“The only way to make sense out of change is to plunge into it, move with it, and join the dance.”
David Byrne famously sang “Watch out, you might get what you’re after” in Burning Down the House. Who really knows if Donald Trump truly wanted to win the election or was hoping to be able to parlay his political success and notoriety into a politically-oriented media empire. None of that really matters now as he is now our country’s next President.
As I watched the election returns roll in and started coming to the realization that Trump not only could win but would probably be victorious, I was a bit numb with a slightly negative bias. My concern was a lack of divided government. The old saying is “United we stand, divided we fall” and I’m beginning to wonder if the more accurate expression is “Divided we stand, united we fall” as division is the norm, our nation was built on checks and balances, and we have continued to grow and innovate and contend with significant domestic and international challenges through it all. Think of Vietnam, Watergate, the Carter malaise, the Reagan Revolution and the initial antipathy towards Reagan as the embodiment of evil, the disdain towards Clinton, Bush, and Obama. And yet through it all, we somehow seem to muddle through. I digress.
My selfish concern about a lack of a divided government is what that could do to interest rates as there would be no perceived check on spending and tax policy which could provoke investors to feel much greater inflationary threats. The following chart shows this has already transpired, at least on a knee-jerk basis.
Long rates have shot up quite significantly and have now breached 2% for the 10-year Treasury.
Don’t forget, however, that there’s many a slip between the cup and the lip. Legislation, especially when it comes to taxes and spending, can be a bit complicated and messy with so many competing interests involved, even if all controlled by one party. It’s been said that the greatest threat to Israel is peace because the one thing everyone can agree on is doing what it takes to protect our country. If that were to go away and they were left to focus solely on dividing the pie, the divisions are so great that the country might rip apart. Let’s see what happens when Tea Party Republicans have to vote on big spending policies and tax cuts that drive up the deficit. And what about enlisting Democratic Senators when 60 votes are needed? I digress again.
I am reminded once again of David Byrne lyrics from
Once in a Lifetime:
And you may find yourself
Living in a shotgun shack
And you may find yourself
In another part of the world
And you may find yourself
Behind the wheel of a large automobile
And you may find yourself in a beautiful house
With a beautiful wife
And you may ask yourself, well
How did I get here?
So how did we get here? This map shows the shift from Left to Right in the 2016 election versus 2012.
These next four years should be fascinating. I mentioned earlier about my concern about a lack of divided government with the Republicans controlling the Presidency, House, and Senate. On the other hand, Trump is no traditional, ideological Republican. In fact, I believe he has changed parties five times since the 1980s. Talk about flexibility!. It seems to me that his messages appealed to as many people seeking bottom up solutions and policy changes versus top down, trickle down economics and less regulation.
Interestingly, Trump made the Forgotten Man one of the key themes of his campaign. Those people left behind by globalization, illegal immigration, and the deindustrialization of America and the “rigged system” that favors the Washington elite and Wall Street. This was the key theme in FDR’s 1932 campaign as well. Like I suspect with other historical parallels that Trump may turn to, he probably didn’t go back and read what FDR actually communicated in that famous speech, particularly when it comes to the cost of tariffs and constraining free trade. This is what FDR said:
- One other objective closely related to the problem of selling American products is to provide a tariff policy based upon economic common sense rather than upon politics, hot-air, and pull. This country during the past few years, culminating with the Hawley-Smoot Tariff in 1929, has compelled the world to build tariff fences so high that world trade is decreasing to the vanishing point. The value of goods internationally exchanged is today less than half of what it was three or four years ago.
- Every man and woman who gives any thought to the subject know that if our factories run even 80 percent of capacity, they will turn out more products than we as a Nation can possibly use ourselves. The answer is that if they run at 80 percent of capacity, we must sell some goods abroad. How can we do that if the outside Nations cannot pay us in cash? And we know by sad experience that they cannot do that. The only way they can pay us is in their own goods or raw materials, but this foolish tariff of ours makes that impossible.
- What we must do is this: revise our tariff on the basis of a reciprocal exchange of goods, allowing other Nations to buy and to pay for our goods by sending us such of their goods as will not seriously throw any of our industries out of balance, and incidentally making impossible in this country the continuance of pure monopolies which cause us to pay excessive prices for many of the necessities of life.
Trump is seemingly beholden to very few members of Congress and financial interests as he received very little support from each to help him get elected. He is probably the most independent person to have ever assumed the Presidency. Thus, very few know where they stand with him or how to gain favor or influence. The one thing they have going for them is that Trump has no institutional knowledge of how government works and the legislation process so he will need a lot of help there. On the other hand, a number of Congressmen won their elections with higher margins of victory than Trump did in their states, so they can’t just roll over and accept everything that Trump wants to do if it goes counter to what they ran on.
It will be interesting to see if Trump ends up having more in common with the Democrats on some issues and Republicans on others. He has some connection with the Sanders wing when it comes to protectionism and more spending. On the other hand, he will piss Sanders and Elizabeth Warren off if he tries to roll back Dodd Frank. And yet Trump is not a fan of the big banks from what I can ascertain or Wall Street money movers such as hedge fund managers. His desire to cut taxes will please Republicans but his ramping up of spending and the deficit will rattle Tea Partiers and other fiscal conservatives.
My guess is that Trump is a fairly common sense kind of guy and he will keep focusing on expanding the potential for opportunity for all from the top down: lower taxes, rolling back of government overreach, reforming Obamacare, more worker protections in trade deals, and enhanced government investment in infrastructure. He is also intent on ramping up military spending, although he has talked about staying out of foreign entanglements. There is something for everybody to like about Trump and of course something to dislike as well so it will be fascinating to see how he triangulates the various competing interests to accomplish his objectives.
