The president-elect is no ordinary candidate, and his effects on the economy will likely be enormous.
American history offers no precedent to Donald Trump’s election to the presidency. Never before has a successful candidate brought no experience in statecraft and politics — and certainly not as chief executive of an America as a populous, complex nation and superpower. Ronald Reagan was “just an actor,” except he had served two successful, largely pragmatic terms as governor of the nation’s biggest state, and he had thought and written extensively about politics. Never before have we had a president-elect who brings the trail of scandal, bragging of sexual assault, business failures and loose talk about such trifles as nuclear weapons.
We are on uncharted seas. And I am afraid.
The economy can expect substantial changes.
Two of Trump’s consistent pledges have been to limit immigration and threaten Mexico and China over trade to get them to “negotiate.” I see no evidence not to take him seriously, with whatever checks might be applied by a Republican Congress and (soon to be) Republican Supreme Court. It’s impossible to see how China, especially, could be brought to “negotiate.” Trump’s nationalism, meet the nationalism of Xi Jinping, a very dangerous game. China happens to be Washington’s largest trading partner and the state would be badly mauled by a trade war. The Trans-Pacific Partnership is dead, with more geo-strategic consequences than economic ones for the United States in the Asia-Pacific region.
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On immigration, even if Trump “limits” his reach to illegal, largely Hispanic, immigrants and Muslims, the situation will be chilling. This potentially affects Washington, and especially metropolitan Seattle, by keeping out talented people from around the world, who boost the economy through their skills and give Seattle much of its world city diversity. A large body of evidence suggests that immigration adds to economic growth and STEM talent (see here, and here, for example).
Would severely cutting immigration raise wages? Perhaps for some. But here things run into the reality of total Republican control of the federal government. Today’s GOP opposes unionization, a higher minimum wage and “burdensome” protections for workers. Republicans see inequality as a natural condition, not one meriting government intervention. Trump and the GOP do promise big tax cuts for the richest. “Entitlements” (i.e. the earned benefits of Social Security and Medicare) will be cut and privatized. Obamacare will be repealed (too bad, you soon-to-be-uninsured 20 million).
Any average American who voted for Trump to improve his or her economic lot is dreaming. Contrary to the prevailing narrative, most of Trump’s appeal was racial, cultural and nationalistic, not economic.
Big business might do very well in the short term under the GOP, hence today’s advance on Wall Street. Trump has no overall plan and a weak bench of advisers, so Rep. Paul Ryan’s Congress will set the template of governance. It will go deep into the pores of the economy. Cutting antitrust enforcement, deregulating, eliminating the federal Environmental Protection Agency, allowing even more offshore tax evasion — all this is coming. The major corporations of the Puget Sound will get these laissez faire advantages, while they last.
One exception are the enterprises of Jeff Bezos, whose Washington Post produced some of the top journalism of the campaign. As a result, Trump, known for his vindictiveness, has vowed to use antitrust as a weapon in this case.
Boeing is something of a question mark. It has earned the ire of many Republicans in their desire to shut the Export-Import Bank. Maybe now that they control the White House, Republicans will let the agency get back in business. Maybe not. The big enchilada: Get in a fight with China, and lose Boeing’s vital Chinese business. Another large question comes on the defense side. Trump has been heterodox on defense spending and even willing to go after procurement dysfunction (if his attention span allows it). This puts him at odds with Republicans who want to let the military Keynesianism roll.
Federal Reserve Chair Janet Yellen will be among the first to hear, “You’re fired.” The Fed will become more politicized, gutting its ability to anticipate and respond to crises (Republicans don’t believe in market failures). Deregulation is likely to sweep away the Dodd-Frank financial reform. Inadequate though it was, Dodd-Frank was at least a beginning. So expect a wave of corruption and bubbles.
Paying for those tax cuts will require cutting research and aid to cities, big blows to our innovation economy and improvement of the urban area. Trump has said he wants big infrastructure, especially passenger rail and high-speed rail like other advanced nations. But he faces a Congress whose opposition to rail is an act of faith.
All this is nothing compared with Trump and the Congress denying mainstream science on climate change. Two years, four years — even if Trumpism is not a permanent regime — will be too late if the United States reverses its leadership on this genuine existential threat. To enumerate its costs to the economy, including our fisheries, trivializes the human and species suffering ahead.
So to the purists who wanted to “burn down the house,” you voted to burn up the planet, morons. This is reality, not reality TV.