies employing them, paying for them with the future earnings of the companies themselves. This is the method used by Louis Kelso’s Employee Stock Ownership Plan (ESOP), which has turned millions of workers into owners without cutting pay or benefits or using workers’ savings.

3. More Control Over Federal Reserve

The federal government already has de facto full control over the Federal Reserve under the Banking Act of 1935 which gave the president power to remove the chairman at will. This is not consistent with Catholic social teaching. Government control of the central bank creates a “dictatorship” which “regulates the flow . . . of the life-blood whereby the entire economic system lives, and [has] so firmly in their grasp the soul, as it were, of economic life that no one can breathe against their will.” (Pope Pius XI – Quadrageismo Anno, §106.)

It would be better to have all citizens vote on qualified candidates for regional Federal Reserve presidents who could then be held accountable for monetary policy.  The Federal Reserve should return it to its original purpose of providing an elastic, private sector asset-backed reserve currency and liquidity for agriculture, industry, and commerce.

Monetization of government debt should be phased out and money issued in ways which create new owners.

4. Deportations to Lower Housing Prices

Deportation to lower housing prices does not appear to be consistent with Catholic social teaching, nor would it lower housing prices. The “ghost cities” of China and thousands of vacant units in Poland during an affordable housing shortage prove this point.

Deporting illegal immigrants may be consistent with Catholic social teaching but creates a tension between rule of law and respecting human dignity. It would be better to help people reform the system in their own countries, so they do not choose to immigrate illegally.

5. No Social Security or Medicare Cuts

This would appear to be consistent in theory with Catholic social teaching, but as a practical matter the system is unsustainable and creates dependency on government. A condition of dependency is not consistent with human dignity and is therefore contrary to Catholic teaching. It would be better to make the system completely need-based to provide a social safety net and make it possible for people to meet their own retirement needs through their own efforts as Leo XIII recommended.

6. Reduce Student Loan Relief Programs

This would appear to be consistent with Catholic social teaching, as there is no reason taxpayers should pay for another’s voluntary expense. To resolve this problem, reforms such as the Economic Democracy Act (below) could be adopted, enhancing personal income and allowing people to meet health and education needs from their own resources without loans.

7. Cut Energy Costs by Half

Expanding exploitation of domestic fossil fuels may be consistent with Catholic social teaching, but is increasingly expensive, leading to higher, not lower costs. The monopoly position of energy providers is also problematical. Development of alternative energy sources, such as fusion power or hydrogen fuel, might be more prudent, as well as lowering prices by increasing competition.

Overall, while they do not appear to be consistent with Catholic social teaching, Trump’s economic plans are no worse than anyone else’s. He proposes differences in degree, not in kind. The problem is in the flawed economic paradigm within which he and others are operating.

An alternative respecting human dignity and which is consistent with free market principles is the proposed Economic Democracy Act of the interfaith Center for Economic and Social Justice. Inspired in part by Rerum Novarum, the Economic Democracy Act seeks to make it possible for every citizen to own a capital stake sufficient to generate an adequate and secure income.

As Leo XIII said, “The law . . . should favor ownership, and its policy should be to induce as many as possible of the people to become owners.” (Rerum Novarum, §46.) Monetary and tax reforms would allow ordinary people to purchase newly formed assets on credit and pay for the assets with the profits of the assets themselves, thereafter, using the income for consumption.

Would Trump react positively to the Economic Democracy Act? Possibly. As Dr. Norman Bailey, Special Assistant to the President and Senior Director of International Economic Affairs during Reagan’s administration has pointed out, Trump likes to stir things up. The proposal is so innovative Trump might see it as his opportunity to make his mark on history. The Economic Democracy Act has the potential to surpass even Abraham Lincoln’s 1862 Homestead Act in scope, which President Kennedy described as “the single greatest stimulus to national development ever enacted.”

*Michael D. Greaney, as Director of Research for the Center for Economic and Social Justice in Arlington, Virginia, helped present a 1992 Vatican seminar on what became Curing World Poverty: The New Role of Property (1994). In addition to numerous other books and articles, he authored Ten Battles Every Catholic Should Know (2018) and is co-author of The Greater Reset (2022).