An expert is a person who has
made all the mistakes that can be made in a narrow field. ~ Neils Bohr
Donald Trump will become the
45th President of the United States (US) in exactly 30 days, following his
unexpected election victory. The Electoral College voted yesterday to make him
president and Congress will certify the Electoral College’s vote on Jan. 6. Coming
into the presidency, Mr. Trump’s experience is narrowly founded on commercial real
estate and reality TV. Unlike Neils Bohr, he would never admit to making any
mistakes. His grandiosity-seeking persona has focused on specific, narrow, micro-oriented
concerns, usually announced via 140-character Twitter posts.
Political commentators have
been spewing too many speculations about how Donald Trump surprisingly won the
presidency. Nate Cohn of The New York Times and others have concluded
that his victory came from a fortuitous, slight “red-shift” in a few
battleground states – Florida, Wisconsin, Michigan and Pennsylvania.
He narrowly won each of these
states by one point or less of the popular vote. But these slender victories gave
him a decisive Electoral College edge. Only with effective, focused and steady
effort over the next several years on the part of Democrats will this red-shift
be prevented from being a long-term political prospect. This is by no means a
sure thing; currently the Democrats are leaderless and far from united. For
example, when was the last time you heard that the Sanders-Warren progressive movement
was succeeding in the political ground work to place strong candidates on 2018
ballots that can actually win elections?
Interestingly, the red-shift
phenomenon has been examined for over 150 years, but not by politicians. Astrophysicists
first discussed it in the
19th century. It was a basis for Edwin Hubble’s early 20th century Law that posited other
galaxies are receding from Earth, causing a red-shift (Doppler) effect. The
Hubble Law supports the dynamic Big Bang model of the universe.
Even though the
headline-obsessed Donald Trump likely will cause a number of “bangs” as
president, with any luck they won’t compare in the slightest to the Big Bang that Hubble described. Fingers
remain completely crossed on this. But let’s now depart from cosmology and take off
to the here and now.
Even before he’s president, The
Donald (TD) pulled off one momentary bang on Dec. 1 in getting Carrier Corp. to
"save" 800 jobs at its Indianapolis air conditioner plant. Nice work.
However, despite all the media hoopla that TD created in Indianapolis, the next
week United Technologies Corp.’s chief executive (UTC owns Carrier) stated
that some of those “saved” jobs would be ultimately lost to automation. In
other words, Carrier still plans to cut its workforce, so those 800 saved jobs
are a chimera. And what about the other 400 Carrier workers that TD seems to
have completely forgotten about who will be soon laid off? Oh well, sorry guys.
Is The Donald ducking his
responsibilities to take a comprehensive view of his job as president? So far,
as president-elect, it seems so. He is all
about tactical, individual, bottom-up “deals,” (micro transactions), rather
than a broader, strategic (macro) vision that might unify and preserve America’s
greatness. [As I’ve already shown, we
are now great, and have been, despite his incessant proclamations to the
contrary.] And yes, in recent times certain groups of Americans have not seen much
if any economic benefit, as other groups have. This vital issue of economic
inequality, that TD’s announced economic policies will not remedy at all, does need to be rectified; but it does not detract from our
overall distinction as a nation. There is no nation that can claim seamless distributional
equity.
The Donald’s Carrier deal required
now-governor Mike Pence to offer a lush $7 million taxpayer-funded bonus to the
company. What happens after January 20 when workers beyond Indiana demand TD’s
help? Maybe President Trump can create a rotating vice presidency of Republican
governors who can bestow multi state crony capitalism outside the Hoosier State
on an as-needed basis.
Irony abounds. The US unemployment rate declined to
4.6% in November, the lowest it’s been in over 9 years. This reduction represents
a significant success for hundreds of thousands of US workers that the Obama
administration has helped in bestowing. In fact, during President Obama’s time
in office the economy gained 15 million jobs, which works out to 36,000 jobs
per week. Yet TD’s public statements clearly emphasize his disparagement of
this advantageous macro situation.
