Friday, February 24, 2017

Trump and Jobs: A First Presidential Look

What will President Donald Trump do about employment?  Despite how much has been said, by him but to a much greater extent on his behalf, we know very little. 

That is not only because of his extremely chaotic nature and his well-established tendency to lie, but also because it is way too early to know.  There is a reason why the first serious assessments of presidents are done after they have been in office 100 days – it takes that long for them to find their footing, to talk with people in both legislative houses, and to get a realistic picture of what they can and cannot do.  We may also not know much before then what concessions Congress will want from him, and what key senators and representatives will request to be added to laws he wants to pass.  We don’t have much help from commentators, who, if on the left, are mostly only repeating concerns they have had about him since before his election, and, if on the right, are finding their own positions between supporting him and holding back in favor of true conservatism instead. 

Thus, we are reduced to reading tea leaves.  Some people, such as stock investors, expect good things, probably from Trump’s almost certain attempts to cut taxes on those with the most income and net worth.  In some cases, employers have seemed scared to announce job cuts, and others have re-publicized upcoming hiring increases.  Most of their business moves have nothing to do with Trump, such as Amazon’s long-in-the-works promise to add 100,000 full-time American positions by the end of next year, “as bricks-and-mortar retail crumbles” (The New York Times, January 12th), “but at what cost?” (USA Today, January 13th). 

What pertinent things did our president propose before he was elected?  Per “A look at Trump’s economic proposals” (USA Today, November 9th), there were many of them.  He wanted to reduce income tax rates, the highest one to 33%, and eliminate gift and estate levies.  He would slash corporate rates from 35% to 15%, and cap small business income taxes at the same level.  Trump also advocated a wide-range of protectionist laws, most spectacularly 45% and 35% Chinese and Mexican import tariffs.  He would increase forgiving of student loans, offer new child-care tax credits, and, surprisingly, mandate six paid maternity-leave weeks.  He wanted no federal minimum-wage increase.  Trump asked for Obamacare to be repealed, but backed a $1 trillion infrastructure proposal that, though it would never approach the 13 million jobs he said it would create, would generate a lot of them.          

On the prospects for these things being accomplished over the next four years, we do know a little more now than then.  With Republicans controlling both houses, tax rates are likely to go down, though probably, since conservatives care more than Trump seems to about the financial consequences, not as much as he would like.  The tariffs will be debated, and could come out either way.  The student loan and child care measures would be good bargaining chips for Democratic support – if this president can show ability to work with Congress instead of only trying to dictate to it.  Almost day by day after the election he backed off further from his pledge to end Obamacare, though that still could happen.  The infrastructure project would seem in the abstract to have strong bipartisan support, but some on the right are against it, and we will hear plenty from them, on this and other issues, over the next year.

When looking at what could be accomplished over the next four years, we must also consider another possibility, peculiar to Trump.  As of yesterday evening, the prediction market gave him 20%, 15%, and 11% chances of leaving office in 2017, 2018, and 2019 respectively., an offshore betting facility which allows, as American casinos do not, wagers on outcomes determined outside the rules of games or sports, had the odds only 27 to 20 in favor of Trump finishing a full term.  An early departure, with chances too significant to be ignored, would precipitate a Mike Pence presidency, with clear expectations of conservative Republican governance.  In particular, that could, or could not, mean an end to the protectionism Trump proposed. 

Other major things could also happen.  A trade war, or even a shooting war, with other large countries could change what Congress is willing to pass.  Negative world-leader reactions to Trump could distort job-related outcomes.  And of course there is the standing possibility of a recession, which last happened eight years ago.  These also mean an unusual amount of uncertainty.  We will know much more, though, by April 30th

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