Tag Archives: Donald Trump

Trump as the Anti-Obama

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Donald Trump assumes office with perhaps the lowest favorability ratings of any modern president. According to the New York Times,

  • Mr. Trump’s approval rating is only 40% among all adults and just 46% among likely voters.
  • But a recent CNN poll reports that 48% of adults think he’ll do a good job as president and 61% think he’ll bring back well-paying jobs to economically depressed areas.capture97

Contrast this with Barack Obama’s latest poll ratings:

  • According to Gallup Mr. Obama leaves office with an approval rating of 57%.
  • But Rasmussen reports that only 35% of likely voters think the country is heading in the right direction (with 55% saying that we’re headed in the wrong direction).

I interpret this to mean that the country is largely turned off by Mr. Trump’s crude speech and sleazy behavior, while still liking his economic program.  On the other hand, voters like Mr. Obama personally while disapproving of many of his policies and accomplishments.

All of this leaves Mr. Trump in an amazingly good political position:

  • With unemployment currently at a relatively low 4.7% and the economy fully recovered from the Great Recession, even modest reform in tax policy coupled with energy, healthcare and financial deregulation could provide a significant boost to long stalled economic growth.
  • He is criticized for having no clear cut political philosophy but this means he is free to do whatever makes good sense regardless of ideology. This will be a huge advantage in working with both parties to get things done.
  • He has nowhere to go but up in the polls. Such an increase in personal popularity will create the semblance of forward momentum.

Conclusion. The prospects are indeed propitious for Donald Trump to become a transformational president.

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The Divided States of America: Who’s at Fault?

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Frontline’s two part series, “The Divided States of America” makes the case that the divisive and hyper-partisan political atmosphere of the past eight years was caused primarily by the racially tinged reaction of the extremist Tea Party to the progressive policies of a forward looking, if inexperienced, black president.

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I think that Frontline has missed the most fundamental reasons for our current malaise, namely that:

  • Slow economic growth since the end of the Great Recession in June 2009 has caused great angst and resentment amongst middle-income, and especially blue-collar, workers who have stagnant incomes when they observe all around them the elite professional, managerial and financial classes who are doing so well.
  • Self-righteous attitude of progressives who refuse to accept that conservatives have legitimate, and maybe even superior, points of view on various issues.

For example:

  • National Debt. The public debt (on which we pay interest) is now 76% of GDP, the highest since the end of WWII, and is projected by the Congressional Budget Office to keep steadily getting worse without a change in policy. Right now, with ultra-low interest rates, our $14 trillion debt is essentially “free” money. But what is going to happen when interest rates go back up to more normal levels? It could easily be a new fiscal crisis, much worse than the financial crisis of 2008.
  • Inequality. Inequality has risen somewhat in recent years but slow growth is the real problem. What is especially lacking is new business investment to increase labor productivity. The best way to fix this is with tax reform (lower tax rates paid for by shrinking deductions) and a reduction in government regulation. But this would mean more “trickle down” economics. Horrors!
  • Improving Obamacare. The Affordable Care Act has increased access to healthcare but has done nothing to control costs. Most developed countries control the cost of healthcare with a “single payer,” government run monopoly. But this is anathema to many Americans who neither want to give up personal choice nor want to forgo the innovation which a free-market consumer-driven healthcare system provides.

Conclusion. The driver of our currently divisive political climate is a deep chasm between the fundamental beliefs of the two different sides. How can this deep division be overcome short of a new crisis which pulls both sides together?  A very difficult question.

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What Will Trump Do?

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I did not vote for Donald Trump because of his often crude remarks and sleazy behavior. But I am now cautiously optimistic about the prospects for his presidency based on the quality of his nominees for important government posts.  Like many of his voters, I “take him seriously but not literally.”

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Here is what I think he will do:

  • Economic Policy. He will try to speed up economic growth, well above the average 2.1% annual GDP growth of the past 7½ years. This can be accomplished with tax reform (lowering tax rates paid for by shrinking deductions), regulatory reform (including paring back Dodd-Frank and the ACA), immigration reform and tougher trade policies. Faster growth benefits the whole country and especially the blue-collar workers who voted for him.
  • Improving life in the inner cities. K-12 education is a disaster in many inner cities and Betsy DeVos will be a reformer in the Education Department. Ben Carson grew up in public housing and is an excellent choice for HUD.
  • Foreign Policy. Mr. Trump wants changes from China on currency and trade practices. He also wants more cooperation from Russia in fighting terrorism. He wants our NATO partners to bear a bigger share of their own defense. His Secretary of State designee, Rex Tillerson, supports arming Ukraine against Russia and also supports the TPP trade agreement with Asia. This all sounds good to me.
  • Fiscal Policy. My biggest concern at this point is our national debt, now 76% of GDP (for the public part on which we pay interest) which is historically high and steadily getting worse. The House Republicans are serious about shrinking deficit spending and hopefully Mr. Trump will support their efforts.