He campaigned with a micro focus on preserving manufacturing jobs, which have steadily declined during
the last 63 years, on fending off the purported “war on coal” that has
affected the nation’s 80,000 coal-miners and stopping imports.
Mr. Trump’s allegations about why coal miners now represent only 0.05% of our labor force are, to be generous, misplaced. Sure, environmental policies established by Republicans and Democrats have played a part (and offered important, essential health and longevity benefits to all of us), but the most important factor reducing coal mining jobs has been competitive market forces, specifically the reduction of domestic natural gas prices due to significant improvements in extracting natural gas from the ground (e.g., fracking).
Mr. Trump’s allegations about why coal miners now represent only 0.05% of our labor force are, to be generous, misplaced. Sure, environmental policies established by Republicans and Democrats have played a part (and offered important, essential health and longevity benefits to all of us), but the most important factor reducing coal mining jobs has been competitive market forces, specifically the reduction of domestic natural gas prices due to significant improvements in extracting natural gas from the ground (e.g., fracking).
Coal’s share of its key
market as a fuel for electric power generation has been cut by 15% during just
the past 8 years. Natural gas and non-fossil-fuel technologies (solar, wind,
biomass) have gained what coal has lost. No bully-pulpit phone calls or
mouth-to-mouth meetings by TD will restore coal’s former markets. Why should
they? He continuously accentuates his acumen as a businessman who understands
markets and technology, and applauds market forces that he has taken advantage
of in commercial real estate. Market forces are present in the energy sector as
well.
The improvement in the
nation’s overall (macro) employment – now 124 million full-time workers – isn’t
his concern; he’s purely focused on micro transactions – industry-specific
situations – like Appalachian coal miners or air conditioner builders. Micro
matters to him. Perhaps he believes macro is for losers.
If we didn’t know it before,
most of us now know that working class wages have stagnated for more than a
decade. This upward wage inertia has turned John M. Keynes' famous downward
"sticky wages" insight on
its head. The wages of less-educated, primarily non-urban workers, among others
have been stuck from rising. White working-class people strongly voted for TD
and gave him a crushing 39% margin
over Clinton. With TD’s beauty-contest cabinet appointments and his suggested economic
policies (e.g., not raising the $7.25/hr federal minimum wage) how can wages
for working-class laborers be improved? They can’t.
Under the Trump presidency, I
expect average real (inflation-adjusted) wage rates will continue to decline or
at best stay steady. Inflation is likely to increase if he convinces his
congressional buddies to fund his ideas for improving the nation’s
infrastructure (an eminently worthwhile, if overdue measure of expansionary
fiscal policy), and increase the defense department’s budget (an utterly
mistaken, uncalled for scheme). Among other reasons, such sizeable spending,
along with Republicans’ incessant desire to cut federal income and remove estate
taxes for the richest Americans, will require large amounts of deficit spending.
Increased deficit spending will raise interest rates on government bonds. Ten-year
Treasury notes’ interest rates have risen
55.7% since Nov. 1.
Right after the Federal
Reserve increased the Federal Funds interest rate last week by 0.25%, the US
dollar appreciated as expected. The new president’s suggested increases in
deficit spending will further strengthen the dollar. With the stronger dollar,
US exporters will have a more difficult time selling their goods overseas and
imports will become less expensive, something that can threaten a larger trade deficit and lower macroeconomic
growth, neither of which is likely to please the new president. Watch for Congressional Republicans
to fortify their discussions about reducing the Fed’s much-needed independence.
In his 44 days as president-elect,
I’m convinced that TD thinks solely in micro terms, he’s a distinctive deal guy.
He is likely to be a pervasive transactional president, unmoored by any
unifying vision of meaningful macro objectives. Perhaps learning from the
Kardashians (although he’d never give Kim even a milligram of credit), he banks
on the broadening power of social media – especially Twitter – to provide pseudo-breadth
to his micro moves.
Can micro TD convince us
and the world that his narrow, transactional perspective is sufficient to lead our
nation? Is this the change that his acolytes voted for? We'll be finding out on
a day-by-day basis beginning in 30 days.