Trump administration

A Glimpse of a Trump Administration

Former Governor of New York Mario Cuomo once said, “You campaign in poetry. You govern in prose.” Mr. Trump’s campaign rhetoric entertained millions. But his actual behavior in office is likely to differ. What will happen when President-elect Donald Trump moves from his corner office to the Oval Office?

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Affordable Care Act

With the Presidency and both chambers of Congress scheduled for Republican control, repealing and replacing the Affordable Care Act is a very real possibility. As it stands, 2017 sees medical coverage rising 25% (for those without tax subsidies), largely because premiums from healthy candidates are not enough to cover the medical costs of the sick.

After meeting President Obama to commence the presidential transition period, Mr. Trump has pointed out some tenets of “Obamacare” he admires, namely allowing children to remain on their parents’ plans until age 26 and banning insurers from denying coverage for pre-existing conditions.

Still, Mr. Trump would like to see more reliance on health savings accounts, tax-advantaged accounts reserved for medical expenses. He also wants to allow insurers to sell in any state regardless of their domicile. But the logistics of building a cross-state health care network may not be possible. Nevertheless, much of how Mr. Trump will overhaul Obama’s signature law has yet to surface.

Infrastructure Spending

Over the next decade, Mr. Trump has proposed spending $500 billion to $1 trillion on infrastructure projects such as highways, bridges, airports, schools and hospitals. Besides modernizing much-needed public structures, the idea is to spur the economy by creating jobs.

These actions, coupled with others, could lead to healthier inflation, which has trailed the Federal Reserve’s 2% target for more than four years. The funding source for this proposal is uncertain, given Mr. Trump’s plan to cut corporate and personal taxes. But his idea to permit a repatriation tax holiday allowing multinational companies to bring overseas cash (estimated at $2.5 trillion) to the U.S. for a relatively low tariff may provide some backing.

Immigration

Mr. Trump has vowed to suspend immigration from certain terror-prone areas. And while the religion (Islam) test has been eradicated, he is still calling for “extreme vetting” of Muslims from regions inhabited by Islamic extremist groups.

On the matter of the U.S.’s southern border, he’s still planning to deport millions of undocumented immigrants. If they want legal status, they must return to their country of origin and apply for lawful entry, which will be expedited under a Trump administration. However, there is recent chatter that legalization could be administered without immigrants leaving the U.S. in the first place.

Regarding the [in]famous wall stretching 1,000+ miles along the southern border, it is still on deck, with the cost to be footed entirely by Mexico—largely through import tariffs.

Finally, regarding H-1B visas, which allow foreign laborers to work in the U.S., Mr. Trump most recently stated bringing an end to this “cheap labor program.” If enforced, this could be a major hit to Silicon Valley technology firms that largely utilize this allowance to bulk up their talent pool.

NAFTA

Enacted by President Clinton in 1994, the North American Free Trade Agreement trilaterally connects Mexico, Canada and the U.S., allowing tariff-free trading of most goods (e.g. clothing, automobiles and textiles), with an exception on certain agricultural products.

Decades later, 80% of Mexico’s exports have moved north, resulting in a U.S. trade deficit. And cheaper labor costs below the Southern border killed U.S. jobs—particularly among large manufacturers.

Mr. Trump wants to reverse these trends by re-imposing tariffs, perhaps as high as 35%, on imports from Mexico. The idea is that many U.S. companies with Mexican factories will be dis-incentivized to continue producing there. Instead, these firms would be better off hiring American workers. (On a similar note, Mr. Trump has vowed to end the Trans-Pacific Partnership, a U.S.-led pact to lower trade barriers with 11 nations around the Pacific.)

It’s uncertain whether Americans will benefit from this protectionist strategy. By spending more on expensive U.S. labor, companies may be forced to pass the burden to consumers through higher prices. But as many factories turn to automation, humans will inevitably be replaced with machines. These “lights-out” factories, so-called because there is little need to have bulbs burning except during breakdowns, will not do much for job creation.

Whatever the Trump administration decides, it should be legislated with care. “Suddenly abandoning NAFTA would disrupt the robust trade among all three nations,” wrote Gary Shapiro, CEO of the Consumer Technology Association. 

NATO

Mr. Trump has not been afraid to opine on the 66-year-old North Atlantic Treaty Organization. He has suggested evaluating the U.S.’s continued membership in it, claiming it has not done enough to counter terrorism and that many of its members have not been paying their fair shares. With regard to indirect NATO fees, including equipment and troops toward a military operation, guidelines require each member to spend at least 2% of their GDP. While the U.S. spent 3.6% of its GDP in 2015, or $664 billion, the median amount for the remaining members came in at 1.1%. As such, Mr. Trump has threatened that the U.S. will not come to the rescue of members if they fail to pull their weight. Of course, this risks questioning NATO’s core principle: an attack on one of the 28 members is an attack on all the members.

An inherent problem with NATO is many members do not contribute their agreed-upon amounts since the U.S.’s commitment to the alliance is unconditional. And currently, there are no sanctions for nations that fall short of this requirement. Mr. Trump has essentially called for the world’s most powerful military alliance to be run like an insurance company. If a member foregoes payment, it should expect to defend itself. Though, whether there is a grace period and what the reality of this means is not clear. But it is important to not drive current members away, or the relevancy of this collective-security coalition may be shattered.

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While Mr. Trump’s campaign rhetoric resonated with millions of Americans, what happens post-inauguration may be a different matter. As Secretary of State John Kerry recently said, “… Some issues look a little bit different when you’re actually in office compared to when you’re on the campaign trail.” The next four years will separate fact from fiction.