A President of Consequence
Ross Kaminsky
by

Last week I received an email from one of my radio show listeners saying “I voted for President Trump but if I had it to do over again, I wouldn’t.” I responded, “I’m in exactly the opposite position: I didn’t vote for Donald Trump but if I could do it over again, given what I know now, I would absolutely vote for him.”

It’s true, and it’s not just because the person I did vote for, Evan McMullin, has turned into an utter embarrassment (a sentiment that many others who voted for him have shared with me).

Rather it’s because, although it takes a fair bit of effort, if I follow the advice that I offer my friends who find Donald Trump maddening to “watch what he does, not what he says or what he tweets,” it’s difficult to imagine a president pushing a nation toward greater prosperity and economic freedom more aggressively than this president has so far. This while simultaneously recovering an important measure of Ronald Reagan’s “peace through strength” and backing away from the rapid and harmful ceding of sovereignty in issues of international affairs to supranational organizations and the opinions of foreign leaders.

This is not to say that President Trump poses any less of a risk to the Republican Party or to the nation in the longer run than I had contemplated when “Negotiating with Myself” about the 2016 election (about which more in a moment) but rather that his first year in office, although quantitatively short of legislative achievements (much like Barack Obama’s entire presidency), nevertheless has seen a beneficial transformation of government beyond what I thought Mr. Trump was either capable of achieving or interested in implementing.

After John McCain’s reprehensible thumbs-down (more like a thumb in Donald Trump’s eye) killed Obamacare reform for the foreseeable future, President Trump — working closely with Speaker of the House Paul Ryan and Senate Majority Leader Mitch McConnell, two men whom so many of the Trump base love to hate — herded the GOP cats and achieved a unanimous vote among Senate Republicans for the first major tax reform in over 30 years.

No law is perfect, and we might object to moving a few million more Americans to paying zero federal income tax, or to Senators Marco Rubio (FL) and Mike Lee (UT) insisting that the welfare state be enlarged through increasing the refundable child tax credit, but overall this tax reform is a massive victory for Republicans. A few specifics deserve being reminded of:

  • It lowers rates for every person in America (the nominally slightly higher 12% rate for part of what was the 10% bracket being offset by a large increase in the standard deduction giving lower-income earners a lower effective rate).
  • It limits the deductibility of state and local taxes, including property taxes, to a total of $10,000 per year, putting tremendous pressure on high-tax (Democrat-run) states to cut (or at least stop raising) taxes as they will no longer be able to force citizens of lower-tax states to subsidize their federal income taxes. USA Today recently published a study naming the seven states with the highest overall tax burden. These seven states have 14 US senators representing them in the Capitol; all 14 are Democrats. No wonder the bill got zero Democratic votes… something which swing-state Democrats may come to regret when the economic benefits of tax reform are felt.
  • It repeals the Obamacare individual mandate penalty (not actually the mandate itself, though, as that could not be done through reconciliation, meaning that a Democratic-run government could reinstate the penalty with just 51 votes in the Senate).
  • And it slashes the corporate income tax rate from 35% to 21%, instantly making the United States a far more appealing destination for job creation and reducing the incentive of corporations to merge with foreign companies for the purpose of relocating corporate headquarters for tax purposes. Getting less press, though also extremely important, is that the U.S. will move to a territorial corporate tax system, meaning that U.S. companies will no longer be taxed on profits earned overseas (although previous earnings which have been kept overseas will face a one-time tax at a special lower rate to repatriate that cash back to the United States).

President Trump has placed Neil Gorsuch on the Supreme Court. Gorsuch, who ironically hails from the Peoples Republic of Boulder, will serve as one of the most constitutionally-oriented members of SCOTUS for decades. It is difficult to imagine a better selection, and given the usual long-lasting impact of a Justice, Trump rightly reminds his supporters frequently of this particular nomination.

