Friday, November 11, 2016

Making America Great Again - Trump Style

There is lot of grief among Democrats that Hillary got more popular votes[1] than Trump and this is the second time Democrats are at the receiving end; first being Al Gore in 2000. Facts are with Democrats and there is a merit in the argument that popular vote should matter. But by American Constitution, a president needs to get 'certain distribution of votes'; not necessarily popular votes. Hence, it was good that Hillary and Obama urged Democrats to accept the result. Replacing electoral college system by popular vote is not on the table. So, unless we find Russian hackers who helped Donald Trump win Mid-West; reality is Donald Trump and Republican Party have got a clear mandate from Americans to make America Great Again.[2]

Job of an election candidate is to 'influence voters'. You do it either by populism or by riding a political movement or by touting an ideology. In some of those mechanisms your policy proposals are clear (movement or ideology paths) while in case of a populism candidate, your policy proposals do not matter much. Hillary turned out to be neither a popular politician nor a movement leader; just the status-quo candidate of the party apparatus. For all character flaws of Trump which got exposed during the campaign, clearly Trump turned those flaws into 'campaign dirty laundry to be forgotten when election is done'. By doing that he has relatively freed himself from the burden of carrying out any of the outlandish proposals he talked during the campaign.[3] However, he is going to face the problem of outlandish expectations from Americans. President Obama faced the same issue in 2008 when he won presidency and Dems won both House and Senate. We all know what happened subsequently. Given that, Trump's political success will depend on how he manages expectations. That does not mean he can afford 'not to do anything'. Question is what will he do or what would unfold in a complete Republican era? That is where the story of "Make America Great Again" starts.

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There are number of possibilities with Trump Presidency. To start with, his personal failings - like falling for other women while in the office, or myriad financial dealings or entanglement of court cases; any of these things can trip the Trump Presidency. Next danger is corruption scandals of his own as well as of his cabinet members since some of these folks like Chris Christie are notorious for such scandals. Add to that the possibility of Trump business being run by his children while in the office - it will be difficult to avoid the conflict of interests or corruption opportunities.

Third trap which a successfully Trump Presidency needs to avoid is the problem of Law and Order. The bully pulpit of Presidency talking bigotry, racism, misogyny; will be considered a license to do same things on a much larger scale by the lower rug of Trumpian political hierarchy. Just think of Black Lives Matter organization colliding with Rudy Giuliani Justice Department. What do you see - possibly blood bath. Any time Law and Order goes haywire, modern Capitalism ceases to work.

This brings us to the fourth danger of Trump Presidency - foreign policy. Trump is naturally going to be a buddy in the club of authoritarian figures like Putin, Xi Jinping, Erdogon, Egyptian president Sisi, Israeli PM Natenyahu and Indian PM Modi. I can see how Putin will counsel President Trump in not rupturing the Iranian deal for his Ayatollah friends. But the question is how stable that equilibrium among giant egomaniacs will be? Any time you are talking 'land or mineral resouces', the real estate developer in Trump will make it difficult to cut a deal. Same applies to the Paris Accord.

Meanwhile, any foreign engagement which does not result in pouring American Soldiers to a foreign land will save the Trump Presidency. One thing is for sure - any Presidency, even the mighty presidency of Donald Trump - will immolate when American Soldiers start dying in foreign lands with no apparent gains. That is what the bi-partisan history of LBJ and George Bush shows us. American Politics has moved forward - even Republicans in 2016 cannot accept foreign adventures like Bush which requires putting American soldiers in foreign lands.[4] I doubt President Trump will put boots on ground. If by any chance he starts a 'wrong war', his presidency will immolate the same way as like Bush.

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If we see Trump Presidency avoiding all these unpleasant traps[5], we reach a happy valley. In this world we will have Paul Ryan championing at least One Trillion Dollar Tax Cuts for the magical 4% growth rate. America will be great again at that point. How do we pay those tax cuts? Of course by cancelling Obama Care! But then what about the health coverage loss for many folks? Republicans will dismantle state boundaries to cross sell those 'catastrophy only insurances' and that will solve the problem according to Republican orthodoxy.[6]

The grandeur of Trump Presidency will not stop at the prosperity unleashed by tax cuts. After all Donal Trump is from Real Estate Industry. So we are talking here at least One Trillion Dollar Infrastructure spending, all by private developers with Fed putting only minimal corpus funds. America will be great again when we will have Trump Bridges, Trump Roads and Trump Airports dotting all over America. With America's transformation under way, President Trump will ask Americans to have the hard conversation about immigrants - who stays[7] and who gets deported.

