After handing huge tax cuts to the country’s richest people and taking away health care insurance for millions, Donald Trump took another giant step toward abandoning his populist agenda last week. Instead of having Medicare negotiate to bring drug prices down, Trump put out a plan that is focused on making foreign countries pay more for drugs.
The most immediate and direct effect of this effort, insofar as it succeeds, will be to increase the profits of the major US drug manufacturers. This is a high priority for all those people who own lots of stock in Pfizer and Merck, but it is not a real goal for the other 99 percent of the country.
It’s true that higher profits could lead to some additional spending on innovation in future years. But just like the claim that the corporate tax cut will lead to a huge flood of investment, good luck trying to find it in the data.
It is also wrong to imagine that the other 99 percent benefit when Pfizer and Merck can get more profits by making our trading partners pay higher prices. First, insofar as foreigners pay Pfizer and Merck more for drugs, they will have less money to buy US car parts or Boeing planes. Other things equal, insofar as Trump’s crusade for higher drug prices succeeds, we can anticipate a larger trade deficit in manufactured goods. This ought to cheer up his supporters in the industrial states.
It gets even worse. As people familiar with negotiations know, if you get more concessions in one area, you get less in other areas. This means that if Trump can pressure our trading partner into paying our drug companies higher prices, he will be less able to use pressure to open doors for US exports. This is yet another way in which he is abandoning US manufacturing workers to…