Thursday, 24 November 2016

Trump Scenario: Atlas Hugged

This is the second in a suite of five scenarios developed by Aleph Insights, designed with the following question in mind:
“What will the US government’s principal strategic priorities be between 2017 and 2020?”
More background on the scenario development process, including caveats about scenario interpretation, is here. The baseline scenario is The Great-Again Gatsby. The three other alternative scenarios are Fear and Loathing in EverywhereWe Need to Talk about Donald, and Catch SSBN-22.

Scenario Narrative


This scenario differs from the baseline in its assumptions about President Trump’s economic and social policy.

In the first 100 days of the Trump Presidency, the new President laid out a radical programme of economic regeneration - the ‘Trump Plan’ - focusing on massive infrastructure projects and tax reduction. Many of the Trump Plan projects, geared towards renewing America’s transport, energy and communications infrastructure, have begun generating significant employment in ‘rust belt’ areas. Since 2017, employment has continued to rise (along its post-2009 trend) along with median wages, and some of the early, smaller projects have started delivering longer-term productivity benefits.

The Trump Plan

President Trump’s tax cuts have also been a political success. Republican control of both the House and Congress enabled the President to pass a number of measures favouring business and low-income earners. Consumer confidence has grown over Trump’s first term and commentators now refer to the ‘Trump Boom’ of 2017-18. US industrial output has been further buoyed by the President’s combative approach to international trade treaties. By early 2020, President Trump’s approval ratings have actually increased from their nadir when he took office.

To the surprise of many, President Trump also seems committed to a progressive, libertarian social agenda. Significantly, Trump Plan investment has been targeted on urban regeneration as well as heavy industry, the administration has actively back-pedalled on many of its pre-election pledges regarding immigration, and Trump has been vocal in his desire to ‘heal the wounds’ in American society. He has reached out to ethnic minorities, appointing a Muslim Attorney General in 2018 (“Muslims are great people - the best people”), and has expressed support for the Black Lives Matter movement, addressing a 2017 demonstration in Washington DC in terms linking prospects for black people to his economic program: "I want to make sure everyone in this country is safe, which means supporting the police, but it also means making sure people of color don’t have to live in fear. I'm going to make this country heal, make it whole, and make it great again. And I'm going to get this country working again. I want you to know that not only do I believe sincerely that black lives matter, I also believe that black jobs matter."

Not everybody is happy with this. The President’s failure to deliver on a number of key election promises, such as his commitment to reduce immigration, has frustrated some of his more radical supporters. This came into sharp focus in 2019 when a report was released detailing the significant number of non-legal immigrants working on Trump Plan infrastructure projects. Social conservatives are also mobilising in response to the President’s failure to appoint their preferred picks to the Supreme Court and his public refusal to support repeal of Federal gay marriage legislation or challenges to Roe v Wade. The 2018 State of the Union address was seen as a turning point for many social conservatives with President Trump declaring that “the choice of the individual will always come before the decree of the government”. This language was seen as particularly inflammatory in the context of women’s access to birth control and abortion services.

Disappointed
(Photo: Elvert Barnes Protest Photography)

Small-government Republicans, while happy with tax cuts, are increasingly resistant to the large increases in Federal spending and the longer-term economic consequences that go with it. They have become alarmed by the burgeoning deficit being racked up by the Government. The mid-terms, which saw the Republican majorities in both houses reduced, made it harder for the President to continue with his economic programme. The Trump Plan is starting to look vulnerable, and markets reflect longer-term concerns about its sustainability: the dollar has steadily declined through to 2020, and interest rates have been steadily rising to counter the inflationary effects of government spending. In the domestic arena then, President Trump’s most vociferous criticism is unexpectedly coming from his right.

There are also concerns that the President has weakened the US internationally. He has alienated the EU and other key allies through his lack of commitment to climate change agreements and his general indifference towards stability in the Middle East and the security of Eastern Europe. The US has also come into conflict with the EU and China over free trade and the implementation of US tariffs on key imported materials and goods - the so called ‘Trade Wall’ that President Trump has been accused of erecting - and by 2020 there are signs that the economic self-determination being promoted by the President is starting to have an effect on the global economy.

President Trump is gearing up for the 2020 election with a distinctly tarnished lustre. Pessimism surrounding the US economy’s longer-term prospects is emerging as the central theme of attack for his Democratic rivals. As the incumbent, and given his populist economic track record to date, he looks like the favourite to win, but many see a recession and subsequent disillusionment looming on the horizon.

Policy Implications


The focus of the US Government during President Trump’s first term has been on delivering economic growth and particularly increased employment (although Trump has also devoted an unexpected level of energy into trying to patch up the divisions in US society). Deficit reduction has been far from a concern for this administration, and the huge levels of spending that have gone towards funding infrastructure projects have raised significant concerns within the Treasury about inflation, longer-term economic prospects, and the spectre of stagflation. Trump Plan spending has also had to be counterbalanced by reduced spending in other areas, and throughout this period departments have been asked to identify efficiencies or divert their spending to support the overall goal of job creation; Federal government has also been mandated to purchase American-made goods whenever possible. With regards to international affairs, the President has taken a fairly laissez-faire approach, unless it has related to trade negotiations. His attention to security matters has tended to be sparing.

(Read the second alternative scenario: Fear and Loathing in Everywhere.)

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