Trump has taken an axe, or at least a hatchet, to the regulatory and bureaucratic states, rescinding dozens of Obama-era regulations and, as the Washington Post put it, “mak(ing) a significant down payment on his campaign pledge to shrink the federal bureaucracy…. By the end of September, all Cabinet departments except Homeland Security, Veterans Affairs and Interior had fewer permanent staff than when Trump took office in January — with most shedding many hundreds of employees.”

Among the regulatory cutbacks, President Trump removed the United States from the Paris Climate Accord, saving American taxpayers tens of hundreds of billions of dollars. And under the leadership of FCC Chairman Ajit Pai (whom Trump named to the chairmanship), the massive and unnecessary government overreach known as “Net Neutrality” has also been repealed, though many court challenges remain.

A recent letter from the Trump administration casting doubt on federal government dollars being used to fund a New York and New Jersey transportation project also shows a rethinking of the proper role of the federal government, a shift toward state and local responsibility for state and local projects that represents, at long last, a pushback against federal involvement in anything that any senator wanted for his state. It also represents the president (indirectly) showing Chuck Schumer that hardball can be played at both ends of Pennsylvania Avenue.

For all these reasons, for the entirely selfish recognition that Donald J. Trump is a daily gift to talk radio, and with the benefit of 20/20 “if I knew then what I know now” hindsight, my not voting for Donald Trump was a mistake (though he lost Colorado by such a wide margin that my vote did not come close to mattering).

So that’s looking back at 2017. What is 2018 likely to bring from this most unusual president? Keeping in mind the warning attributed to Yogi Berra that “it’s tough to make predictions, especially about the future,” a few thoughts about why I expect the coming year to end on a less positive note for this president, his supporters, and the Republican Party than the past year did.

My concerns fall into a wide range of areas, from investing to international trade to geopolitics to Mr. Trump’s unceasing and inevitable Trumpiness.

First, as someone who was involved in financial markets as a profession for nearly 30 years, and who put a substantial portion of my net worth into the stock market several years ago, I am concerned that I see, for the first time in a decade, persistent positive chatter in the “mainstream media” and the mass-market financial media (CNBC, Fox Business, etc) about how bright the future is for corporate earnings, how stocks are going to keep rising, and generally about how well almost all things in our financial lives are going.

I am a strong believer in investor optimism as a contrary indicator; in other words, the more bullish the investing public is about stocks, the more bearish I am. This is not a matter of wanting to be contrary but rather the fact that high levels of optimism imply high levels of existing investor participation in markets, meaning that most of the money that could go into stocks already has gone in — but stocks need new money to rise in price. In other words, if everyone is already in, the only thing left to do is sell.

Having seen markets climb a “wall of worry” with much of the public wary of stocks following the 2007-2008 government-caused financial and economic debacle, an increasingly broad acceptance of stocks as being on a glide-path toward higher prices has me worried that 2018 will see far more volatility than we’ve seen in several years. I would not be surprised to see markets lower at the end of 2018 than at the beginning — which could have political as well as financial implications. (Note: this is not a prediction of a worsening economy, just of a riskier stock market.)

In an impromptu interview given by President Trump to New York Times reporter Michael Schmidt, President Trump remarked that he had gone easy on China “in terms of trade” because he’s hoping that Chinese President Xi will help us deal with North Korea’s nuclear ambitions. News that Chinese ships are illegally transferring oil to North Korean vessels caused the president to note, “I’m not happy about that.”

If Trump, who is believed to support import tariffs on many products including steel and aluminum, goes down an anti-trade road with China (or with Mexico and Canada), that poses tremendous risks to the U.S. economy, to the millions of jobs which rely on trade, and to the political future of Republicans in the 2018 elections.

A “trade deficit” is not inherently negative nor does it, as President Trump seems to think, represent a loss to America or Americans. Indeed, to the extent that a trade deficit occurs because foreign manufacturers are offering a better blend of price and quality than American manufacturers are, the trade imbalance represents billions of dollars of savings to Americans engaging in voluntary transactions.

