Donald Trump was an unusual Presidential candidate. His campaign style was unusual, combative, rude, impromptu and rash in presentation. His tweets were also unusual but he was successful in getting millions of followers and creating a new political fad, now adopted and imitated by many politicians. He was not eloquent in speeches with his limited vocabulary, but he was persistent in his claims, attacks and promises even without backup data or being challenged by the media. His ability to occupy the media limelight by attacking media was another unusual political phenomenon never occurred before. He was able to cast almost all his opposing and negative media reports into one disposal - ‘fake news’- amazingly, it worked.
Donald Trump surprised the media and the nation by winning the 45th US Presidency. He surrounded him with new faces in cabinet and White House appointments leaning towards right wing, hawkish and supportive to his ‘America First’ political slogan. Not everyone adjusted well in his new Administration. Trump was not shy in blaming his subordinates for blunders or crises whether they were created by them or him. One thing has become clear is that Trump is determined to deliver his campaign promises as his way of proving his worth to the people who elected him. On the issues raised during his presidential campaign, such as immigration, military revamping, job creation, trade imbalance, infrastructure as well as general economy, he has been focused on fulfilling his promises in his term.
Taking the immigration, he was serious about building a wall along the US-Mexico border. He was also harsh in dealing with illegal immigrants demanding deportation even mercilessly causing separation of children from their parents. He is pressuring Mexico to pay for the wall by saying “one way or the other Mexico will pay for the wall”. Trump’s immigration policy is stopping the illegal from consuming the US social welfare dollars and building a wall to stop inflow of illegal immigrants and drug smuggling into the U.S. draining the US economy - conceptually nothing wrong. President Trump’s desire to expand the military was a core promise during his presidential campaign. However, his proposed $54B increase in military budget raised concerns on federal budget cuts on non-military spending. He encouraged updating US Navy and Air Force military power but demanded more frugal budgets on weapon development from military suppliers - a balance sheet approach. Under Trump Administration, the U.S. sold more military gadgets than his predecessors enriching the military industry complex, good for winning more campaign donations and votes but little to do with long term national defense or world security.
President Trump had proposed gigantic tax cuts to induce American corporations to move their manufacturing facilities back to home to create jobs, but no coherent policy is announced to make that happen. Trump’s solution on job creation is also bottom line thinking. He hopes to induce corporations to bring headquarters and factories back to the U.S. simply by cutting taxes but not tackling the skill obsolescence problem - a fundamental education issue. He decided to initiate a trade war to reduce trade imbalances with US trading partners without a clear road map to hit homerun. Thus we see Harley Davison announcing moving part of its manufacturing to Europe citing the impact of 25% tariff on steel imports. Tesla, valuing potential China market for electric cars, is making plans to establish a huge manufacturing factory capable of making 500,000 electric cars per year in Shanghai free trade zone. Trump wants to levy tariff on imports, a simple balance sheet approach, to balance trade with no careful analysis of the impact to the entire national and global economy.
Trump claims; “for too long, US lawmakers have invested in infrastructure inefficiently”, ignoring critical needs, and resulting in deterioration. Therefore, the United States has fallen behind other countries. Trump wants to give Americans the working, modern infrastructure they deserve, but his plan of creating a $1.5 Trillion program for infrastructure repair and upgrade hinges on leveraging $200B federal dollars for five to one State and local government funding – simply a transfer of burden. The infrastructure burden has been shifting to the State and local governments for decades, however, most local governments on deficit budgets are unable to upgrade the infrastructure. So shifting the burden off the federal balance sheet is too simplistic a wish for solving the deteriorating national infrastructure. Without understanding what resources are needed, what magnitude of the budget is required, what priorities must be set up in a coordinated national plan executed in a timely fashion, can local governments fix the infrastructure problem – It seems impossible.
After the recovery from the housing-loan bubble in 2008, the U.S. general economy has slowly recovered and been stable with stock market showing a healthy pulse showing the second longest bull market cycle. However, all these can burst like a balloon again, if Trump’s trade war would bring down the US GDP by half or one percent point like some economists warned. In the main stream media, the anti-Trump sentiment is running feverishly high, although Trump seems to be able to hold his core supporters together sustaining his approval rating. What troubles the public including his supporters is that he has not laid out a clear blue print to make America Great other than repeating his ‘America First’ campaign slogan and ‘money-driven agenda’.
The trillion dollar question is whether Trump has a strategy and a secret plan for governing the U.S. domestic issues and directing the foreign affairs. The media does not believe he does thus constantly bashing him in a bad light. But in all fairness, based on his track record in office for the past nineteen months, I will say that President Trump had been very active in taking actions and initiatives. Analyzing what he has done so far, I am willing to say that Trump does have a strategy. His strategy is a ‘money-driven agenda’ to bring money to the U.S. treasury. He wants others to pay for the US spending, demanding NATO and other US allies (Japan, South Korea, etc.) to increase their defense budget, selling more arms worldwide and squeezing defense contractors, all based on a businessman’s simple balance sheet mentality with little security analysis. In Trump’s business mind, a positive cash flow and bottom line on the balance sheet represents success. More money and better fiscal state means better can the U.S. manage her national and international affairs – nothing wrong with that concept.
However, this kind of money-driven balance sheet approach to deal with the U.S. domestic and international issues is very much like using an abacus to solve a complex economic problem which can hardly be characterized by a differential equation. We expect that the Trump ‘money’ strategy will run into more problems than providing solutions in the long run. Take the trade policy or tariff war alone, many analysts have questioned its wisdom; some call it a poker player’s bluff that the U.S. can’t afford the consequence. The U.S. cannot solve the trade issue by bluffing. God has dealt the U.S. very rich resources. The heart of US economic problem is productivity, work ethics, and effective education and economic development policies. The trade imbalance was a result of trades made between willing partners. Trump’s tariff threat may get trading partners to negotiate faster, but the Trump Administration must have a deal in mind with every trade partner and must be prepared with a viable alternative if a deal goes sour.
Trump’s deal with EU President Jean-Claude Juncker made on 7-25-2018 is a reasonable tactic to calm US soybean farmers’ protest. But asking China to give up her ‘made in China 2025 plan’ and deny her market value to attract capital and technology investment seems to be a no deal and unfair proposal. Based on the tariffs already enacted by Trump Administration (and the total impact by escalated retaliation), the consequence may be a reduction of long-run US GDP by 0.06% (0.47%), wages 0.04% (0.33%) and full-time jobs 48,585 (364,786). (Erica York and Kyle Pomerleau, Tracking the Economic Impact of U.S. Tariffs and Retaliation Actions, Tax Foundation 6-22-2018 updated 7-20-2018) A Wharton Budget Model even predicted a reduction of GDP 0.9% and wages 1.1% by 2027. Trump must realize a ‘money-driven’ strategy is not adequate, more in-depth analysis with fair assumptions must be made to support a government policy.