“Markets like good news. Markets dislike bad news, but markets hate uncertainty.”
Willis Sparks, European investment adviser
“Uncertainty is the refuge of hope.”
Henri-Frederic Amiel, 19th-century Swiss philosopher
In the last two centuries, the U.S. economy has endured 47 recessions. It has withstood more than a dozen major wars. It has been battered by droughts, floods, tornadoes, earthquakes and forest fires.
The latest misfortune arrived in January as a swirl of chaos and confusion introduced by the 45th president of the United States.
Donald J. Trump is to clarity what vodka is to sobriety.
The voters who propelled Trump to victory made more than a political verdict when they cast their ballots. They made economic choices based on little or no detail. “Wonderful” and “beautiful” are not public policies. Many of the promises truly were “fantastic,” as in, impossible to believe.
Somehow, some way, Trump would make everyone better off. The election result was the equivalent of diners looking up at a waiter and saying, “Surprise us!”
But will they swallow whatever mystery meat arrives at the table?
Take the Trump tax plan unveiled last week. With the stock market near record highs, the bulk of Trump’s proposed tax breaks go to — Surprise! — Corporate America. The same business owners now sitting on $1.9 trillion in cash — money that’s neither creating jobs nor raising wages.
Of course, some families would save big money with the proposed tax cuts. Including — wait for it — the Trump clan. An end to the inheritance tax would just happen to save Trump’s heirs billions. Did Trump supporters vote to make the Trumps richer?
Meanwhile, the tax scheme would boost the national debt by an estimated $2.4 trillion. Remember when Trump said he would eliminate the national debt? Shocker!
For the moment, forget that Trump spews falsehoods, scandal and conspiracy theories faster than a baby fills a diaper. The topic of today’s meditation is not the fate of U.S. democracy but the future of the nation’s economy.
Saddled with the lowest approval ratings in history for a new president, Trump’s act already may be wearing thin. But his unpredictability and predilection for bait-and-switch could be the next big test for the U.S. economy.
The Dow Jones industrial average is up close to 2,200 points since Election Day. Jubilation!
That may yet prove to be the triumph of greed over fear, applauding the hope of unfettered capitalism in the absence of facts. Trump’s explicit plans for spending, taxes and regulation remain, for the most part, boldfaced question marks.
Those doubts make economic decisions complicated guessing games with billions in investment, trillions in trade and millions of jobs at stake.
Risk implies reward. It also can bring ruin. The test of Americans in the months and years ahead will be their tolerance for navigating haze. It’s anybody’s guess whether Trump voters will end up shouting “More!” or “Enough!”
The problem with predicting the final judgment is that uncertainty sometimes can be inviting.
For more than 50 years, fans savored the brilliance of jazz trumpeter Louis Armstrong. No two performances were alike. Satchmo’s delivery always was fresh.
But charting a course for commerce is not a game of improvisation. Winging it can lead to shortcuts for the few at the expense of the many.
Unfortunately, many Trump voters told pollsters that they crave “shaking things up.” They want something different, even if they don’t know what it is. That may be an ominous omen.
Consider the lessons of B.F. Skinner, an experimental psychologist who made a name for himself in the 1930s while frustrating caged pigeons at the University of Minnesota.
What Skinner found was … unexpected. Given food in return for tapping their beaks against metal switches, the birds did not require a reward for each performance. Getting fed only some of the time, amazingly, actually offered a stronger incentive than constant reward.
Trump’s voters may end up being like those birds. If Trump can deliver what he promised, now and again, once in a while, maybe his pigeons will remain loyal.
Start building a wall on the U.S./Mexico border. Check. Mexico refuses to pay for it. Well, we can’t win ’em all.
Wave forward the Keystone Pipeline as a victory for U.S. steelmakers, the “exclusive” suppliers of the metal for the project. Maybe few will notice that 30 percent of the pipe comes from Russia.
Rebuild and expand the nation’s roads, bridges, airports, power grids and broadband networks? Give tax breaks to private investors and let them collect the profits on tolls and access fees until the end of time. Want to ride the Donald J. Trump Expressway? That’ll be 20 bucks.
Install another conservative on the Supreme Court. Another success! But is that worth more than finding a job in regions where few are in sight?
Trump claims he inherited a “mess” from President Barack Obama. Yes, perhaps falling unemployment, consistent job growth, low inflation and rising wages have the makings of a nightmare. But what will Trump’s legacy be?
Bankrupt casinos, a closed university that offered counterfeit course and a retail enterprise selling fashion made in Hong Kong seem unlikely hallmarks of an architect of American economic revival.
One thing is clear, the trillions in tax cuts Trump promises to champion would aggravate one of the country’s worst economic problems — income inequality. The highest-income Americans would reap windfalls of six figures. For the richest of the rich, tax bills would fall by more than a million.
The gain for everybody else? They’ll be overshadowed by myriad planned cuts in government services.
Trump’s effort to strip 24 million Americans of health insurance came to grief, but he has options aplenty for altering $4 trillion in taxes and spending. Consequences will ripple through a $19 trillion U.S. economy.
Which of Trump’s goals will he pursue hardest? The holy quest to slash income taxes on the rich and on corporate profits? (A trillion cheers for the “1 percent.”) Or can we anticipate new double-digit taxes on imports? (Bad news for Target and its shoppers. Also, any U.S. manufacturer that uses foreign parts. Which is to say almost all of them.)
Listen carefully and you’ll hear the answer is “both.”
Or maybe “neither.”
Pity the Fortune 500 CEO or the small-business owner who has to make decisions about investment, research spending — not to mention hiring and firing — with future tax policy as vague as an abstract painting.
Trump talks of raising barriers to immigration with “extreme vetting” and outright travel bans from select countries. The result would be economic casualties in all directions.
A high-tech company relying on foreign talent to design and build new products suddenly has to guess whether the courts will let Trump erect an invisible wall at the nation’s border. That won’t drain the swamp. It will drain the talent pool.
Florida orange growers, Idaho potato growers and Midwestern meatpackers could go begging for help if low-skilled recruits disappear.
U.S. universities add billions to this nation’s balance of trade by educating prosperous students from around the world who pay up to triple the tuition of native-born classmates. Higher education could stagnate with a smaller, less-diverse reservoir of future innovators.
Trump vows to relax, if not end, enforcement of environmental rules. Which ones? When? How? Nobody knows, least of all the president himself.
Companies that specialize in environmental protection — from smokestack scrubbers to water filtration systems to chemical spill cleanup — have almost as much to lose as people who like to breathe clean air and drink pure water.
How many high-paying, forward-looking jobs will be at stake in the service of protecting polluters?
After generations of railing against government “picking winners and losers” — nurturing select industries at the expense of others — Trump’s Republican Party now calls for elevating the interests of fading industries over fast-growing rivals. Up with coal. Down with solar and wind. Never mind that “green” energy creates far more new jobs than fossil fuel.
When — or whether — Trump supporters will change their view of the disorder the economy is about to face remains at open question.
“The observer defines the event,” German physicist Werner Heisenberg famously proclaimed.
An artwork pocked with a dense field of dots may appear to be a random array of unrelated points on paper. But some people, if they look hard enough, can picture an eagle in flight or the head of Elvis.
What Trump’s supporters see in him as time passes is, for want of a better word, uncertain.
What I see today is a president whose face belongs on a $3 bill.
Mike Meyers, a former Star Tribune business reporter, is a writer in Minneapolis.