Also, the capital surplus (the other name for a trade deficit) returns to the U.S. in the form of investments in both financial and hard assets, creating prosperity and jobs for Americans. Finally, the idea that the federal government can tell us we can only buy a product from someone if we are willing to pay more than the seller is willing to sell it for should be offensive to any supporter of liberty. Again, if Donald Trump goes down the protectionist route, millions of Americans will pay the price, as will Republicans in the upcoming elections.

Due to the failures of the three presidents before him, particularly Bill Clinton (who also “missed opportunities to kill Osama bin Laden”), President Trump has been dealt a near impossible hand with North Korea and its mercurial tyrant Kim Jong Un. Particularly following the way President Obama allowed Libyan dictator Muammar Gaddafi to be overthrown, brutalized and killed after Gaddafi had ended his country’s nuclear weapons program, Kim sees the possession of nuclear weapons as the only way to ensure his regime’s continued survival. It is unlikely that anything short of military action will stop his pursuit of a viable nuclear arsenal.

Not sanctions, not American jawboning, not even pressure from China — though such pressure will be, as it always has been, half-hearted given that the Chinese are happy to have a divided Korea providing a buffer between the U.S.’s strong ally, South Korea, and the Middle Kingdom.

Therefore, the question facing President Trump will be simple to put into words but exceptionally difficult to answer: Do the dangers of a nuclear-armed North Korea and the risks that they will not be deterred from using those weapons justify a pre-emptive strike on the country given the very large costs guaranteed to South Korea, likely to Japan, and possibly to the United States itself of a second Korean War?

There are no good answers here. My hunch is that trying to live with a nuclear North Korea is a better bet than attacking a nation with the world’s fourth-largest standing army, numbering about one million men, with plenty more available as Kim’s cannon fodder, many of whom are already stationed, along with thousands of pieces of artillery, within less than 50 miles of Seoul. But if President Trump and his team decide differently, we could see a brief but exceptionally destructive scene on the Korean peninsula. It is also worth noting that China has said they would support the U.S. in military action against North Korea only if North Korea struck first.

The domestic political impact of a military confrontation with the DPRK is unpredictable. People could see President Trump as a wartime president deserving of public support, which could benefit Republicans in 2018. Or they could see him as recklessly costing blood and treasure of Americans and our allies, which would be politically devastating. Of course, these considerations, much like President Trump’s statement about his prioritization of trade discussions with China, are much less important than war itself.

Other areas of geopolitical risk for President Trump include Iran (its ballistic missile program, funding of international terrorism and, as of the past few days, whether street protests evolve into a potentially regime-threatening scale), Russia (particularly given the U.S. decision to supply lethal “defensive” weapons to Ukraine), and dealing with the ongoing messes in Afghanistan and Iraq — one the longest war in U.S. history and one the aftermath of a misguided war, and both getting remarkably little attention from the American press or public.

And finally, there’s Trump himself. On one hand, as the New York Times put it, “President Trump has brought a reality-show accessibility to a once-aloof presidency, invigorating voters who felt alienated by the establishment.” For that, for his constant attacks on “fake news,” his repeated exhortations to “make America great again,” his pounding of “the establishment” — while still finding a way to work within it to some degree, for taking his messages directly to the people via Twitter, millions of Americans appreciate, even adore, this president.

At the same time, and partly for some of the very same reasons, millions of Americans are somewhere from uncertain about, too uncomfortable with, too repulsed by Donald Trump. And while Trump supporters are fond of noting the failure of polling to predict the result of the 2016 elections, a couple of items are worth noting: First, Donald Trump will not be on the ballot in 2018 — though whether that will be a good or bad thing for Republican candidates is anybody’s guess. Second, while the Alabama Senate election had issues very specific to that race, in that contest and in Virginia’s elections for governor and state legislature, Democrats substantially outperformed polls.