Conclusion. Donald Trump has a highly unconventional (but very effective) style of communication. If it leads to progress in addressing our biggest problems as above, then he’ll have a very successful presidency.

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Trump Could Become a Transformational President

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According to the historian John Steele Gordon, “Trump May Herald a New Political Order,” there have been just four transformational presidencies so far in U.S. history:

  • Andrew Jackson in 1828 moved the locus of political power sharply down the socioeconomic scale.

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  • Abraham Lincoln in 1860 preserved the Union, freed the slaves and turned the South into essentially a third world country for the next 100 years.
  • William McKinley in 1896 ushered in an era of almost unbroken Republican dominance which lasted until the 1930s.
  • Franklin Roosevelt in 1932 who overcame the Great Depression and greatly expanded the reach and power of the federal government.

Ronald Reagan in 1980, constrained by a solidly Democratic House, was less transformational than the four presidents above, even though he ushered in the era of Great Moderation which lasted until the Great Recession hit in 2007-2008.
Barack Obama in 2008 took office with strong Democratic majorities.  However the last eight years have proved a disaster for the Democratic Party.  They lost the House in 2010, the Senate in 2014, and Republicans now control most governorships and state legislatures as well.
Now consider Donald Trump’s strong political position as he takes office:

  • The Republicans hold a big majority in the House and a small majority in the Senate. And ten Democratic Senators in states carried by Mr. Trump are up for re-election in 2018.
  • He was elected to change the self-serving ways of Washington and owes little to the political establishment.
  • His cabinet picks, many with excellent qualifications, signal profound changes in government policy, especially lower tax rates and a regulatory environment more friendly to business.

Conclusion. Mr. Trump has excellent prospects for achieving faster economic growth and therefore rising incomes for the blue-collar workers who provided his victory margin. If he can also improve life in the inner cities, as he has promised to do, he and the Republican Party will be unbeatable for many years to come.

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Repealing and Replacing Obamacare

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The U.S. spends 18% of GDP (and rising) on healthcare, public and private, almost twice as much as any other developed country. The Affordable Care Act, passed by Congress and signed by President Obama in 2010, increases access to healthcare in the U.S. but does nothing to control its cost.

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President-elect Donald Trump and the Republican Congress want to repeal the ACA and replace it with a more effective and less expensive alternative. An excellent plan for doing this, “Transcending Obamacare” has been proposed by Avik Roy, the President of the Foundation for Research and Opportunity.  Mr. Roy’s Universal (and refundable) Tax Credit Plan will:

  • expand health insurance coverage well beyond ACA levels without an individual mandate
  • improve the quality of coverage and care for low-income Americans
  • achieve permanent solvency of U.S. healthcare entitlements
  • reduce the federal deficit without raising taxes
  • reduce the cost of health insurance for individuals and businesses

Here are the main elements of the Universal Tax Credit Plan:

  • Premium assistance. The Plan repeals the ACA’s individual mandate and expands access to health savings accounts. By lowering the cost of insurance for younger and healthier individuals, the Plan would expand coverage beyond ACA levels.
  • Employer-sponsored insurance reform. The Plan repeals the ACA’s employer mandate, thereby offering employers a wider range of options for subsidizing workers’ coverage.
  • Medicaid reform. The Plan migrates the Medicaid acute-care population onto the reformed private individual insurance market, with 100% federal funding. The Plan returns to the states full financial responsibility for the Medicaid long-term care population.
  • Medicare reform. The Plan gradually raises the Medicare eligibility age by four months each year (forever), allowing younger retirees to remain on their existing plans.
  • Veterans’ health reform. The Plan gives veterans the option of private coverage via premium assistance.
  • Medical innovation is encouraged by the Plan.

Conclusion. The Universal Tax Credit Plan is a big improvement over the ACA because it expands access, improves quality and dramatically lowers costs for both individuals and the country as a whole. Check it out!

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The Obama Legacy: Personal Popularity Coupled with Poor Judgement

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As President Obama prepares to leave office many observers are weighing in on his accomplishments, as I have already done myself, see here and here.