Back to how did we get here. Towards the end of the election, I gained more clarity about Trump through the brilliant blogging of Scott Adams who created Dilbert. He also happens to be an expert in persuasion. According to Adams, Trump is the most effective persuader he has ever seen and he brilliantly utilized some of the most powerful tools of persuasion that was completely lost on the mainstream media and political elites and yet was so effective on the populace. Before I discuss Adams let me first point out something said by Peter Thiel about Trump which I think is the essence of what has been missed by most people. Thiel said:
“But I think one thing that should be distinguished here is that the media always has taken Trump literally. It never takes him seriously, but it always takes him literally.”
It’s quite the opposite for Trump voters, argued Thiel: “I think a lot of the voters who vote for Trump take Trump seriously but not literally. And so when they hear things like the Muslim comment or the wall comment or things like that, the question is not ‘Are you going to build a wall like the Great Wall of China?’ or, you know, ‘How exactly are you going to enforce these tests?’ What they hear is ‘We’re going to have a saner, more sensible immigration policy.’ ‘We’re going to try to figure out how do we strike the right balance between costs and benefits.’ ”
Facts get in the way of a good narrative. Persuaders tap into deep-seated fears and this can often be done through emotion and exaggeration. We know that myths and fairy tales are not true. They are powerful metaphors that tap into universal themes and concerns that often reside deep within our psyches. They are subconscious. Persuaders tap into our subconscious so facts don’t effectively penetrate down to that deep of a level as they are too dry and devoid of emotion and visceral connection. Trump is communicating in themes and metaphors. We know he has no plan for ISIS or building the wall and tearing up trade agreements. He is tapping into the fear that we have no plan for the Middle East and we are exposed to terrorists from there and getting into a quagmire. He is showing strength and confidence when discussing the wall and that he knows the economic fear and insecurity that exists when threatening to walk away from trade agreements.
His stark language shows he knows what people fear and he hears them and will not forget about them. He is for them. Adams calls this pacing and this is what he says about it in relation to Trump:
“Trump always takes the extreme position on matters of safety and security for the country, even if those positions are unconstitutional, impractical, evil, or something that the military would refuse to do. Normal people see this as a dangerous situation. Trained persuaders like me see this as something called pacing and leading. Trump “paces” the public – meaning he matches them in their emotional state, and then some. He does that with his extreme responses on immigration, fighting ISIS, stop-and-frisk, etc. Once Trump has established himself as the biggest bad-ass on the topic, he is free to “lead,” which we see him do by softening his deportation stand, limiting his stop-and-frisk comment to Chicago, reversing his first answer on penalties for abortion, and so on. If you are not trained in persuasion, Trump look scary. If you understand pacing and leading, you might see him as the safest candidate who has ever gotten this close to the presidency. That’s how I see him.”
Trump won the game of Survivor. Trump is a savvy media person and has had nine lives in the business world. He has tremendous experience getting out of sticky situations and emerging from the ashes like a Phoenix through bold and brash language and tactics. It worked for him in the world of business and becoming a large media figure, so why wouldn’t he stick with a winning formula?
There’s an interesting article on how to win Survivor and a couple of points really stuck out for me related to Trump which helps to additionally explain his approach up until this point and how he may govern. The first is related to alliances and this is what the article says:
“Thus, while it sounds counterintuitive, in order to form a successful alliance that will not break, you must align yourself with people who plausibly believe they can beat you.”
This may result in Trump aligning with some Democrats because they think he is vulnerable since he lost the popular vote and they can beat him. It’s akin to them believing that Trump let the enemy into his fort and they will take every advantage of him by being open to some forms of cooperation.
The next one relates to not getting trapped in dilemmas. The author writes:
“A “dilemma,” in fact, is trying to choose between two things. Not many things — two things. Since the advent of Survivor alliances, people tend to think of themselves as having two choices. You can go with one alliance, or you can go with the other alliance. You can do this thing, or you can do that thing. This sometimes takes the form of calling yourself the “swing vote,” and it almost always results in you being immediately booted, because whatever you do, nobody likes you.
Smart people remember that if there are eight people left, no matter what everyone is telling you, there aren’t two choices of who you can vote for — there are seven. (Well, six, since someone probably has immunity from the challenge.) Flexibility is a virtue.”
Trump seems to be a master at this. His changes in party affiliation speak to his flexibility and he took this to the campaign trail by beings the most flexible candidate that I can remember. He will never box himself in and this drives many well educated, fact-based people crazy. On the other hand, if you’re running against 16 other primary candidates and a formidable Democratic machine that has tremendous advantages when it comes to raising money and an easier electoral roadmap, Trump couldn’t play by the traditional rules and had to do whatever it took to survive and then win.
I’ve pontificated enough. Obviously, this was a monumental historical event. There’s a lot swirling through my head that I’m still trying to process. I’m sure I’ll have more to say, particularly on the economic front as it relates to a Trump presidency.
Before signing off I just want to give a heartfelt thank you to Leonard Cohen who truly left so many extraordinary gifts to the world with his beautiful writings, his self-effacing humor, and unique voice.:
Rest in Peace Leonard Cohen
Ring the bells that still can ring
Forget your perfect offering
There is a crack in everything
That’s how the light gets in
-Anthem by Leonard Cohen
Over to You:
Again I ask, How Did We Get Here?