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U.S. economic direction an enigma after Trump’s reality show campaign: Don Pittis

Donald Trump has created great expectations. In a cliffhanger election, angry and disaffected voters turned to him to transform the economy and make America great again. 

But following a reality show-style campaign, details of exactly what the president-elect will do once he takes office remain a cliffhanger too. And while critics from all sides have called for change, Trump and his backers could take the world on a breathtaking ride.

“The forgotten men and women of our country will be forgotten no longer,” said Trump in his victory address.

And his supporters really do expect change.

Corporate elitists 

“I want a government that works for me the individual,” said a woman who supported Trump, quoted on CBC Radio’s The Current yesterday. “I want the government to work for the people and not for a group of corporate elitists who are puppets for corporations.”

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Trump garnered support from blue collar voters who believed he would make their lives better, but he was also backed by the old tax-cutting Republican elite. (Mike Segar/Reuters)

Comments like that could have come from supporters of avowed democratic socialist Bernie Sanders, defeated by Hillary Clinton in the race for the Democratic nomination.

And while some Sanders supporters have admitted to taking their anger with them to join the Trump wave, none of the campaign messages telegraphed by the president-elect reveal him as a bleeding heart.

In fact, after he promised corporate tax cuts partway through the campaign, Trump gained the firm backing of many old Reagan conservatives who believe that letting companies keep their profits and letting the rich be rich will create the kind of country they want

Yesterday, stock markets headed for record highs.

Bold and entrepreneurial

There is little question that the global economy, including the United States, has been suffering from paralysis, with governments and central bankers worried that sudden or radical change would destabilize a system that they fear could be teetering on the edge of an economic cliff.

With the bold overconfidence essential to an entrepreneur, Trump may be able to break that logjam. And with the White House, the House of Representatives and the Senate all firmly Republican, Trump will lead a government finally able to make bold legislative change.

So how, exactly, is Trump going to try to make America great again?

As of this writing, building a wall on the U.S.-Mexican border and getting rid of Obamacare are the only two items on the Trump campaign’s “positions” page.

Trump Positions

By themselves it is unlikely either of those two would be enough to transform the economy, although eliminating the Affordable Care Act could boost private sector health companies.

But other positions stated in speeches and debates would have wider economic impact. Cutting taxes enough to encourage U.S. companies to repatriate profits held overseas could bring new investment.

Positives and negatives

Repudiating trade agreements and making exporting countries pay could force companies to manufacture in the U.S. Billing other countries to pay for U.S. military spending would bring in cash. Reneging on the U.S. commitment to fight climate change promises to reignite the U.S. coal and oil sectors.

Renegotiating overseas loans could be a money-saver. Tossing out Federal Reserve Chair Janet Yellen and putting in a friendly face could tighten Trump’s grip on the country’s system of money.

But all those actions would have negative as well as positive consequences.

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Coal miners hope that Trump’s plan to renege on measures against climate change will revive the industry, but as with many of his economic strategies, there may be an economic backlash. (Jonathan Ernst/Reuters)

Reagan’s tax cuts never did increase growth enough to replace lost revenue, and tax cuts are likely to increase inequality. 

Throwing up trade barriers, whether a wall of concrete or tariffs, usually prompts costly retaliation. If NATO members have to shell out, perhaps they will decide to spend the cash at home. Ignoring scientists on climate change and creating global worries about the soundness of the Federal Reserve could hurt the U.S.’s position on the world stage.

Relinquishing leadership to some other country would erode the clout that the U.S. has to promote its financial interests.

Promises vs. policy

For those reasons it remains unclear how closely Trump will follow his own prescription. Things said off the cuff to excite a roaring crowd may turn out to be bad economic policy.

And if you believe people like Robert Gordon, the author of The Rise and Fall of American Growth, a return to Trump’s promised four per cent growth rate just isn’t on the cards. Without immigration the U.S. will wizen, all its greatest innovations in the past.

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Outside the U.S. Embassy in London protesters are more concerned by Trump’s social policy than his economics. (Hannah McKay/Reuters)

To many of Trump’s opponents, his policies represent a social retreat, from inclusiveness and open-mindedness.

To his supporters, he represents a return to a better country where God-fearing working people got their fair share.

In some ways maybe this is just what the world economy needs, a reset, a break from the status quo, throwing the conventional rules up in the air and starting from scratch. But such sudden alterations in course do not guarantee success.

There was a nasty edge to this election. If Trump’s promises for a return to greatness and economic growth go unfulfilled, will blue collar outrage be aimed at Trump? Or will their blame be directed at others?

If Trump’s economic plan fails, the nastiness may not be over.

Follow Don Pittis on twitter @don_pittis

More analysis by Don Pittis

Article source: http://www.cbc.ca/news/business/trump-economics-solutions-1.3841645?cmp=rss