The success of Trump Presidency will depend on whether it brings prosperity to larger America. The larger White America might have elected him for number of reasons - less bad than Hillary, or because he will appoint Conservative Supreme Court judge, or because he is not a politician, or because he is the cultural anecdote to the PC culture personified by Democrats. But one important reason is the expectation that he will bring jobs to the Rust Belt.[8] There is a good chance that as economic recovery induced by low Fed interest rates reaching the point of diminishing returns, unfunded tax cuts and uncontrolled spending will reinflate the economy. Assuming that inflation is controlled, we may see a larger prosperity.[9] But it is hard to conceive how all that prosperity will translate into jobs in Rust Belt in today's globalized, heavily automated world. If President Trump halts all of trade with rest of the world, that too not necessarily result in manufacturing jobs coming back to MidWest.[10] It is understandable that Trump will not do new trade deals, but the Republican Party machinery is completely dependent on 'free trade'. No one has any idea, including Trump, how he is going to resolve this tension between 'pro-trade' and 'anti-trade' policy choices. On the other hand if out of hand deficit starts inflation which is not controlled or by politicizing Fed, interest rates are hiked prematurely; we are talking a recession. In a recession there is no way jobs are coming back to Rust Belt as well. So whether it is recession or economic boom; we are not seeing any employment gains necessarily in Rust Belt.[11] As a result unless President Trump is able to divert attention of White American Voters to non-economic issues; it is difficult to visualize he will continue his mandate in the second term purely on economic agenda. May be he can argue then "how the system is rigged"! But that journey from "Make America Great Again" to "how the system is rigged" will not be pleasant or palatable for a larger population for sure.

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[1] She will continue to accumulate more votes as final results get tallied in CA and other big Blue states.

[2] In 2016, American system for once worked like a parliamentary system - no argument for Republicans to blame Democrats or any gridlock in Washington. In coming years political success or failure in America will be completely owned by Republicans. If this becomes a pattern - i.e. people realizing that 'gridlock does not serve' and the vaunted 'checks and balances system' is overrated; it will help Washington to be lot more 'responsive to people's concerns'. That will be the answer for 'Washington is broken' problem.

[3] For example, the famous 'wall on Mexico border' promise; Trump can extricate himself as follows: he will demand a visit by Mexico President to the White House. He will have discussions with the Mexican President. Then he will declare to American People that "he has warned the Mexican President and received an assurance from the Mexican president that Mexico will not send any more migrants over the border, else those will be shot. So there is no need for the wall." Trump Administration will say "our great leader Trump is going to monitor the situation for a year or so. No need for the wall right now." Done. 

[4] Not for nothing Trump always lied that 'he opposed Iraq war from start'. He knew how important it was to convince his constituency that he will not start unnecessary wars.

[5] There are few other political dangers which can derail Trump Presidency. Amidst the euphoria of total Republican victory, it is easy to forget frothy relationship between Trump and Congressional Republicans. In general, Trump is simply an outsider who happen to 'rent' Republican Party for his presidential ambitions. No one has any ideas whether he is truly interested in solving problems of Americans and in the process he will whack Republican Party as needed. On the other hand it is clear that Congressional Republicans and Conservatives are clearly sticking with Trump and all his faults for the simple reasons of getting their Conservative agenda enacted. That is what the Mike Pence, Paul Ryan, Mitch McConnell and Reince Priebus cabal is all about. Given this context it is conceivable that either because President Trump wants to really go beyond Conservative ideology - which is actually needed if you want to make real progress or he finds Conservatives are simply looting his political capital for their ideological purposes; we can see the fight between Trump and GOP. Just few days before the election, there was an open talk that how GOP will be folded soon. So to assume all those fissures will vanish completely does not seem rational.

The other equally esoteric possibility is the rise of a third party. One election night is enough to throw the entire Democratic Party in death throes. Unless Democrats stay united - their coalition is much diverse making it harder to stay together and unless they adopt smarter politics; there is every chance that Democratic Party will fold; opening a space for another party. Conventional wisdom is in American system, in the framework of 'checks and balances'; two party system is the norm. But who knows we may be hitting limits of that thinking. As American system starts behaving more like a parliamentary system - all levers of powers in one hand at a time - there could be an opening for a third party to make the play.

But I consider both possibilities with lower probabilities since there are lot of unknowns to make any educated guesses. 

[6] That is what Dr. Ben Carlson will be selling us on behalf of Trump Administration.

[7] Anna Coulter is saying unless we have our forefathers born in this country, we do not award citizenship. Only one problem is marquee Republican Senators like Marco Rubio, Ted Cruz all have foreign born parents who came to this country legally and then naturalized. So Coulter will have to evict parents of Rubio and Cruz before taking that non-sensical view.

[8] By RustBelt, I meant states like PA, WI, MI, OH etc.; traditionally also referred as MidWest.

[9] The one thing I want the Republican Congress and Republican President to do is to bring back all the reckless spending of Bush era. Except that Bush's trillions went on the war. In this case Republicans should use those for tax cuts and infrastructure spending. Lot of liberal economists like Lawrence Summers and many investment bankers are advocating so. Now, clearly that is antithetical to the 'balanced budget' orthodoxy of Freedom Caucus and Conservatives. But for once I am hoping Republican Party forgets how it opposed Obama spending by arguing "we are broke". We need profligacy. 

[10] Halting trade with rest of the world is not conceivable. It will induce global recession as well as American Economy will go into recession too. Worse, even then it is hard to imagine new steel plants coming Ohio during any such global recession. Protectionist talk is a good campaign technique but not a workable solution.

[11] The only way RustBelt will get employment back is overall rest of the economy is doing great AND government does targeted public spending in certain industries within RustBelt along with sustained social capital spending in those geographies - like health, family welfare and education. Neither Trump has any patience for such detailed policy wonkery nor Republican Party Policy agenda contains any prescriptions even remotely resembling to that. 

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