CEA | PERSPECTIVAS

Columna Perspectivas del mes de diciembre. Mensualmente, esta sección del Centro de Economía Aplicada (CEA) de la UCEMA provee un análisis de destacados economistas con orientaciones y enfoques diferentes respecto de los problemas económicos de nuestro país y el mundo.

Por Bernard E. Munk*

The surprising electoral victory by Donald Trump (and his loss in the popular vote) has the media intensely speculating on the likely domestic and international polices of the incoming Administration. The pre-campaign rhetoric is being searched for relevant inferences on the new Administration’s likely policy agenda of economics and international policies. That is likely to be misleading precisely because Trump’s election campaign was so different from traditional Presidential campaigns. What it took to win might be quite different than what it will take to govern. Even the early appointments do not yet give us a definitive picture to the actual governance menu that Trump presents.

MunkThe gap between campaign promises and likely policies should serve as a warning that predicting the actual policy menu of this President is likely to be fraught with more than the usual uncertainties. Without sufficiently definitive statements from the President elect, since his victory, preconceived hopes and inherited prejudices rule, particularly in the media. After Henry Kissinger's meeting with Trump, his comments to the press referred to the difference between election promises and substantive policy. He was puzzled as well

Still, markets are forward looking and responses have been seemingly positive at least regarding economic policies thought to be likely. Yet, market reactions often fasten on previously noted criticisms of people and industries without any definitive explication of what actual Presidential preferences will be. Trump’s criticism of some major Silicon Valley giants has been cited as a reason in the decline in their shares, but at this point no one really knows how policy will be shaped by his relatively weak connections to the Hi-Tech industry. The transition between the old and new Administration is likely to contain unexpected surprises.[1]

Presidential transitions have traditions and both the President and the President Elect at their first meeting seemed to recognize that both can gain from a smooth transition that excludes painful pre-election charges and focuses instead on what will be good for Americans of every stripe. The "progressive and/or liberal" media has been less forgiving of the transition process, as have some of the badly bruised Democratic politicians. Democrats are still in disbelief that voters turned against what they thought were their needed "progressive" ideas, particularly since major polls predicted victory. Rather than looking at their own their own agenda and bias, the "kept" media and the progressive zealots are trying to assign blame to external events, such as the querulous behavior of the FBI, to explain the Democratic Party defeat. The claim that FBI Chief Comey caused Clinton’s loss seems like "sour grapes," but it will provide impedance to a smooth transition and opposition to the Trump policy agenda in its first “100 Days.” Perhaps even more importantly, that continuing disbelief and heavy criticism of the President Elect will serve to prevent the Democrats from a useful inward meditation over what American voters want as opposed to what Democrats told them they ought to want.

We had long thought that it was the Republican Party that would need a thoroughgoing internal revolution beginning with what they believed their Party stood for, but as it has turned out, their victory closed off that review. Instead, it is the Democratic Party that has been badly split open. The split between the parties, however, surely to widen once the actual Trump agenda becomes public accompanied along with the appointments in the new Administration. As the new Administration formalizes its policies, it is quite likely that bitter factional disputes will still emerge from under the Republican tent.

At this stage, then, appraising the likely Trump legislative and administrative agenda is chancy and predictions may fail when the rubber finally meets the road. Nonetheless, we try below to put together what we think the top policy advisors and the President Elect will choose as their main lines of policy. We divide our analysis between International Economics and Politics and Domestic Affairs, even though they are clearly interdependent.

Geopolitics and Geo-economics

As Commander-in-Chief, the President will be faced with immediate decisions because while our troop involvement is in the anti-ISIS campaign is small, significant military and economic resources are deployed and there is no immediate "discharge of the war." Trump is on record saying, "I will destroy ISIS" but the practical content of that intended destruction has not been made clear.

Trump's foreign policy pronouncements have also included objecting to the Iran "deal," supporting Israel, demanding NATO members increase their support, a possible change in our stance toward Russia, immigration reform (including the Wall), protecting the homeland, China (both currency "manipulations" and Chinese exports) and ending the traditional "free trade" orientation of American international economic policy. That forms a very big agenda and clashes with traditional Republican preferences in many areas.

The list requires attention to both foreign and domestic affairs and would tax even the most well prepared President Elect. Unfortunately, after such a strenuous political campaign, the new Administration has to have policies for these areas immediately without perhaps sufficient internal deliberation as to the form such policy changes are to take.
It doesn’t seem that Trump undertook major policy reviews during the campaign and with less than two months before inauguration, the new Administration is going to be extremely busy developing the details of its policy agenda. Moreover, because the Trump utterances during the campaign challenge traditional Republican ideas, Trump will have to spend a major effort to argue his policy case to the American and foreign publics. At the same time, we should expect significant interruptions to policy formulation from events outside the US that operate on their own time clock.

[1] Amazon, whose founder, Jeff Bezos, owns the Washington Post was criticized by Trump. AMZN trade above 844 on October 5 but fell to 719 on November 14 (the week following the election). It has since risen to 785 on November 22.

Bernard E. Munk

Bernard Munk, FPRI Senior Fellow, is the Principal of Munk Advisory Services, an investment advisory service for professional investment managers and private investors. Dr. Munk founded and operated six different companies in international and domestic business active in Europe, the Far East, Central and South America and Africa. The companies include: Penndel Energy, Bemico Corporation, Protimex Corporation, Western Hemisphere Industries, etc. His previous experience includes serving as the Chief Economist at Bowman Capital Management, Visiting Professor of Board of Governors, Federal Reserve System, a Fellow at The Brookings Institute, Adjunct Professor of Management at the Wharton School of the University of Pennsylvania and Senior Fellow in the SEI Center for Advanced Studies in Management. Dr. Munk received his Ph.D. (Economics); M.A. (Economics); and BA (history) from the University of Chicago.