What was unimaginable is now not just imaginable, but a reality. America has chosen: President Trump. His candidacy and soon-to-be ascendancy to power are closely linked to right-wing extremism and the nostalgia of lost glory not only in the US, but also in Europe, as was seen with Brexit. The world was not ready to entertain the possibility that Trump could be his party's nominee, let alone be elected as President. In that context, neither the media nor those who supported him cared about pinning down his policy agenda beyond sloganeering and vulgar/arrogant rhetoric. That part of the drama is over. Now that the world has woke up to the reality - President Trump - experts and pundits alike are trying to figure out which way the country and the economy are headed.
It is particularly difficult for experts and analysts to speculate the future because nobody knows which Trump they will be dealing with. Is it President Trump, who was thoroughly unpresidential throughout election season who will now attempt to be presidential? Will he be guided and tempered by his businessman and dealmaker background? Or will he be the demagogue-in-chief, whose rhetoric is not merely extremist but also deeply concerning if he tries to act out whatever came out of his mouth during the primary and post-primary election season? All that is anyone's guess. Here I am trying to articulate the likely scenario based on some of the key ideas Trump has touted.
Let's first deal with some of his signature ideas.
a. The Wall: Will he build the promised wall at the US-Mexican border? He might build a token one just to fulfill his promise, but nothing like the tall and long wall he touted is likely.
b. Muslim immigrants: Ban new Muslim immigrants? He might not go for a ban, but significantly tighten immigration of Muslims in particular.
c. Illegal immigrants and deportation: He is expected to significantly curb illegal immigrants. As far as deportation, he might undertake some symbolic steps, but might not be as drastic as he suggested during the election campaign.
d. Obamacare: He is expected to repeal it. Will he have something better to offer? That's an unknown.
e. Isolationism: Not likely. Rather, conflict is expected to grow and widen during his administration, unless his businessman mind keeps his macho-egotist mind in check.
f. Recognizing Jerusalem as Israel's capital and shifting the US Embassy to Jerusalem: There is already indication after the election that Trump is expected to follow through. This might be the first and clear indication that he does not care about the consequences as much as he does about his ego and that he wouldn't be much different as a US president, who cannot act highly independently when it comes to Israel and its lobby in the country. This step will seriously strain his standing in the Muslim world, as many friendly and some puppet regimes in the Muslim world will find it difficult to support such a move.
What about the economy? That's where the biggest story might lie, with a more predictable scenario. However, since the economic aspects are interrelated, it's preferable to discuss this in terms of interrelations rather than separate bulleted items. This scenario is based on some of the firm and clear promises that are also consistent with his philosophy. And, with both houses in his corner, he will have little difficulty pushing through his agenda that is also in line with Republicans.
He will go for major tax cuts, which will nominally help others, but mostly help the rich like him. As he has a penchant for "big", he might try to set a record in terms of the magnitude of the cut. [Forbes: Trump's Campaign Rhetoric May Have Been Populist But His Tax Plan Isn't]
He has already promised that he will go on the path of broad deregulation. [Washington Times: "Congress set for Deregulation Spree under Trump"] In terms of consequences for the country, history has not been kind when huge, pro-rich tax cuts have been combined with broad deregulation. Each major deregulation wave has been followed by a major economic/financial crisis, the most recent one in 2008 came close to another depression, or the worst since the Great Depression. Both tax cuts and deregulation will be pushed easily with friendly legislature.
There is a common consequence of large tax cuts: larger deficits. While robust, broad-based economic growth and job creation can help offset the effects of larger deficit, and while the Republicans have been notorious for the slogan of fiscal discipline, the reality is that the root of the biggest expansions of deficit lie in Republican administrations and agendas. [Business Insider: "The Truth About Who's Responsible for Our Massive Budget Deficit"] Increase in deficits during democratic administration has occurred usually when the contingency dictated, not due to an ideological or dogmatic bias in favor tax cuts, especially for the rich.
But the story about the explosive deficit has not been only an economic one. American military (mis)adventures in various parts of the world have been a major factor. Just the two wars in Afghanistan and Iraq have had an estimated cost of $6 trillion+. [Politifact: Did U.S. Spend $6 trillion in Middle East wars?] And, this was with financial support from the oil-rich GCC countries. These countries would not be able to continue their major support for the ongoing conflicts and would be less inclined to support any future (mis)adventures. Trump has been insisting, against his own previous statements, that he was against the war in Iraq and that he thinks that America has wasted and diminished itself through its foreign engagement, especially with regime-changing undertakings.