Mr. Trump and his supporters shrug off his current approval numbers — the lowest ever measured for a first-year president. But unless Trump, through a combination of good results from policy and a slight change in his own behavior, can raise those numbers from the mid-30s to the mid-40s, Donald Trump risks become the GOP’s version of Barack Obama: a man who signed only one noteworthy piece of legislation early in his presidency and was then emasculated by voters handing control of government to the opposition party.

As far as Trump behaving any differently, I’ll quote myself, writing in May 2016: “For those who hope he will become ‘more presidential,’ I think the 25-year old recording of Trump pretending to be Trump publicist ‘John Miller’ shows that he’s been this same guy for most of his adult life and will never change.”

Donald Trump and his strongest supporters are misinterpreting the 2016 elections as a massive vote of confidence in him. It wasn’t. Yes, it was a scream against a government which has consistently let us down, against the status quo, and to a lesser degree against the “establishment.” But mostly it represented many people’s utter revulsion at the idea of a President Hillary Clinton.

An election is, as the literal meaning of the word suggests, a choice. In 2018, those choices will not include Donald Trump’s name on the ballot, nor Hillary Clinton’s; instead they will represent local preferences colored by voters’ desires to show support for or opposition to the president.

If the economy remains strong, as it likely will in the absence of exogenous shocks, we will see whether Americans will “vote their pocketbooks,” as history suggests they usually do, and reward Republicans with ongoing majorities in the House and Senate or whether, as we saw in Virginia, highly motivated Democrats along with millions of moderate/unaffiliated voters, especially women, send the message that “we don’t care what you’ve done for the stock market or the economy; we just can’t stand — and won’t stand for — Donald Trump.”

I suspect it will be the latter, but the actual degree of anti-Trump voting will be critical because Republicans can lose more than 20 House seats and still keep the majority — though they will be, as Michael Barone notes, defying history if they do so. On the Senate side, Republicans have only a one-seat majority but Democrats are defending far more seats in 2018 than Republicans are, including 10 incumbents running in states won by Donald Trump. In other words, Republicans can lose a little and still dominate.

Preventing a Democratic wave in 2018 will require a combination of good luck, good governance, and slightly more appealing behavior by Donald Trump over coming months. The first is impossible to predict, the second is likely to be a tug-of-war between what the administration and Congress actually accomplish and the way the Trump-hating media characterizes it, and the third is a pipe dream.

Regarding the second, the president has some big goals for 2018, including a DACA replacement, as part of which Trump expects Democratic agreement to fund a “border wall.” The politics will be as important as the policy details since each party will try to make the other appear as unreasonable obstructionists. The debate will occur in an environment in which the majority of the country (though not of Republicans) is closer to the Democratic position on these issues than to Trump’s position.

I believe — and I believe the president believes — the maxim that “leaders do not follow polls; they change them.” In this vein, President Trump has the opportunity to lead a broadly popular resolution to the issue of illegal aliens who were brought here as children, and to continue to define the border wall as something that could in places be a “virtual” wall created by electronic surveillance, drones, and other non-physical-barrier methods. Democrats who feel certain that they have the upper hand in this debate are overconfident, particularly because President Trump’s prior utterances on these issues point to an interest in a “moderate” solution, one which it will be difficult for Democrats — especially vulnerable Trump-state Democrats — to oppose without substantial political risk to themselves.

In 2016, I wrote about “Trump’s potential to hand complete control of the country to Democrats in just a few years.” My fear of that outcome has not lessened despite my admiration for what he has gotten done in his first year in office.

By the time we see the results of the 2020 elections, Republicans may be left to wonder — as some Democrats must have following their Obama-caused political annihilation across many levels of government — whether the price of a Trump presidency was unbearably high. But until then, with cautious optimism that he will not lead us into trade wars, I wish President Trump godspeed on his continuing journey to rein in the size, cost and intrusiveness of our government, to thump “Chuck and Nancy” whenever possible, and to remind me why I should have voted for him in the first place.

Ross Kaminsky
Ross Kaminsky
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