Yesterday, the 2016 Republican Platform was approved at the RNC in Cleveland. As expected, the document’s language on economic policy reflects positions taken by Donald Trump. Mostly. But the Party surprisingly endorsed a reinstatement of the Glass-Steagall Act of 1933. This is an unforeseen stance, following years of disinterest in Glass-Steagall by the GOP.
Below we examine this unexpected turn of events and offer some Glass-Steagall deprogramming and review the other tax and regulatory proposals in the platform.
Budget and Tax Provisions
The GOP platform restates the Party’s longstanding support for a balanced budget amendment to the Constitution, which would cap spending to an “appropriate” percentage of GDP, as well as mandating a super-majority in Congress to approve any tax increase. The document adds that all provisions in a budget must be subject to a test of whether the proposed expenditure is “within the constitutional scope of the federal government” and whether it can be justified by foreign borrowing. With regard to debt, it supports imposing caps on all future debt and accelerating debt repayments.
Similar to the 2012 platform, this one reasserts that a consumption tax must be accompanied by a repeal of the federal income tax under the 16th Amendment. The document also calls for lowering the corporate tax rate to be “on par with, or below, the rates of other industrial nations,” with a switch to a territorial system of taxation.
While supporting greater financial regulation under Glass-Steagall, the platform pushed back at every other regulatory efforts. It allows that sensible regulations could be compatible with a healthy economy but claims that regulators are at present “exploiting everyone.” The platform pledges to minimize intrusive regulations with an eye to protecting small businesses and new enterprises. Dodd-Frank is a “legislative Godzilla” used by the Democrats to “crush small and community banks.”
It again calls for an annual audit of the Fed as way to improve transparency and accountability to the Fed, particularly in its open market operations and its interactions with foreign banks. The platform criticizes the CFPB, a “deliberately-designed rogue agency” that answers to no higher authority, proposing that it be abolished or subjected to Congressional appropriation.
Glass-Steagall Pulled from Rabbit’s Hat
It bears mentioning that much of Glass-Steagall remains in place to this day. Throughout the 1990s, several key elements of the Act regarding the separation of banking institutions and securities firms were repealed. It is these provisions that are now under consideration of being reinstated, despite the blunt language that refers to reviving the entire Act.
A cynical take says Trump’s proposal could be a Trojan Horse loaded with loopholes for large financial institutions. Combined with the fact that previous drafts of the GOP platform made no mention of Glass-Steagall, some have questioned how thoroughly the Trump campaign vetted the proposal.
Since the financial crisis of 2008, there have been several bipartisan proposals to bring back Glass-Steagall’s restrictions on interactions between commercial banks and securities firms but none has gained serious momentum. Congress has held no hearings on Glass-Steagall provisions since the financial crisis, let alone floor action.