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Today let’s evaluate his major achievements:

  • Reviving the economy after the Great Recession. This was done but the recovery has been unnecessarily slow with annual growth averaging just 2% of GDP ever since June 2009. In fact, stagnant middle-class and especially blue-collar incomes are the reason Donald Trump eked out a victory over Hillary Clinton.
  • A giant step towards national healthcare. Even if the Affordable Care Act is repealed, its replacement will be much more universal than before. Unfortunately, however, the ACA increases access but does nothing to control the cost of healthcare (now 18% of GDP) which continues its steady rise. This is what has to change.
  • A global pact to combat climate change. Global warming is real but our response should be more circumspect. China has only pledged to reduce carbon emissions after 2030. India has 300 million people off the electric grid. It also has an abundant supply of coal. Heroic efforts by the developed world alone will have little effect on worldwide C02 levels.
  • A rash of new financial and environmental regulations. Both Dodd-Frank and new EPA regulations have contributed significantly to the economic slowdown which is why they are likely to be modified by the Trump Administration and Congress.
  • The Iran nuclear deal. The problem here is what will happen when the 10 – 15 year deal expires. Iran then will have a green light to develop nuclear weapons unless China and Russia agree to new sanctions which is unlikely.
  • American retreat from superpower status. Obama deposed a dictator in Libya but walked away from the aftermath. His premature decision to leave Iraq allowed ISIS to spring up. He let the civil war in Syria run out of control. A “reset” with Russia did nothing to prevent Putin from invading Ukraine and annexing Crimea.

Conclusion. As the first African-American President, Barack Obama is certainly a historical figure. But “a presidency of great promise is now ending in rancor and disappointment.”

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A Major Difficulty of True Healthcare Reform

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As my regular readers know I am focused primarily on two major national problems:

  • Speeding up economic growth to create more jobs and better paying jobs, and
  • Getting our national debt under control by reducing our annual budget deficits so that our debt will shrink over time as a percentage of GDP.

The evidence continues to persuade me that entitlement spending in general and the cost of healthcare in particular will play the biggest role in solving these two problems. My last post points out that healthcare, higher education and housing are all drags on family expenses but that the cost of healthcare has by far the largest negative effect on our economy.
The United States spends 18% of GDP (and climbing) on healthcare, both public and private, twice as much as any other developed country.  This enormous expense must be reduced but how will it happen?  The Affordable Care Act has increased access to healthcare but has not bent the cost curve.
Now the Republicans (President-elect Trump and Congress) want to repeal the ACA and replace it with something less restrictive and less expensive.   A popular alternative is health insurance which has:

  • High deductibles typical of catastrophic coverage in order to hold down the cost of insurance.
  • Tax credits to defray the cost of insurance.
  • Tax preferred health savings accounts to pay for routine expenses below the deductible.

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Unfortunately it’s not this simple. Today’s New York Times has a credible Op Ed by Drew Altman, CEO of the Henry Kaiser Family Foundation, “The Health Care Plan Trump Voters Really Want,” which reports on a series of focus groups set up by Kaiser after the election to quiz Trump voters about healthcare. What Kaiser learned about Trump voters is that:

  • In the pre-ACA market, they liked their ability to buy lower-cost plans which met their needs.
  • They want lower drug costs and improved access to cheaper drugs.
  • The very last thing they want in healthcare reform is higher out-of-pocket costs.

Conclusion. What Trump voters are looking for in healthcare reform is quality healthcare at a low cost. This is also the Republican ideal.  But the high deductible plus health savings account combination is going to be a hard sell to many Trump voters.

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What Is Slowing Down Today’s Economy?

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We will soon have a new President and, even though his election was somewhat of a fluke, he will obviously want to help the blue-collar workers who elected him.  The best way to do this is to make the economy grow faster.
The Gallup economist, Jonathan Rothwell, has just issued an excellent analysis of some of the major reasons for our current slow economy, “No Recovery: an analysis of long-term U.S. productivity decline.”

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Says Mr. Rothwell:

  • The problem is severe. U.S. GDP growth per capita has declined from 2.6% in 1966 to .5% today. Small differences expand into vast gaps in potential living standards. 1% growth for the next 35 years would expand household income from $56,000 in 2015 to $79,000 in 2050 (inflation adjusted), whereas 1.7% growth would raise household income to $101,000 in 2050.
  • Changes in living standards are fundamentally linked to changes of how the quantity of goods and services relate to their cost. Deterioration in the quality-to-cost ratio for healthcare, housing and education is dragging down economic growth. These three sectors alone have increased from 25% of GDP in 1980 to 36% of GDP in 2015.capture92
  • The cost of healthcare is 4.8 times as high today as in 1980, the cost of education is 8.9 times as high today as in 1980 and the cost of housing is 3.5 times as high today as in 1980. These compare to an overall cost increase of all items of 2.5 times today compared to 1980.
  • These three sectors have all gotten more expensive (without getting more productive), thereby absorbing more of families’ incomes, making it harder to satisfy other wants.

