Looking Ahead Post Election
No silver linings or sour grapes
Trump has won reelection. Yay! Boo! Whatever!
Now that the emotions are out of our system, let’s give an assessment of Trump’s campaign policies from both an optimistic and pessimistic perspective.
Guiding this analysis will be the working assumption that you should probably take Trump and his rhetoric with a grain of salt. This isn’t said out of criticism or naive hope. Rather it is very much who he has always proven himself to be. It is in fact the crutch his supporters lean on when apologizing for his campaign positions and promises that are awkward at best, contrary at worst.1
Eli Lake’s pre-election appearance the podcast Honestly summed it up well—Trump and the Art of the Bullshitter. I would strongly encourage you to listen to it. I don’t think there has been a more succinct elucidation of who Trump is. Trump is simply the best politician of the era and one of the best ever. Make no mistake, this is not a compliment.
As you work your way through this list possibly assigning your own probabilities as well as direction arrows (is it a good or bad thing if it does happen), be sure to appropriately assign blame or credit as the case may be to the Democratic Party. They once again failed democracy by putting up a pathetic contender.
While it is easy to blame the voters, the truth is we know who they are, what they respond to (see the Lake podcast above), and what they're capable of. It is up to the elites to chart a better course by presenting better alternatives. Sadly the recent track record doesn't build a lot of hope for the Democratic Party to get their act together.
Despite many raising that as an optimistic take, that the Democrats will see the need to bring their A game, their recent performances belie there capabilities. In 2016 a technocratic overlord (Clinton) had to kinda, sorta cheat an airhead socialist (Sanders) for the prize of being Trump’s first general-election victim. Then in 2020 a group lusting after what appeared to be the opportunity for tyrannical control and an ultimate wish list of government power advancement (Warren, Sanders (again), et al.) succumbed to the perennial Democratic B-lister (Biden). We know the debacle that was 2024—a vapid campaign from a zero candidate (“Trump’s really bad, don’t you know. I’m gonna change everything, and everything is fine. Vote for me. Q.E.D.”). The party that put Obama, (Bill) Clinton, Johnson, and Kennedy at the top of the ticket seems to have retired.2
Does the Republican Party deserve blame? Yes, a hell of a lot. They are awful too.
Last thing before the list: This was partially inspired by Alex Tabarrok’s post on the best-case scenario for a Trump presidency and Gene Healy’s election-day post which pragmatically sides with Trump as the preferrable candidate considering only the policy implications.
Trump’s proposals (in no particular order and certainly a partial list):
Immigration - deporting non-citizens who are in the U.S. illegally
This is very bad (morally and pragmatically), but it is also quite unlikely (<5%).
Immigration - greatly restricting entry, turning away asylum seekers, reinstituting first-term policies, etc.
Also very bad morally and somewhat bad pragmatically especially if the immigrant flow is greatly curtailed. This labor pool likely kept us out of recession so far. I would rate this as fairly to highly likely (70-90%).
Taxes - continuation of 2017 TCJA policies including extension of personal tax breaks
This is good to exceptionally good. A potential bad component would be a repeal of the $10,000 SALT limit. The extension of the reductions to personal income rates/brackets is bad from a budget perspective. Highly likely (>80%).
Taxes - no tax on tips, overtime, or Social Security
This is very bad. It introduces major distortions into the tax code—something the TCJA was very good in removing—and it moves up the date for Social Security’s insolvency considerably. Fortunately I find this all fairly unlikely (20-30%).
Tariffs and trade - widely imposing 10-20% tariffs along with much higher targeted tariffs
This is very bad. The optimistic take is that all his blustering on tariffs and trade wars didn’t last long or amount to nearly as much as advertised in his first term. But he had NAFTA and TPP to occupy him that go around. There are no analogues today. So we should probably up-rate this probability (20% chance of the worst version and 80% chance of the least-bad version).
Regulation - slowing down if not shrinking the regulatory/administrative state
This is very good. While I love the prospect of him letting Elon Musk and Rand Paul go all Javier Milei on the beast, I have my doubts this will happen. I do think we will see meaningful reductions in growth and reductions overall in the regulatory state. I estimate the best case at a low likelihood but the balance quite high (15% and 85%, respectively).
Industrial policy - subsidies, playing favorites, and cronyism otherwise
This is bad. Trump instituted and Biden furthered Buy American rules that favor U.S. companies. These are bad on the merits and in practice. I don’t expect any relief here in a second Trump term. I think he’ll also continue all of the CHIPS Act and other subsidies. Fortunately when it comes to pure cronyism, Trump largely limits it to the grift of hawking to his constituents. All of this looks likely to continue (>70%).
Energy - subsidies and tax policy that favors/disfavors certain energy sources
This is degrees of losing relatively less given the context that we are already doing so much in this space. Trump will “level the playing field”, if you will, by sharing the wealth of government largess back toward oil & gas and perhaps nuclear. More on that last point in the next bullet. This is very likely (>85%).
