Diary

Trump: Challenging the Established Order

Silicon Valley venture capitalists love companies that disrupt industries – Tesla in cars; AirBnB in hotels; Uber in local transportation; Amazon in anything. Information technology is usually a key element, but what they are really looking of is a way of transforming an industry which does not effectively meet customer needs. It is ironic that they hate the great political disrupter, President Donald Trump. Whatever his personal shortcomings and his inability to coalesce a Washington majority around his proposals, he deserves credit for challenging the established order where lesser leaders have lacked vision or feared to tread.

The big ones – where he has broken with Republican Party orthodoxy and found a Democratic party thus far totally unwilling to give him the handful of votes which he would need in the Senate to pass common sense legislation favored by a strong majority of Americans.

– Immigration. Eleven million illegal immigrants; no effective border control; a predecessor who was clear that he did not have authority to exempt categories of “undocumented immigrants” from enforcement, then did so with millions of children.  Trump had a strategy: apply pressure by terminating President Obama’s illegal program with enough lead time to allow Congress to act. He had a balanced proposal which went well beyond the “heels dug in” on either side: a path to citizenship for 1.8 million; enforcement of the border (including a wall); limits on the scope of family members who come as sponsored relatives, and instead focus on immigrants who bring benefit to America; elimination of the lottery designed to allocate immigration slots to people from random countries. We wait for Congress.

– Gun control. After years of inaction, we have a president who is willing to take on the NRA and the “Second Amendment” wing of his party. He will eliminate “bump stocks” which make assault rifles out of semi-automatics – by executive order if necessary; he will agree to increasing the purchase age for rifles, expanding background checks, and aggressively using mental health exclusions. We wait for Congress.

And the third element of the trifecta which will be a signature success (or failure) of his presidency – foreign trade. The first portion of the problem has been fixed – a disadvantageous tax code which made American companies less competitive and encouraged capital to be kept offshore. As a testament to the #Resist movement, no Democratrs in the House or Senate voted for the tax code changes. On trade, the Democrats in opposition will be joined by most of the Republican establishment which believes in multilateral “free trade” agreements adjudicated by the World Trade Organization, rather than the Trump approach of direct negotiations between the United States and individual other countries. Some themes to watch:

We are losing the current game, have been for decades, and neither party has effectively questioned the status quo since the 1980s when the Japanese car makers were pressured into producing cars in the United States as the price of market access. The 2017 deficit in Goods and Services of $566 billion was up 12% from 2016, and increased from 2.7% to 2.9% of GDP. (The Goods deficit was $810 billion; the Services – travel; education; trade-related; professional and management – surplus was $244 billion.)  Domestically, the winners have been more politically powerful than the losers, particularly as the Democrats have abandoned the white working middle class.

–  The primary target is China. China represents almost half of our deficit in goods – $375 billion in 2017. They were invited to join the World Trade Organization in 2001, but have retained their system of state-sponsored industries targeting global markets, demanding transfer of technology in exchange for permission of foreign companies to do business in China, and exclusion of foreign products through tariffs and other barriers. From their perspective the game is working – growth remains above 6%; Xi Jinping is set up as “ruler for life”; basic industries continue to grow (they make half of the world’s steel) as they subsidize development in central and southwest Asia. With a detailed Trade Representative  assessment in hand, Trump has asked the Chinese government for a plan to reduce the deficit by $100 billion with the premise that if they do not make real progress, he will find a way.

Trump is playing multi-dimensional chess. He starts with tariffs on steel and aluminum because they are symbolic, but also because a 1972 law and WTO regulations give the President latitude on industries related to national security. This provides leverage for renegotiation of NAFTA, which has primarily benefited Mexico. From there, the theme is that each country is different. He will eventually address the fact that Value Added Taxes – used by most developed countries, but not the United States – are unfavorable to American exports.

–   Trump is poor at building coalitions. With former Goldman Sachs president Gary Cohn’s exit from the Council of Economic Advisors, Trump loses a strong connection to the top levels of Wall Street as well as to the “free traders” in Congress. Treasury Secretary Steve Mnuchin, Commerce Secretary Wilbur Ross, Trade Representative Robert Lighthizer, and  National Trade Council Director Peter Navarro are capable lieutenants, but a broader coalition is needed to turn policy into effective action. Likewise, there are not a lot of foreign leaders signing up to help restore balance to global trade.

Some of this will get done; much won’t. The Democratic #Resisters and the Republican NeverTrumpers remain hopeful that the Senate’s dilatory confirmation process and Mueller’s meandering search for Trump malfeasance will prevail over the President’s willingness to challenge the established order on the major issues  confronting the country. This writer hopes not.

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This week’s bonus is a sample of the five-minute videos developed by Praeger U to articulate conservative positions. This discussion by Dave Rubin, “Why I Left the Left”, has received some 17 million views.

www.RightinSanFranciscvo.com  – 3/9/18