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Trump and Judy – it’s not economics but farce and anarchy driving the US election but that doesn’t stop Mike Wilson looking for clues to future policy

Would you be very surprised to hear that there’s really quite a lot of confusion about where Donald Trump and Hillary Rodham Clinton stand on the matter of economics? And that, amid all the blustering, name-calling and downright threatening behaviour that has characterised this most degraded of presidential elections, the subject of economic policy has hardly surfaced at all.

And that’s a problem for a bemused and worried world as it waits for the result of the 8th November poll.

Denial of service attack

It’s not that Hillary Clinton doesn’t have an economic policy – broadly, ‘more of the same’ with perhaps a little more wealth redistribution thrown in – and nor is it that Donald J Trump plainly doesn’t. It’s that Trump has brilliantly shifted the focus the debate away from substantive issues like economics and international relations, to the extent where Mrs Clinton literally hasn’t managed to find the platform time to expound it.

It’s a technique that Russian hackers might have been proud of. If you batter your target with enough random garbage – and Trump’s unending tide of bizarre falsehoods and abuse can hardly be described in any other way – then you can shut them up for long enough to wound them. Sound familiar?

Trump and Judy

We’ve been hearing quite a lot about so-called disruptive models in the last couple of years. Companies like Uber or AirBnB or challenger banks are shaking up the stuffy old mould and making us all think again about the businesses we thought we knew. Well, you’re going to hate this analogy, but Donald Trump is the very epitome of the disruptive economic model.

Cast aside your preconceptions about how fuddy-duddy old federal budgets should be made to balance, and give a warm welcome to the concept that foreign debts can be run up and then quantitatively eased away, or simply written off if that’s too difficult.

Open your mind to the idea that you can pay America’s workers more while still reducing the overall cost of labour for employers. It’s easier than you think.  Well, the first part is, anyway. All you have to do is cut corporation taxes, personal taxes and (critically) inheritance taxes, and you’ll really believe a man can fly. Why, you can pay for the fiscal gap by levying a 35% tax on Mexican imports, and a 45% duty on Chinese goods.

Better still, deport all the pesky Latinos who are either sponging off the US state or else working for far too little money, so that …. no hang on, that won’t bring down employment costs at all. Ermmm, but it might create new job openings for the downtrodden white blue collar class, who surely can’t wait to get back to the romantic grime of Detroit’s derelict car factories or the pure air of the midwest’s coal mines. That’s how you make America great again. Apparently.

Trump’s economic illiteracy is beyond simply staggering. But that’s not the point, because The Donald is not running on policy at all. He’s running on blind, lashing-out anger. And that’s the way his supporters like it.

Donald Trump is the 21st century’s answer to Mr Punch. He bullies, he threatens, he shouts, he degrades women, and he’s ready with the gallows (and worse) for anyone he can’t get on with. He’ll have to purge the judiciary before the hangings can start, of course, but that’s not going to be too difficult. He’s a delight for anyone who can’t tell real life from reality TV, but who likes a bit of violence. Just don’t ask him where his sausages have been.

And Hillary? The most unpopular Democrat presidential candidate in living memory, with well over 60% of the electorate expressing their mistrust of her – compared with 70% for Trump. She may have vastly more political experience than Trump on both a national and an international level (Trump has none at all, of course) – and for my money she beats him on both intelligence and debating skills – but she will be forever dogged by the revelation that she maintained sneaky secret email identities in connection with her confidential work as Secretary of State. And that makes her a liability of a different, political  kind.

But then, this is no ordinary election, and it’s being fought on Trump’s chosen territory and not Hillary’s. The outside world (i.e. us) will have to wait to see exactly what she makes of her mandate, if she can secure it.

Debt, and its many uses

Could Trump get away with his twin goals of boosting the federal debt pile and making the dollar strong enough to demonstrate America’s might to the world?  Well yes, say some theorists, he could. It worked for the US government after the Vietnam war, when a vast quantity of debt was turned into paper that the world promptly fell over itself to buy – thus driving up demand for the dollar in its post-gold-standard guise (1971) and cementing its authority as the world’s favoured currency of last resort.

It worked for Ronald Reagan, another unlikely Keynesian, who issued colossal volumes of debt in the early 1980s as he battled to keep America’s smokestack industries running in the face of a recession and a sharply improving Japanese trade attack. Reagan opted for debt rather than higher taxes, which looked like a huge gamble at the time, but it paid off handsomely. He did, however, have the good sense, once the economy was back on course, to raise taxes and restore the balance. Something that few of his successors have ever had the courage to do.