Energy - expanding drilling and lessening barriers to nuclear
As a flip side of the energy coin, this is a very good item. Obviously many of these items overlap as this has a lot to do with regulation like the prior one does taxes and industrial policy. So there should be some consistency in this list to the degree we can expect consistency from Trump. On the whole this isn’t as likely as many probably expect although Elon might be helpful here (50-60%).
Judicial appointments - picking up where he left off with largely good appointments
Trump was good on this issue. I think this has room for deterioration for sure. Still, on balance it should be good judges (good, not conservative per se). This seems very likely (>80%).
Education - reducing the emphasis of DEI and Title IX extremes and being supportive of school choice
These are all good to the extent a President can do much here. The first areas are more available than the latter. Highly likely given the experience in the first term combined with all that happened in COVID, et al. (75%).
Entitlement programs - protecting Social Security and Medicare
This is bad. We desperately need massive reform to these programs—the source of all our long-term debt woes. I don’t expect he will do anything to help matters, which is a confusing way of saying he won’t protect them because he won’t reform them. There is an outside chance he allows a BRAC-like commission to actually institute reform. Still, sticking with very likely he does not attempt any reform (90%).
Entitlement programs - Affordable Care Act (Obamacare) and Medicaid
This would likely be good. He promised a lot in his first term, but only really delivered on allowing states to institute work requirements on Medicaid. Capping block grants would be a good, low-hanging-fruit solution for Elon’ chainsaw crew to target. Based on his first term, I have to expect little here (25%).
War and foreign policy - keeping us out of war and entanglements
This would be very good provided the strategy didn’t include completely exiting all engagement in the world or a poorly-staged reduction/exit. Reminder: he did not get us out of Afghanistan and he did relax the rules of engagement that led to big increases in civilian airstrike deaths. On the positive side he did improve the share of NATO funding and support coming from other members. He promises an end to the Ukraine-Russia war before Inauguration Day. I’ll take the over. A willingness to not be a hardliner in the Middle East could be a benefit. This is all less than even chances (35%).
Housing - [not sure how to summarize this one] protect housing but also pro building?
There isn’t a lot a President can do here as it is mostly a state and local issue. Some of Trump’s indications are good like reducing environmental review regulation and opening federal lands to development. Some are very bad, and the bulk of his rhetoric is NIMBY. Reminder: deportation is bad for housing hurting supply much more than bringing initial demand relief and don’t forget Say’s Law—supply creates its own demand. We lose those workers at our own peril. Since the most specific policies he identifies are positives, I’ll say this is in the good category. Moderate likelihood (40%).
Drug freedom - [another I find hard to summarize] right to try but not illicit narcotics…; anti-big pharma, vaccines, etc. (RFK, Jr.); anti-regulation, so… anti-FDA?
Trump was good on right to try yet he did nothing helpful on drugs such as descheduling. I am hopeful that the RFK alignment was purely transactional and that trade is complete. If this were a movie, Trump would take RFK for a drive over a bridge into a lake.3 Trump’s deregulation plus any lingering friction from COVID might mean the CDC and FDA have a big opponent as a boss. All in all, this is a net hopeful issue with a moderate likelihood (30%).
I debated putting these all together in a graphical format because I make no assumptions about the importance weight to assign to each. Hence, I am reluctant to show the graph below since I definitely DO NOT want to imply any kind of equal weighting to each item on this partial list.4
Should we be optimistic? Well, yes. In general that is the better disposition. After all, it will be generally correct in the long run and more pleasant in the short run.
Specifically to this situation, I would say be cautiously optimistic at least with respect to our biggest fears. The probabilities I assigned above are obviously limited by my perspective and ability to guess. But to bolster that consider that when the stock market rallies as strongly and decisively as it did Wednesday following Trump's victory, we have to take that as a strong positive endorsement. While some of the positivity was likely due simply to their being a decisive outcome leaving little worry for a contentious period of lawfare and perhaps building in a higher inflation future, the overall magnitude of the leap up forces one to see it as a bright signal of a better path forward for our entire economy and world.
I know that will ring hollow for some who do not understand how well linked the stock market is to everyone’s wellbeing (including those outside the U.S.). Yes, the stock market is indeed very much not everything, but it is a great proxy for the world we live in.
So, I’m disappointed in the outcome but optimistic it will be better than the alternative. Trump has a big but very unlikely downside. Harris was just degrees of locked-in downside but with a cap on how bad it could probably be. At least Trump brings some good policies. That’s . . . something.
It is also invoked when his bad behavior is brought up.
No, I do not necessarily or at all admire these guys. I am just recognizing that they were top quality at the game.
Not a row boat—wrong movie. A car ride. And the title would be Fluoride. Okay, too much.
There are more items in the graph than bulleted since a few bullets have a couple components (best/better case and worst case).