If Trump would indeed follow through and disengage America from its military footprint and focus on fixing its internal problems, that would be really good for America and the rest of the world. But we are talking about Trump here. His rhetoric of flexing military muscles and his braggadocio may soon lead to more and deeper conflicts, for which there might not be support even from the traditional and trusted allies. Thus, even with grand economic success as Trump has trumpeted, one or two such major (mis)adventures will offset the benefits of any potential economic success and take the country into a deeper hole.
Notably, the total outstanding student loan debt is $1.2 trillion, in contrast with $6 trillion spent on (mis)adventure. America has always been short on long-term priorities. If many college students in the aftermath of the election take to the streets, this might be just the tip of the iceberg of what’s to come.
There is another deficit-related danger. Trump seems to be philosophically enthusiastic about debt. He proclaimed himself as the "King of debt". [CNBC: 'King of debt' Donald Trump: 'Now is the time to borrow'] He is very excited about the era of quantitative easing or even the negative interest rate environment and he also thinks that he is a master of creatively using debt. It would be easy to rack up more debt, especially long-term borrowing, but if the economic success and job creation he has TRUMPeted does not occur as envisioned, while tax cuts and deregulation are pushed as expected, any major (mis)adventure could easily diminish America much more fundamentally than make it great again.
Beyond sloganeering, he has not explained how he will bring strength to the US economy. However, he has enthused his support by his fantastic rhetoric: "I will be the biggest job president God has ever created." His biggest achievement to date is making the unimaginable a reality - his becoming the President, but creating jobs like he TRUMPets might prove more difficult. But maybe God was on his side in this election, or so is claimed by his base of conservative, religious right-wingers - pulling off another "miracle" is something that no one can quite yet explain. That America has lost jobs through unfair trade deals and practices of major trading partners might not be simply remedied by revising those deals, confronting those unfair practices and/or signing new deals that are more favorable to America. The job loss story has deeper structural dynamics, about which it is not clear that he has any understanding. The overall dynamics might lead to a more anemic job creation, unless God helps.
With massive tax cuts, broad deregulation, and ballooning deficit, any failure on the front of economic growth and job creation, combined with further potential military entanglements and (mis)adventures, he is more poised to diminish the country than to make it great again.
However, there is another dimension of his slogan: Making America Great Again. What is this greatness about? Will America be great again as an economic superpower, like it has been in the past? Will it be militarily great as it is now and continue to have its arrogant global footprint with what Einstein warned about "Military Mentality"? Or, is he talking about greatness in terms of a moral beacon and powerhouse?
Well, the pursuit of moral greatness as envisioned and aspired by the founding fathers, unfortunately, has been long lost. It is least likely that this is the kind of greatness Trump has in mind or that he can steer the country in that direction even if he wanted to. Or, if he could be at least as adept as he has been at "grabbing" some parts of the human body, grabbing America and guiding it towards a moral high ground might not prove as easy. Although if that happens, it would indeed be great for America and better for the world.
Would he be able to usher in a new era of economic greatness? With a miracle, anything is possible. But his pathways are limited, especially in light of the overstretched expectations he has created.
Would he be able to restore greatness in terms of America being a military superpower? That's where he might have some success, but in the past century all military adventures have turned into misadventures and ultimately pushed the country on the path of descent, not ascent. With major and fundamental shifts in the global power structure, where China is on the ascent and more countries (including allies) alienated, restoring even military greatness would be daunting at best and attempts or adventures in this direction might prove counter-productive in terms of the pursuit of economic success.
With an anti-establishment sentiment, Trump came to power to reclaim the White House for the majority of whites who voted for him. But not being a career politician is not the litmus test for being anti-establishment, as his accumulation of fortune has not kept him far from the establishment's corridor of power. He has taken every political advantage from his establishment contacts and engagements at home or abroad to enrich himself.
So, will he make America great again? Well, in a military sense, he will attempt to reclaim greatness. In an economic sense, his success is unlikely to match his outlandish sloganeering. In a moral sense, neither can nor does he seem to be thinking in that direction. Lest it is misunderstood, Hillary Clinton would not have fared differently in this regard.
[The author is an associate professor of economics and finance at one of the universities in the Gulf region. Email: [email protected]]
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