One-year score card for Trump


by Alasdair Macleod, GoldMoney:

We understand our politicians to be human, with much that that implies. In a democracy, politics is a competitive business, which means that generally well-balanced individuals tend to succeed, while those who are obviously unbalanced do not. And as for political power corrupting individuals, that is normally limited by the obligation to periodically seek an electoral mandate. That, at least is the theory, but in late-2016, the election of President-elect Donald Trump caused us all to question these fundamental assumptions. 

It is now almost a year since president Trump took office, so it’s a good time to assess his impact both at home and abroad. To some extent this task is made easier by the hurried publication of Fire and Fury, by Michael Wolff. Or should that be, made the assessment more difficult?

Wolff’s book is certainly controversial. It paints a picture of rival camps in the White House, all telling Trump only what they want him to hear, making it palatable with flattery while briefing against rival camps. It paints a picture of Trump as a self-centred, media-obsessed, child-like slob who retires to bed at 6.30pm with a McDonalds hamburger, calling his billionaire friends and others on the telephone to constantly seek their reassurance and confirmation that he is a great guy. In short, Wolff alleges Trump is wholly unsuited to the office.

Unfortunately, much of it rings true, evidenced most recently by Trump’s clumsy response to stifle publication, which only served to make Wolff’s book the hottest item in all the bookstores throughout America. His subsequent tweets, proclaiming himself to be a genius, “and a very stable genius at that”, puts him on a par with Kim Jong Un when it comes to bizarre outbursts. With Kim the Rocketman, as head of a repressive police state threatened by America, there are reasonable political explanations for his behaviour. Not so apparently, with Trump.

At this rate, as Trump’s presidency unfolds, only the true anarchists, those that want to see the establishment crash and burn, will be left supporting him as he declines into failure. Many ordinary Americans, fed up with all the alleged corruption in US politics, and the very obvious erosion of their personal freedoms, voted for him hoping for change. For this change to succeed, a Machiavelli combined with an expert in classic economics would be required, qualities unfortunately not evident in Trump.

There are two possible ways ahead for the Presidency. First, the sacking of Steve Bannon, and the subsequent pressure put on Breitbart’s shareholders to remove him as executive chairman will have created a well-informed and dangerous enemy needlessly. It is commonly understood that in politics you must keep your enemies close to you, and a suitable appointment anywhere is the means of doing just that. Instead, it is unlikely we have heard the last of Mr Bannon, who is now free to testify against his prime enemies, Jared Kushner and his wife Ivanka, over meetings with Russians. Bannon should not be underestimated as a future danger to the presidency.

The months ahead will certainly be interesting, and with Bannon sniping from the side-lines, Trump may become even more unpredictable. The second, alternative, way ahead will require Bannon to disappear and let the deep state in the White House and Langley gradually take control over Trump and his family.

If Trump survives, it will be under these conditions, and he will likely become little more than a figurehead, ranting to little executive effect. Though this could apply to some areas of policy and execution, economics remains a central problem. Trump takes a simplistic businessman’s approach. He believes that American businesses should be protected from foreign competition and that businesses should pay less tax. He reckons that these two policies will create jobs and make America great again. The effect on the budget deficit is either ignored, or airily dismissed as tax cuts being positive for tax revenue in the long run.

This has even the neo-Keynesians and monetarists deeply worried, and for once they have a point. Tax stimulus for them is appropriate when the economy is in recession, not when it is already expanding. At this stage of the cycle, the budget should be moving into surplus. It is not. Furthermore, Trump’s tax policies are going to increase it at the worst possible time. Economists at the Fed and elsewhere will expect this to result in rising price inflation, for which interest rates will have to be raised to control it, triggering the next credit crisis. 

Furthermore, if Trump introduces trade tariffs on imported raw materials, semi-manufactured, and/or final goods, he will end up raising consumer prices even more at a time when domestic capacity has run out of headroom. Trump fails to appreciate that tariffs are a tax on consumption, raising prices and harming consumers. Only now are mainstream critics beginning to express their concerns at the potential economic consequences of Trump’s overly simplistic approach to trade protection and tax.

The international dimension

Trump’s election was so unexpected that world leaders have beaten a path to his door, not to curry favour (except perhaps the British, seeking to re-establish the “special relationship” that had declined in the Obama years), but to suss him out. Doubtless, Putin would have visited him as well, but the furore over real or imagined Russian intervention in the election made that impossible. Instead, President Xi visited Trump at his private residence at Mar-a-Lago at an early opportunity. It was during the state dinner that Trump launched the attack on Syria’s Al Shayrat airfield, and he read the result to the assembled Chinese dignitaries off the tape. One cannot imagine the Chinese behaving like that, and what Xi thought of it is not recorded.

The visit by Angela Merkel, the de facto leader of the EU post-Brexit, was something of a horror show. Trump complained about unfair competition from BMW, and that Germany wasn’t pulling her weight in NATO. Furthermore, America expected Germany to cease trading with Russia, not only a near-neighbour, but a very important one for German exports and energy supplies. Mrs Merkel’s body language said it all, and no public handshakes or cheek-kissing were recorded. 

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