Editor's note: This story was originally published in late October. With Ted Cruz contending with Donald Trump for the delegate lead for the Republican nomination, we thought it was worth another look to see what might happen to the U.S. economy if Cruz were to win the Presidency.
Can you imagine a future where Ted Cruz becomes the Leader of the Free World? Cruz Control would certainly spur major economic changes, and having the junior U.S. Senator from Texas as our next Commander-in-Chief is actually not outside the realm of possibility.
“Donald Trump’s presence in this race has turned all the conventional wisdom upside down,” said Joel Sawyer, Republican digital consultant at Campaign Grid, a digital political advertising firm in Washington, D.C. “Any of the middle- to top-tier candidates have a shot, and I would put Cruz on that list.”
Many Americans will form a more concrete opinion of Cruz when they get a run-down of his economic outlook during the third Republican presidential debate on Wednesday (which TheStreet will be covering live). And while a Cruz presidency remains unlikely, it’s worth imagining what the U.S. markets and economy would look like were that to become reality.
Cruz has a few concrete initiatives that could alter this country's economic landscape. Among his most significant proposals are eradicating the Export-Import Bank, switching to a flat tax, balancing the budget and euthanizing Obamacare. Those policy bullet points may be his biggest asset, emphasizing his serious experience and specific game plan.
“His strategy is he wants to be the candidate that Trump and Carson voters come home to,” Sawyer said. “He’s counting on that anti-establishment bloc to come home to a more traditional candidate in the end. Even though he counts himself as an outsider, which to some extent he is, he is a sitting U.S. senator with a voting record.”
Of course, ideas are more valuable when realizable, and a glance at the feasibility of his proposals is in order. It’s time to take a deeper look at Cruz's plans.
End the Export-Import Bank
Cruz wants to end the practice of using taxpayer dollars to subsidize what he calls "corporate fat cats" by ending the Export-Import Bank, which provides financing to overseas customers buying expensive products from American manufacturers such as GE and Boeing.
This is a stand against what Americans see as corporate privilege, according to Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University and an expert on the Ex-Im Bank. She calls the corporate favoritism provided by Ex-Im “a very unhealthy marriage -- with unfair privileges, given to a few at the expense of the majority.”
This anti-corporate cheerleading has become in vogue since the Great Recession, when banks and entitled large corporations were seen as gaining advantages to the detriment of the common American tax payer. Cruz's decision to highlight this initiative is sending a clear message.
“It is picking a position on the broader issue of cronyism,” de Rugy said. “I do think it’s important. In a sense, the need to come out against cronyism was made very pressing.”
(It's worth noting that Cruz's wife, Heidi, has had a successful career at Goldman Sachs, a corporation that has received governmental favors in the past. And historically, Cruz has received $69,350 in campaign donations from Goldman.)
The advantages to putting the kibosh on Ex-Im are clear and elevate Cruz's favor to a wide swath of the electorate. But even though Cruz's initiative is, at first blush, a crowd pleaser, it's not universally approved. Corporations who benefit from Ex-Im float the possibility of economic havoc were it to be eliminated.
Others suggest ending Ex-Im could put U.S. corporations at a significant disadvantage, according to Robert Ferrari, who teaches economics at Rowan University.
“As long as we are operating in a global environment, to end the Ex-Im bank while other countries have their methods of supporting their trade would be a significant negative to U.S. exporters,” he said, saying it would reduce U.S. exporters’ revenue, profits and U.S. taxes paid.