[Marxism] Donald Trump is creating a field day for the 1%
lnp3 at panix.com
Tue Feb 28 06:25:21 MST 2017
FT, Feb. 28 2017
Donald Trump is creating a field day for the 1%
by Edward Luce
He was supposed to be leading a revolt against America’s elites. In
practice Donald Trump is laying out a banquet for their delectation. The
Trump White House is drawing up plans for across-the-board deregulation,
tax cuts and a new generation of defence contracts. The only question is
at what speed.
In contrast, Mr Trump’s middle-class economic plans, such as they were,
are already receding. The chances of a big infrastructure bill are
rapidly dimming. In marketing they call this bait and switch. The effect
of Mr Trump’s economic agenda will be to deepen the conditions that gave
rise to his candidacy.
The biggest winners will be on Wall Street, in the fossil fuel energy
sector and defence. Stephen Bannon, Mr Trump’s most influential adviser,
last week described the bonfire of regulations as the “deconstruction of
the administrative state”. For every new regulation, two will be
scrapped. The first clutch will come this week with executive orders
undoing Barack Obama’s “clean power plan” that limits carbon dioxide
emissions and a separate one on clean water. Anticipation of this has
helped to fuel the boom in energy stocks since Mr Trump was elected. The
Dow Jones Industrial Average rose more in Mr Trump’s first month than
for any president since Franklin Roosevelt.
Financial stocks have also over-performed since the election. Many, if
not most, of the protections included in the Dodd-Frank law after the
collapse of Lehman Brothers are in Mr Trump’s sights. These include the
Volcker rule that restricts banks from speculating with other people’s
money, and possibly protections designed to shield the consumer — what
Mr Trump called the “forgotten American” — from reckless marketing. Such
rules have inhibited Mr Trump’s Wall Street friends from lending money,
he said earlier this month.
Elsewhere the open season is well under way. Mr Bannon’s
“deconstruction” is already touching most areas of US federal activity.
Last week the stocks of private prison companies soared after the
Department of Justice scrapped an Obama rule that ended the outsourcing
of federal incarceration. They had already jumped after the announcement
the Trump administration would detain illegal immigrants in federal
centres rather than release them.
Likewise, the new head of the Federal Communications Commission has
purged key parts of the net neutrality rules put in place to shield
consumers from discrimination. The FCC also scrapped plans to open the
cable box market to competition. Expect similar field days in the
for-profit higher education sector, defence industrial stocks and public
The scale of Mr Trump’s tax cuts are more vague. Steven Mnuchin, the
Treasury secretary, wants them enacted by August. It is unclear whether
it will include a “border adjustment tax” that would hit importers but
supposedly incentivise manufacturers to bring production back home. The
import tax would raise roughly $1tn over the next decade and finance a
much larger tax cut than otherwise. Unsurprisingly, the only stocks that
have done badly since Mr Trump was inaugurated are big retailers, such
as Walmart, who would be hardest hit by a 20 per cent border tax. Their
customers are the forgotten Americans whose grocery bills would soar. It
matters little to them whether Mr Trump pushes through a large or a
medium sized tax cut. Simple arithmetic ensures the gains would go
disproportionately to the top one per cent.
How will Mr Trump keep the forgotten Americans happy? His only concrete
promises were to boost infrastructure and protect entitlements such as
social security and Medicare. Only the second is likely. Plans to raise
infrastructure spending were more apparent than real — most of the
supposed new money was in tax credits rather than spending. But even
this is unlikely to pass Congress this year.
The answer lies instead in Mr Trump’s grander promise to pursue a “buy
American and hire American” agenda. The beauty is that he can define the
art of this deal any way he wants. Talking up the “big mess” Mr Trump
says he inherited from Mr Obama is a part of it. Deporting illegal
immigrants counts as hiring Americans. Cajoling companies to announce
new jobs in the US, or to bring them back, will also fuel that narrative
— even if they are simply repackaging existing plans. Expect a flood of
fake job announcements.
The darker side is who Mr Trump will blame when people start to complain.
His administration’s perennial enemy is what Mr Bannon calls the “big
opposition” — the media. Bad news will be dismissed as globalist propaganda.
Mr Bannon has also reiterated the case for “economic nationalism”.
China, Mexico and others are ready scapegoats. Expect large anti-dumping
actions in the coming months. Then there are the Muslims, illegal
immigrants and so on. They are soft targets.
Will Mr Trump’s tactics be enough to make the forgotten American feel
remembered? Possibly. The president has a knack of sounding off against
the elite while lining their pockets. The rule with Mr Trump, as in
life, is to watch what he does, not what he says. They are often two
edward.luce at ft.com
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