The symbolism of President Donald Trump's pre-inaugural appearance before the Lincoln Memorial was part of his effort to show that he is sympathetic to the aspirations of the black community even though one of its leaders declared him "illegitimate" and added a boycott of Friday's swearing-in to his boycott of George W. Bush's inauguration. But it also reminded us of the ability of the republic to survive a contentious transfer of power, more contentious even than yesterday's, which saw hoodlums burning cars and trash cans in the streets of D.C.: seven states seceded even before president-elect Lincoln took the oath of office. We witnessed an American president whose vindictiveness is exceeded only by his vanity turning over power to a new president whose ignorance is exceeded only by his self-confidence. Not a combination likely to make their respective enemies eager to let bygones be bygones and come together to get on with the job of governing the nation. And anyone who hoped that our new president would offer an olive branch to the establishment against which he campaigned, had only to hear his first speech as president to know that such hopes will not be realized.
Never-Trumpers find Trump an easy target; more serious critics find him a more difficult, moving target. An opposition senator was once asked if he had gotten a commitment from Franklin Roosevelt, and responded, "Did you ever nail a custard pie to a wall?" So with Trump, who is either adept at keeping critics off balance, or a bundle of contradictions. We will for the next four years at least be dealing with a man sufficiently thin-skinned to feel compelled to respond to criticism from Meryl Streep, an inconsequential Hollywood star, while allowing his nominees for cabinet posts to say what they think, even if they disagree with him. Which many of them do, without a tweet from their boss.
Trump makes no secret of his admiration for Vladimir Putin and believes the Russian leader is a man with whom he can do business, to borrow from Margaret Thatcher's description of Mikhail Gorbachev. Never mind that Putin's goal is to undo the unravelling of the Soviet state, a process initiated by Gorbachev. Rex Tillerson, Trump's choice for secretary of state, and several nominees to key national security posts, take a less benign view of Putin and his invasion of Ukraine and annexation of Crimea. They see Russia as a great threat to America and to its "near abroad", and said so to senators eliciting views they hoped would embarrass Trump. They got the anti-Russian statements they sought, but not any red faces from Trump.
Trump is an even more difficult target for critics of his economic policy, if indeed he has a coherent set of views that can reasonably be called a policy. (Which many economists doubt.) Gathered at their annual meeting to seek and grant jobs, and to present papers so heavily laden with equations as to be beyond the comprehension of most people, members of the American Economic Association reportedly bemoaned their loss of influence on economic policy. Blame it on Trump or, perhaps, on the inability of most of the profession to foresee the recent housing bust or devise ways of more equitably sharing the benefits of globalization and the free trade that in theory benefits Main Street as well as Wall Street.
Trump's desire to reduce imports and increase American exports as part of a job-creating program is well known. Companies planning to build factories in Mexico to make cars for export to the U.S. have felt the lash of the then-president elect's tweets, and his plan to renegotiate NAFTA was a crowd-pleaser at his campaign rallies. Surely a protectionist at heart, a man who now says he sees "protection" as needed if America is to heal the wounds of globalization. But think again.
Wilbur Ross, Trump's choice for secretary of commerc,e and the man who will head the administration's trade team, told senators at his confirmation hearing, "I am not anti-trade. I am pro-trade. But I'm pro-sensible trade. [Being anti-trade] is a disadvantage for the American worker and the American manufacturing community…. I am keenly aware of Smoot-Hawley [Tariff Act of 1930] and the effect [it] had on trade in general and on our trade in particular…. That kind of approach … didn't work very well then and likely wouldn't work very well now." If Trump follows through on his promise, Ross and his team will lead the re-negotiation of NAFTA. If successful, a Trump influenced NAFTA 2.0 could slightly and probably appropriately tilt towards a U.S. advantage.
Ross may well be more in tune with Speaker Paul Ryan than with the President. Ryan proposes to achieve a better trade balance as a by-product of a "border adjustment tax" that would heavily tax imports and exempt from taxation profits from exports. Learning of the role of the border tax in his overall quest for tax reform and a better trade balance, Trump immediately tweeted his opposition. "Too complicated. Any time I hear border adjustment, I don't love it. Because usually it means we're going to get adjusted into a bad deal." Clear and succinct. Until the then-yet-to-be inaugurated Trump was told that such a tax was to provide about half of the revenues needed to offset about half the revenue losses from reducing the corporate tax rate from 35% to something closer to 20%. So the very next day a backpedal, "It's certainly something that's going to be discussed … over the next month-and-a-half, two months." During which the president should be overjoyed to learn that the mere possibility of a border adjustment tax has many American companies asking overseas suppliers to consider moving their manufacturing plants to the U.S. to avoid the proposed levy on imported parts and other goods.
Then, there's the budget deficit. "We're gonna knock it down and we're gonna bring it down big league and quickly." But there is also the President's plan for an infrastructure programme so "YUUGE" that it would dwarf his predecessor's $800 billion plus stimulus package. Unless private capital funds the program, Trump's plan could balloon the deficit.That is something Republican deficit hawks in the House will not buy into, leaving Trump dependent on Democrats, many of whom boycotted his inauguration, for approval of the plan. He might win that battle, but in the process lose the war for his tax cuts.
So now that Trump can act as well as tweet, time for a reality check. The most important reality is that he is inheriting an economy neither as healthy as Obama claims, nor as poorly as Trump contends. The housing sector is in good shape, but rising interest rates are crimping sales in some markets. The auto industry has completed a record year, but only by discounting vehicles and offering credit terms not seen since the housing market collapsed. The job market is healthier and the unemployment gauge flashing "full", but only because so many workers have dropped out of the labor force. America remains the innovation capital of the world, but productivity is not rising very much. Wages have turned up, but many have not yet recovered ground lost during the recession. More people have health insurance, but only due to an unsustainable and costly system concocted by Democrats with no Republican input. Corporations have taken to announcing job additions, but many were planned long before Trump gave the products of such companies his blessing.
My advice to Trump fans who are hoping for real change, and to Trump opponents who believe the worst is yet to come, was offered by Richard Nixon's attorney general when Nixon rose from the political grave to take the White House: "Watch what we do, not what we say." And what he does might well not be enough, and come soon enough, to sustain the exuberance of investors, who abhor the major characteristic of Trump policy-making: uncertainty.