MarketLine Blog

Donald Trump: Incoming president likely to create bigger mess than his hair

Donald Trump’s policy detail is rather thin, but based on multiple and contradictory things he has said on the campaign trail, shrinking of the state via both reduced tax income and federal spending while promising to build a border wall and renovate infrastructure, protectionist stances on international trade agreements while promising a Brexit Britain a comprehensive deal, an expansion of dirty industries at the expense of environmental regulation, and undermined central bank independence.

Donald Trump’s election to the Oval Office was considered one of the most divisive and bitter elections in recent memory, with much focus on the candidates’ personalities rather than policy. Trump himself was reticent on policy details, with only vague promises to restore things to various superlatives. His economic policy web page listed many of the ails of the Obama administration, but offered only a handful of bullet points about what the Trump Pence ticket would do to rectify the situation.

Trump is now president with a Republican hold on the House of Representatives, Congress, and potentially the Supreme Court come 2020. As such, it could be expected that much of his policy will be centered on Republican ideological folly, with self-defeating government cuts and a bonfire of regulations. The Affordable Care Act will be scrapped, taxes rolled back. However, coupled with promises to build a massive border wall with Mexico (he did say he’d get Mexico to pay for it but that seems delusional) and increased military and infrastructure spending, the conclusion is that the US deficit and national debt will continue to balloon.

There are two policy areas in particular which could have a profound impact not just in the US, but globally. Climate change was hardly discussed during the campaign, but Trump is considered a skeptic, so hard fought multilateral agreements could be snubbed, particularly as Trump plans to unleash fracking and coal industries in a bid to meet his fantastical job creation numbers. This could be detrimental to alternative industries in the short run, but long term US intransigence to a climate deal could make it very difficult to keep temperature increases below the dangerous 2 degrees.

The second is the protectionist, anti-globalization rants that resonated with the Rust Belt states. Trump has been bellicose regarding NAFTA, seeking renegotiation or even scrapping the deal, and other negotiated deals with Asia-Pacific (TPP) and the EU (TTIP) will also be terminated. His earlier campaign rhetoric focused much on China’s manipulation, blaming them for outsourcing of jobs, violating WTO rules and manipulating currency. While there is some truth to this and the decline of US manufacturing, automation is more prevalent here than outsourcing for job losses.

The US has elected a man for his business acumen when his businesses have gone bankrupt several times, is currently being sued for his Trump University, with little to no experience in government or policy- and of course it is a false equivalency that a government’s habits are analogous to either a household or firm. Trump’s solutions to some genuine problems are rooted in 20th century orthodoxy, and it is more than likely to accentuate the problems rather than help them.

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