Almost all new presidents come into office with an ambitious agenda and are determined to put their personal stamp on the office during their first 100 days. Donald Trump is clearly no exception and the promises he made, in the parlance of his political speeches, are huge. But while much has been made of the Republican majority in Congress, it bears repeating that Democrats have a significant 48 vote minority in the US Senate, adding compromise and complication to the wide range of issues Trump will be facing outlined here.
The Federal Reserve
As a candidate for office, Trump derided the easy monetary policy of the Janet Yellen-led Fed. But as President, especially as one with a real estate background, Trump might feel differently if higher interest rates squelch his hoped-for economic growth. There are currently two vacancies on the seven-seat Federal Reserve Board of Governors, and over the next few years the Chairmanship of Janet Yellen will expire as will the Vice Chairmanship of Stanley Fischer. This could give Trump the ability to appoint a majority of the Board in a fairly short period of time.
The President-elect spoke with unusual stridency about trade during the campaign, but even his supporters would admit that it will be hard to deliver on his promises. With respect to key trading partners, Mexican and US manufacturing components are too intermingled and a promised 35% tariff, with its threat of Mexican retaliation, would create havoc on both economies. China is of tremendous importance to the US and global economy at large and has tremendous leverage to retaliate. This goes beyond blocking US exports to include a wide range of issues such as cyber security, cooperation in North Korea and the issuance and buying of Treasury debt.
Trump has repeatedly criticized America's infrastructure and also the need to put people back to work rebuilding that infrastructure. This is one issue, however, where he and his party are far apart. His Republican caucus is not entirely convinced that extensive infrastructure spending is needed, particularly if there is no easy way to pay for it. In 2009, they voted unanimously against President Obama's stimulus package and decried pork belly spending and this remains part of their DNA. Trump might get more support from Democrats who welcome the jobs, and would also enjoy watching an early internal battle between the new President and Republican Congressional leaders over how to pay for it.
The power of the presidency as evidenced by President Obama can be enormous when it comes to new regulations. Trump has already said he would halt and reverse any number of Obama initiatives, including those on climate change, worker overtime pay and the new Department of Labor (DOL) fiduciary duty rule which imposes complex standards and expanded liabilities for financial services firms. Trump has also vowed to repeal the Dodd-Frank Act, which regulates the banking industry at significant cost to the industry. While most banks want Dodd-Frank reformed, many have already invested significantly in compliance and don't necessarily want to completely gut the law. While reversing executive orders can be done fast, overturning regulations takes a bit more time and may be harder than expected. However, it could still get done.
The ultimate goal of Trump's tax reforms is to reduce the tax rate for corporations and individuals and broaden the tax base. To accomplish this, Trump has said that there is no reason why a tax bill has to be revenue neutral, while Senate Majority Leader McConnell, reflecting most of the Republican Caucus, says it must be neutral. McConnell has in mind the federal budget deficit, which was close to $600 billion for the 2016 fiscal year and is expected to get much larger due in part to aging baby boomers and higher interest rates on the national debt.
By spring of 2017, there is likely to be a new Chairman for both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission. And given that these new chairmen will almost certainly be Republican, we can expect more reliance on market forces rather than regulation to promote competition and consumer protection. With respect to the SEC, you could expect a retreat from many of the increased disclosure requirements that have emerged during the last eight years, ranging from investment in fossil fuels, to executive pay/employee pay ratios, to the extent of measuring the level of minority and women workplace in management positions.
Donald Trump's choice for Treasury Secretary Steven Mnunchin has said that Fannie Mae and Freddie Mac, which guarantee the interest and principal on roughly two-thirds of American mortgages, should be privatized but not closed. Congressman Jeb Hensarling (R-TX), the powerful House Financial Services Chairman, is anxious to make his mark by blowing up both Fannie and Freddie. In the end, I would anticipate some sort of compromise that moves closer to what Mnunchin wants than that being pursued by Hensarling.
Affordable Care Act
Since the Affordable Care Act (ACA) was enacted in 2010, the Republicans have voted repeatedly to repeal it, knowing it would face a certain veto from President Obama. Both Trump and Congressional Republicans want to repeal it and replace it with something else, although there is no consensus on what this might be. House Speaker Paul Ryan (R-WI) wants to create a voucher-based private health insurance program with financial assistance to those in need. In the meantime, hanging in the balance are the 19 million people currently insured under the ACA. Taking a step in the right direction, Trump made a good move in nominating Congressman Tom Price (R-GA) to be Secretary of Health and Human Services. He is a surgeon who has done a lot of work and thinking on this matter during his six terms in Congress. The inclination right now is to repeal the law but keep it in effect for at least two years after the next election and use the time to come up with something else. Like all other proposed changes to health care, this is easier said than done. Health care is an intensely personal issue, and as President Obama and Congressional Democrats learned, "you break it, you own it." Proceed with caution and don't expect to make friends.
We can expect stronger enforcement and more jawboning on immigration, but nothing nearly as draconian as that which was talked about during the campaign. Trump has already partially retreated with respect to his campaign statements that he would immediately reverse President Obama's Deferred Action for Childhood Arrivals. This has allowed 740,000 immigrants to obtain work permits with another 7,000 being approved every month. In recent statements, Trump has somewhat backed away from this although he has not said anything specifically on what he intends to do.
The need for bipartisanship
After years of rancor between Republicans and Democrats, it would be good to get bipartisan cooperation and this brings forth a level of public consensus that adds legitimacy and support for the things that are being done. Given the age we are living in, I have no illusions that this will occur. However, I do see developing fissures between the new President and Congress on issues relating to spending and deficits. As a developer and candidate Trump has never abhorred debt. This is one principle that usually unites the Republican Party, even though they deviate from this when it serves their purposes.
I remain a bit hopeful that, given the new president's lack of policy knowledge and experience in Washington, Congress will reassert the power provided to them in the United States constitution, which has been significantly eroded be the federal government for decades now. I think it would be helpful in forging a consensus and compel Congress to take more responsibility for their actions and for the people they serve.