By Roy C. Smith
It’s a bigger shock than
Brexit. The polls had it totally wrong, with bookmakers giving odds of 83% for
a Clinton victory a day before the election. A nationwide wave of unseen
Republican support appeared unexpectedly and elected the most negatively
regarded and controversial candidate to run for the office in modern times.
The result was not only surprising, it turned out to be
worse than any of the so-called elite establishment types regarded as their
nightmare scenario: Donald Trump not only becomes president, but Republicans
retain their majorities in the House of Representatives and the Senate, giving
the new administration legislative powers to pass all sorts of controversial
measures promised during the campaign.
Markets will go haywire for a while because of the
uncertainties. It is hard to guess where economic policies and outcomes might
end up, but as often happens when jolts like this occur, markets overdo it. In
fact, as unappealing as Mr. Trump may be to some, his actions could be
beneficial to the economy and cause markets to give him another look.
First, Mr. Trump’s domestic economic policies are not too
different from those offered by Speaker of the House of Representatives Paul
Ryan, whose “Better Way” conservative approach to tax reform and other economic
measures are essentially reasonable in a Ronald Reagan sort of way. Such
policies, like Reagan’s in 1981, might very well provide the boost the
slow-growth economy of the Obama years needs. Senate Democrats may try to force
a 60% vote to pass these plans, but popular presidents can often find ways to
get the few missing votes they need.
Second, Mr. Trump’s promise to undo much of the Obama era
regulation by executive order – which has been considerable in energy,
environmental, financial and pharmaceutical sectors -- would be very welcome in
business sectors.
Third, Mr. Trump’s approach to trade and immigration may not
result in the dire outcomes the campaign has led us to expect. He is likely to
force a confrontation with Mexico on issues related to NAFTA and “the Wall”
(i.e., the border), and with China on imports, but these will lead to
negotiations to gain some improvement in the status quo. Richard Nixon did the
same when he imposed a 10% tariff on Japanese imports in 1973 that ended in
some voluntary quotas and a victory for American workers. Nixon said that being
seen as unpredictable increased his bargaining power. Trump supporters believe
his proactive negotiating style learned in the take-no-prisoners New York real
estate markets is his true comparative advantage. It’s all about deals; if
something doesn’t work, try something else.
Mr. Trump is also likely to get his nomination for the
vacant Supreme Court position approved, bringing the court back to nine
justices. The list of nominees he has already put forward is not really
controversial at all. But, Mr. Trump’s intention to “repeal and replace” the
Affordable Care Act (Obamacare) is unlikely to happen soon. There is no
replacement plan as yet, and the Act is popular enough to make getting the 60
votes in the Senate unlikely.
Of course there is a lot to worry about with Mr. Trump in
the most powerful office in the world, starting with who his advisers will be
and whether he will listen to them. He likes powerful personalities like Chris
Christie, the New Jersey governor who chairs his transition committee, Rudolf
Giuliani, a former mayor of New York, and Newt Gingrich, a former Speaker of
the House of Representatives. They were all made in the Trump mold – brash,
bullying and confrontational, but they are people who got things done. Though
Mr. Trump makes a lot of his own decisions without relying on others very much,
these largely have to do with managing his own image and persona. He has
learned to delegate the rest of what he has to look after to competent, if low
visibility associates.
The list of names he has presented so far as potential
cabinet members or senior advisers contains very few individuals (beyond the
three mentioned) with experience of high level public service. Up until now,
many of those with the necessary skills and experience have been reluctant to
be associated with Mr. Trump, but having won, he is in a much better position
to attract the talent for his administration that he will need.
In the end, Mr. Trump will be confined by the checks and
balances of the American constitution, and the standards of presidential
conduct that the American public expects. He has been given an opportunity to
serve his country that few ever receive, an opportunity that cannot succeed
without public support, which he will have to earn the hard way – by delivering
results sufficient to retain the support. He has invoked the insatiable gods of
populism to get elected, and will have to satisfy them once in office.
At this point neither we nor the gods know what we have got
on our hands. Democracies can produce unexpected leaders when electorates are
afraid, unhappy or excited. Some of
those leaders came from backgrounds offering no training for Presidential
office at all, including Jimmy Carter, Ronald Reagan, Bill Clinton, George W.
Bush and Barack Obama and we survived them. Today, we are giving Donald Trump,
the first businessman to be elected president since 1928, a chance to see what
he can do. So let’s wait and see.
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