Conclusion.  We all want schools that work, adequate housing, and quality healthcare.  The problem is how to achieve these ends in a much more affordable manner.  Stay tuned!

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The Meaning of 2016

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For my last blog post of each year I briefly summarize the main events of the preceding year and then try to evaluate their significance. Last year I was badly off in one respect. I said that the rise of Donald Trump was a disaster for the Republican Party because he could not possibly be elected president!  I badly underestimated the force of populism sweeping the country.
Here are the main events of 2016:

  • Brexit. On June 23 Great Britain voted 52% – 48% to leave the European Union. Elite opinion advocated staying in and the polls predicted majority support for staying. The world was shocked when the vote went the other way.
  • Donald Trump was elected the next U.S. President on November 8. The polls predicted a Hillary Clinton victory and she in face won the popular vote by a 3,000,000 vote margin. But Trump squeaked by in the Electoral College by winning the rust belt battleground states of Michigan, Pennsylvania and Wisconsin by a combined total of 100,000 votes (see attached map to understand the Trump electoral vote margin).capture17
  • The Mid-East Refugee Crisis, Terrorism and Russia’s Vladimir Putin were even bigger problems in 2016 than in 2015 and will present huge challenges to Donald Trump when he becomes President on January 20.

Granted that Trump was elected by a slim electoral vote margin and a smarter campaign by Clinton could have led to a different outcome, nevertheless for such a sleazy, non-politically correct candidate to have done so well, has huge significance. It constitutes a major slap down of elitism:

  • Consider where our most recent presidents went to college: Reagan (Eureka College), George H.W. Bush (Yale), Bill Clinton (Yale Law), George W. Bush (Yale), Barack Obama (Harvard Law) and Donald Trump (Fordham). In other words, Trump will be the only president since Reagan not to have graduated from Harvard or Yale.
  • Consider that since John Paul Stevens (Northwestern Law) retired from the Supreme Court in 2010, every current Supreme Court Justice has graduated from an Ivy League Law School.
  • Consider that most nationally prominent Republicans, including members of Congress, shunned Donald Trump on the campaign trail even as his poll numbers steadily increased. In other words he was elected largely without the help of the Republican establishment.

Conclusion. The American voters have decided to take a big chance on a nontraditional presidential candidate. Are the voters collectively smarter than the elites to whom they usually turn for leadership?  I am optimistic that the answer will turn out to be yes!

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The Obama Legacy II. In the tender hands of Donald Trump

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A year ago, I examined “The Obama Legacy” from a general point of view. I simply looked at his record after seven years in office:

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  • Stagnant Economy, growing at an anemic 2.1% annual rate ever since the end of the Great Recession in June 2009.
  • Massive Debt, at 74% of GDP (now 76%), the highest since the end of WWII.
  • Chaotic Middle East, the rise of ISIS in Syria, Iraq and North Africa and the resulting refugee crisis in Europe is the result of weak U.S. leadership.
  • Hyper-partisan Political Atmosphere, especially because of the above failures, leading to the rise of populist political candidates such as Bernie Sanders and Donald Trump.

Now, a year later, as he prepares to leave office, all of the above conditions are still true. The only major change is that the conservative, not the liberal, populist, Donald Trump, will succeed him in office.  Admittedly, the election outcome was a fluke.  Trump’s electoral margin was provided by a slim popular vote victory of 100,000 votes combined in the battleground states of Michigan, Pennsylvania and Wisconsin.  Such an outcome was totally unpredicted and represents a miscalculation by the Clinton campaign.
In other words, the election easily could have gone the other way, in which case the Obama legacy would have had a four year period of protection by a Hillary Clinton presidency. Nevertheless, according to the Democratic pollster, Stanley Greenberg, the Obama presidency was deficient in several fundamentally crucial ways:

  • More than 1000 state and national Democrats lost their elections during his two terms. Republicans now have total (legislative and governor’s office) control in 25 states.
  • The economic recovery from the Great Recession morphed into bailouts – bank bailouts, auto bailouts, insurance bailouts, rather than directly addressing the continuing economic struggles experienced by a majority of Americans.
  • Approximately 40% of the Democratic base of minority, unmarried female and millennial voters disapproved of how President Obama was handling his job in 2010 and 2014, and many of these voters stayed home during the 2016 election as well.

Conclusion. The fate of Mr. Obama’s major achievements of the Affordable Care Act, the Iran nuclear agreement and committing the nation to address climate change are all now at risk of being overturned by the new presidential administration.

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