<b>Deepak Lal:</b> The Trump trauma

I have recently spent a month in Los Angeles where the anti-Donald Trump hysteria is extraordinary. A plebiscite on California seceding from the United States is to be put on a forthcoming ballot. This reminds me of a report by Joan Robinson at a dinner party in New Delhi in the 1960s of the signs she saw in Havana during a visit which said: “The US says it cannot live a few hundred miles from a Communist country. Why don’t they move?” Now Californians unwilling to live with their democratic citizens who elected President Trump want to do what Fidel Castro had advocated. This hysteria is matched by the unhinged responses to the Trump presidency in most of the midstream media, Hollywood, Silicon Valley and many academics. There are columns arguing that he is clinically insane, and how he should be impeached, less than a month into his presidency. Joseph Epstein (WSJ, February 11-12) has rightly categorised this hysteria as due to a Trump Trauma. Its sufferers, Bruce C Onsager in the FT (February 11-12) notes “display an intolerance to others’ points of view that is nearly religious. Their shunning of America now that Americans have had the gall to elect a president they disagree with is the kind of reactionary narrowness for which liberals used to hold conservatives in contempt.” This dogmatic intolerance of modern liberalism, as Mr Epstein notes, makes those in the grips of Trump Trauma “feel terribly good about themselves, on the right side of things, above all filled with virtue”. It is this smug moral superiority claimed by progressive liberals that classical liberals have always found insufferable. 

But are there legitimate reasons to worry about the Trump presidency? In his first month in office he has through using executive orders been largely redeeming his campaign promises. Any fears that he will be a Hitler should be assuaged by the various court orders opposing his ill-devised order to restrict travel by nationals from seven Muslim-majority nations. With his attorney general in place, a new executive order taking account of the federal courts legal objections is being prepared.

There have been worries that there is no clear line of authority in Mr Trump’s White House, and in their first weeks in office many of the President’s advisers and Cabinet nominees have contradicted him and each other. This has led to the impression that Mr Trump does not know how to govern. An excellent essay by Chris De Muth (“The method in Trump’s Tumult”, WSJ, February 11-12) shows that Mr Trump seems to be reverting to a form of leadership exercised by Presidents Washington, Lincoln and Roosevelt. Instead of viewing disagreements with and amongst their subordinates as a problem, they used it as a tool. “They surrounded themselves with highly accomplished, strong-minded advisors, and used vigorous debate among them to generate fully considered options for confronting the intractable problems of the day”. Mr Trump, too, has picked a highly capable Cabinet, and “self-assuredly encouraged them to speak their minds. ‘I want them to be themselves’, he tweeted, ‘and express their own thoughts, not mine’”. Thus he has accepted General James Mattis’ view that torture is not permissible. He has backed off on his complacent views on Russia, with both Vice President Mike Pence and Secretary of State Rex Tillerson stating that Russia’s occupation of Crimea was illegal and indefensible. Similarly they and General Mattis have reaffirmed the importance of NATO and the US commitment to the defence of its members, in contradiction to many of Mr Trump’s tweets. All this is in contrast to “the insular Jimmy Carter, who disdained disagreement and the rigid ideologue Barrack Obama, who, in George Will’s formulation, ‘never learned anything from anyone’”. 

Nevertheless, there are two clouds on the Trumpian horizon. One concerns the economy, the other the “deep state” of the intelligence agencies. On the economy, Mr Trump’s executive orders on dismantling the regulations which have strangled the economy should aid economic growth. The authorisation of the two pipelines for Canadian oil, as well as the reversal of Mr Obama’s anti-coal mining executive orders, should make the US a formidable energy power. But it is in fulfilling two major economic objectives which require Senate approval that there will be difficulties.

The first concerns the repeal and replacement of Obamacare. There are major disagreements in the Republican caucus on repealing the expansion of Medicaid by Obamacare, on which the extension of medical care to the hitherto uninsured depended. As many of these beneficiaries were in the rust belt which voted overwhelming for Mr Trump, any repeal of their new entitlement would endanger the Republican Congressional majority.

Illustration by Binay Sinha

The second concerns the “border tax” envisaged in Speaker Paul Ryan’s corporate tax plan to establish the low-tax regime envisaged by President Trump. This would be similar to a value-added tax. It would change corporation tax from being based on the profits earned from where operations are based to one where products are sold. Under the proposed new corporation tax rate of 20 per cent, the border tax adjustment gives exporters a corporation tax exemption, whilst importers will have to pay the corporation tax by the elimination of the tax deduction for imports. With unchanged savings and investment, the standard national income identity states the trade deficit will be unchanged. Hence, after the border tax is implemented the exchange rate must appreciate to bring US import and export prices back to where they were before the tax. Also the import tax is estimated to yield $120 billion a year (Martin Feldstein, WSJ, January 9). Most importantly, if the US example of basing corporate taxation on profits earned where products are sold is followed by other countries, it would eliminate the incentive to locate operations and profits in low tax locations. As Chris Giles has noted (FT, January 19) this would be a global “Trump corporate tax revolution”. But this tax reform is being threatened by importers lobbying against it; exporters are in support. Whether the Republican caucus can hold together to pass Speaker Ryan’s tax Bill still remains in question.

Finally, with the illegal leaking of classified telephone conversations of the President and the ex-National Security Advisor Michael Flynn, Mr Trump has a war on to tame the “deep state” of the national intelligence agencies. This will be hindered by the Mr Obama administration’s rescinding in early January of a directive going back to President Reagan which limited the number of people with access to classified information in these agencies. This will make it difficult to identify and charge the leakers. Nevertheless, for those not suffering Trump Trauma, the next few years herald the prospect of a revival of the US economy and a reversal of the global disorder under President Obama.