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The Price of the Price of Trump

August 7, 2017

Since Trump's election, the DOW has had 50 record closings, and since his swearing in, it has had 33. Unemployment is at a 16 year low; consumer confidence is at a 16 year high. See here and here. These are remarkably strong economic indicators. As far as I can tell, Donald Trump has nothing to do with them. Actually, that's unfair. He is the President. The more accurate assertion is that these indicators have developed in spite of, not because of, the Trump Presidency. 

 

These impressive indicators are primarily a function of the macro business cycle. As such, we would have experienced the same general indicators had either Hillary Clinton or Donald Trump won the 2016 election. It seems implausible to ascribe any of this market success to Trump, who thus far has only met with policy defeat after policy defeat. If he is responsible, it is in the most counter intuitive way. We have a virtual deadlock with Congress, and markets seem to prefer legislative dysfunction to either of two alternatives: (1) uncertainty (will we have or repeal the ACA, pay for or not pay for a wall, expand or restrict international trade, and the list goes on), and (2) a potentially costly regulatory agenda. Fiscal policy has a notable lag effect on business cycles, and to the extent that government can have a more immediate effect, it is through monetary policy, something for which Trump, once more, cannot claim credit. 

 

Had Hillary won, and had Congress gone Republican, she would almost certainly have "benefited" from the same legislative gridlock, and the markets would likewise have rewarded her, at least early on. Timing is all in politics, and at the end of the Obama presidency, the markets were poised to explode. For that too, I'm inclined to credit the business cycle more so than particular policies. Perhaps the markets might have been less enthusiastic had Clinton won and carried a Democratic Congress on her coattails. But truthfully, it seems most unlikely that she would have succeeded in pushing an ambitious regulatory agenda through Congress, especially with the enormous federal debt left from the prior administration. The most plausible success might have been much needed Obamacare repairs, and had that occurred, it seems most unlikely to have adversely affected the business cycle, especially since such a large part of this admittedly ambitious program is already baked-in.

 

This all carries two profound implications:

 

First, everyone paying attention knows that Trump is a liar, a narcissist, and frighteningly incompetent. But when it comes to market performance, a strong minority are apt not to draw such fine causal distinctions. The stock market continues to climb, business continues to expand, employment continues to grow, and the economy continues to hum. Those of us who regularly obsess about Trump might simply be low-level background noise for those whose principal concern is how the economy is doing in ways that directly affect their income and portfolios. Such pocketbook voters are apt to invert the "not" in the famous line from John F. Kennedy's inaugural address: "Ask not what your country can do for you; ask what you can do for your country." See here. They are apt to prefer, instead, the quote from Ronald Reagan's debate with Jimmy Carter: "Are you better off than you were four years ago?" See here.

 

The second point is more troubling: Let's assume a large enough voting population does, in fact, regard Trump simply as the price of doing business. If so, what is the price of the price of Trump? The answer is disturbing. Even if we are lucky enough to get through a Trump presidency (maximum one term, please!) with no genuine disasters that result from his stunning personal deficits, consider the price we all pay moving forward. Those responsible for Trump, direct supporters and apologists, have lost any and all credibility respecting claims to moral outrage at candidates whose personal behaviors are atrocious; at features of platforms we have to tolerate to get the parts we like; and at those who vote based strictly on what makes them feel good in the moment, rather than based on careful and reasoned analysis concerning the most important challenges that we as a nation inevitably face. If all that matters is that the economy continues to hum, even if the president is not plausibly responsible, then we have to expect that many voters will consider turn-about fair play. Of course turn-about isn't fair play. Integrity, empathy, deep knowledge, and sound judgment must continue to matter. But that is not the lesson of this presidency and of those who think that all that matters is winning. That, and how their personal portfolios are faring. Those who think Trump is the price of doing business should reflect on just how expensive doing business really is. 

 

I truly welcome your thoughts and comments.

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