TRUMP: POLICY VERSUS PERSONALITY
Tharindra Gooneratne delves into the policy outline of America’s controversial Commander-in-Chief
An American man with limited political experience campaigns against the establishment. He is a Presbyterian, has Scottish roots and is a talented orator in the eyes of many. Branded as a ‘populist,’ he draws on support in the South and Midwest.
The year is 1896 and the individual concerned is William Jennings Bryan, the Democratic Party’s presidential candidate. And 120 years later, another Presbyterian with Scottish roots and populist tendencies is picked to represent the Republican Party – and ultimately elected president.
Since then, it has not been smooth sailing for President Donald Trump. The first 100 days of his presidency rank among the weakest in history. With all the drama surrounding his presidency, it is easy to forget that Trump remains the most powerful man on the planet.
Let’s analyse Trump’s position on three key aspects.
Trump has been an advocate of lower taxes and deregulation since he first dabbled with the prospect of running for president in 1999.
He has railed against bureaucracy and red tape, issuing an executive order to roll back Dodd-Frank regulations governing Wall Street and another instructing federal agencies to repeal two existing regulations for every new regulation introduced.
Moreover, he has often referred to America as the ‘highest-taxed nation in the world.’ At 35 percent, the US corporate tax rate is indeed the highest among the 35 member nations of the Organisation for Economic Co-operation and Development (OECD) – in comparison, the UK’s corporate tax rate is 19 percent. Trump recently proposed to reduce this rate to 15 percent while lowering the ceiling on individual income taxes.
The critical question in relation to tax reform is the implication that lower taxes would have for the fiscal deficit.
Currently, the national debt stands at US$ 20 trillion with Congress having to raise the debt ceiling regularly to avert a potentially catastrophic government shutdown. So the success or failure of fiscal reform should be judged not only by short-term boosts to growth but also on the longer-term implications for national debt.
Trump was elected on a campaign promise of ‘making America great again.’ He often highlighted the country’s large trade deficit, promising to impose exorbitant tariffs on imports from China and Mexico.
Since assuming office, Trump has withdrawn from the Trans-Pacific Partnership (TPP) – a multilateral trade agreement between 12 countries – and threatened to pull out of the North American Free Trade Agreement (NAFTA) unless the deal is renegotiated.
He has also signed an executive order directing federal agencies to ‘Buy American, Hire American,’ in line with his promise of bringing back overseas jobs.
An argument can be made for renegotiating trade terms with foreign partners. Many of America’s trade partners impose far higher tariffs on imports than the reciprocal tariffs charged in the US. According to The New York Times, America’s average tax rate on imports is nine percent, which is far lower than the rates imposed by China (27%), India (31%) and Britain (25%).
But there are immense risks associated with an open trade war. Higher import tariffs lead to inflation as American consumers end up paying more for imported products. Simultaneously, they force trade partners to retaliate, thus creating a race to the bottom that leaves American exporters and multinationals at risk. These implications must be factored in prior to any significant shift in trade policy.
Besides his admiration for Russia’s President Vladimir Putin, an aspect of Trump’s foreign policy stands out. In his first 100 days as president, Trump did not embark on a single overseas visit – the longest such run since ex-president Jimmy Carter. However, foreign policy has ranked high on his agenda.
His mantra is that ‘foreign policy should be aligned to serve America’s immediate economic interests.’ He has proposed a 28 percent reduction in funds allocated to diplomacy and foreign aid.
Trump has also advocated a shift in policy on Syria, stating that the US would not focus on the removal of President Bashar al-Assad from office. And he has repeatedly asked NATO members to step up defence spending instead of relying on the United States.
On other aspects, Trump has been notably hawkish. He’s proposed a 10 percent rise in military expenditure at the expense of education and environmental protection. He has been aggressive on trade with China, signing executive orders to prevent dumping in the aluminium and steel industries. Moreover, he has upped the ante on North Korea, vowing to ‘rein in the menace.’
Balancing diplomacy with aggression and focussing on long-term goals will be critical for Trump’s success in the global arena. An inward-looking foreign policy that’s combined with fractures in relationships with allies will be detrimental in the long run especially if it results in America’s status as the most dominant global superpower being undermined.
Trump’s policies are more populist than pragmatic, and focussed on short-term boosts for growth at the expense of long-term stability. And he needs to unite a fractured Republican Party to implement them while facing serious allegations of misconduct himself.
The road ahead is looking increasingly difficult for the US Commander-in-Chief.
As the man who has written many business books that end at Chapter 11, as his presidential rival Hillary Clinton had quipped a short while before the polls, regardless of his massive fortune and popularity, Trump hasn’t been a successful businessman unlike his contemporaries.
Also, as someone who has built on the inheritance from his father, he has no claim on the much respected ‘self-made’ label, either. As for his political legacy, I believe that half a decade from now, political historians will be recording Trump’s presidency as one of the gravest mistakes or as one of the worst strokes of bad luck as they chronicle the American politics.
His decision to roll back Dodd-Frank Regulations governing the Wall Street could easily lead to another major banking crisis since it’ll be a massive incentive for the banks to carry on their so-called financial innovations without restraint. While reducing the corporate tax rate to 15 percent seems to be a business-friendly move on the surface, it’s too drastic a cut to make sense and will give rise to a serious budget deficit while the pile of US national debts remains as high as US$ 20 trillion, an amount we can hardly write in numbers at one go.
The open trade war he’s started waging certainly doesn’t bode well for the overall health of the American economy, either. He’s provoking their trade partners to retaliate in an attempt to protect their own interests while American consumers continue to rely on the imported items.
As Tharindra concludes, the road ahead is very bumpy for Mr. Trump. Also, it’s on the cards that by the time he leaves the office, the United States of America will be in more trouble than ever in almost every respect.