China, Mexico and those damned Europeans

We may as well start by restating the obvious. Donald Trump has ditched the Republican Party’s decades-long commitment to international free trade, in favour of punitive import tariffs against those states which he thinks are manipulating their export economies to the detriment of small-town, blue-collar America. In China’s case, it’s also a visceral reaction to his claim that China has cheated its way toward owning a huge chunk of America’s bond debt. Something that he believes should never have happened, although it’s not clear how anybody could have stopped it in a free market.

We already know what Trump thinks of Mexico’s export surplus, but a bigger surprise for Europeans is his hostility to Canadians. Trump is spitting nails about Mrs. Clinton’s adherence to the 1994 Nafta deal with Mexico and Canada that her husband Bill originally signed – and he has also challenged her to deny that she supports the Trans-Pacific Partnership. She’s already declared her opposition to TPP, but it’s on the record that she once called it “the Gold Standard” of trade deals, and he suspects that she’ll lose no time in implementing it if she wins the presidency.

Awkwardly, America’s senior business community broadly supports TTP, which seems to put both candidates adrift of the industrial consensus. It remains to be seen how that one works out on the ground.

As for Europe – which has image problems of its own, remember – the divide is more pronounced. Hillary can’t afford to be publicly seen as approving too much of those pinko commies in Germany (editor – shurely shome mishtake?) Or not, at least, as long as the battle for blue-collar votes is on. Privately, Europeans are quietly confident of a benign attitude from a Clinton administration. But shhh, keep it to yourselves.

Taxes

It’s rather hard to pin Mr Trump down to any serious policies on tax, except that he wants to cut taxes generally. His September 2016 programme envisages a continuation of the 2015 schedule that would implement a 15% business tax, a 33% personal tax ceiling (compared with the current 39.6%), and also – for the first time – the complete repeal of inheritance taxes. A move which, as his adversaries comment, would benefit the billionaires rather more than the blue-collar masses who have no savings.

Could that be afforded? Well, the Wall Street Journal calculated last autumn that Trump’s earlier plans would have broadly tripled the effect of the GW Bush tax cuts of 2001 and 2003. Trump’s new plan, the WSJ says, would reduce revenue by an extra $4.4 to $5.9 trillion over a decade, although there might be some extra revenue from economic growth.

Mrs Clinton, on the other hand, is concentrating her efforts on higher earners, bringing in a minimum 30% income tax for households with more than $2 million a year. She has pledged to use “business tax reform” to pay for around $275 billion of much-needed infrastructure spending (on top of a $305 billion five-year programme agreed last year), but she’s strangely silent on the detail. Trump, by comparison, is promising $1 trillion of infrastructure, but it hasn’t been costed at all.

Above all, Hillary hasn’t laid out any of her plans for corporation taxes, which is a worry for the business community. Both candidates are at least agreed that an onslaught is required against large companies that try to move their headquarters abroad for tax purposes. Although how that will go down in Europe remains to be seen.

The Trump grudge against Wall Street

Trump’s deep antipathy toward the US financial markets goes a long way toward explaining why he hates the city slickers with such a vengeance. It’s all a little odd since it was the senior bankers who bailed out Trump’s crashed casino, with considerable ingenuity, after his first corporate bankruptcy.

But there we are. What annoys Trump is that the US markets have risen by more than 230% since the 2008 lows – thanks, he says, to an absurdly low interest rate, and also to the release of $3.8 trillion of quantitative easing that has put the country into hock. The market’s “all a big bubble”, he told Fox News recently, and he forecasts “something that’s not pretty” when rates rise again.

He doesn’t favour a rapid rise in rates, he says – well, who would, with an election coming up? – but he believes that Fed Chairman Janet Yellen has been nobbled by the Democrats to sustain the bubble for a while, and he aims to replace her with a true Republican before long.

Don’t scare the horses – yet

Should we be worried by all this? Only if we think that a President Trump could assemble a practical body of Republican support in Congress. And, given the 150 or so Republican delegates who have already disowned him, the omens on that front are not good.

Which leads us, finally, to the impact that this highly engrossing Punch and Judy show is having on today’s financial markets around the world. And, although things may have changed by the time you read this, I’m guessing that the markets are doing well to keep their blood pressure down and their worries muted.

It might look like a binary choice between heaven and hell to most of us, but it ain’t necessarily so. The widening Clinton polling lead (in late October) might not be unassailable, but it’s as good as we’ve got to go on at the moment. On the present showing, Trump’s ideas are too incoherent to get anywhere; whereas the Ice Maiden may be devious but at least she’s experienced.

Ken Fisher, the perma-bull head of Fisher Investments, has never been one to fret about such indeterminacies. All new governments bring uncertainty and radicalism, he says, and they always end up ploughing the same furrow as all their antecedents. Why worry? Be happy. We’ll do our best, Ken.

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