Thursday, December 29, 2016

Where will Trump take the GOP?

Appointing Cabinet secretaries and advisers is critical to shaping a presidency. Every president paves the direction of policy between hiring yes men like Warren Harding or a team of rivals like Abraham Lincoln. Both types of administrations work, but both can also fail. The new administration, depending on who is in it and how competent they are, can also shape the ideology of a party for the next four years by influencing the president.

In addition to his appointments, Trump owes his core supporters what they wanted. Many blue-collar workers who voted for him did not find Hillary Clinton as someone who cared about them. They haven't benefitted from the Obama economy. These workers are asking for some policies that are ideologically different from conservative proposals.

Conservatives, including myself, have always been proponents of free trade. Many of the blue-collar workers who backed Trump, however, want him to enact a more nationalist trade policy, which means using the power of subsides and tariffs to defend American industries. Trump's influence within the Republican Party matters. Stephen Moore, an economist I've mentioned in earlier blog posts and one of Trump's campaign advisers, reportedly said that the GOP is no longer the party of Ronald Reagan at a meeting with Republican lawmakers.

In the case of the Carrier deal, Trump has a protectionist solution. He decided to offer the heating and air conditioning corporation a special incentive to keep one of their factories in the United States. This could benefit hundreds to thousands of people who are aided by the factory's presence in Indiana. It isn't only 800 workers who are being helped (which is more direct through wages), but also the families of those who don't love their jobs.

If deals like the one with Carrier become more common, then it is possible that the United States could move away from the more traditional form of free market capitalism we have enjoyed for decades. Lawrence H. Summers, economist at Harvard University and a former Treasury secretary, believes that Trump will deliver ad-hoc capitalism, which is similar to the kind of capitalism we see in Vladimir Putin's Russian Federation. It involves rewarding reward domestic companies and political supporters rather than using competition to balance global markets.

The problem with Trump's solution is that it does not many benefit a great number of consumers who benefit from Carrier's products, but won't enjoy a potentially lower price from the originally planned movement to Mexico where the costs of labor and doing business are cheaper. This is explained perfectly in a post by Adam Smith Institute fellow Tim Worstall on Forbes (he dubs Trump's policies folk economics).

There are many people who voted for Trump because he campaigned as a force for change against the establishment. The president-elect, however, seems to be faltering on his populist message to "drain the swamp." Trump's Cabinet appointments aren't bad, but many of them have been involved in politics for years and have routinely donated large sums of money to politicians they support. Newt Gingrich has also said that Trump doesn't plan to drain anything. From what he knows, the Republican nominee was only using it for rhetorical purposes to excite his base.

This could hint that Trump  wasn't planning on taking a sledgehammer to the establishment all along. If this is true, then he is neither a conservative or a nationalist, but merely a centrist (and possibly still leaning to the left, but that depends on his policies). Then there's the degree to how far he will go with lawmaking. If Trump's tariff and subsidy proposals are relatively minor or nonexistent in public policy, then they probably won't effect the economic platform of the Republicans significantly. The more nationalist his policies, the greater the influence assuming he will have the backing of the Republican Congress under Paul Ryan and Mitch McConnell.

As of now, it is way too early to know where Trump will ideologically take the Republican Party. This is highly bent on how successful he will be as a president. If he goes down in flames and is ranked as one of America's worst, then chances are his influence will be minimal. If he proves to be one of the greatest, then he could change the GOP into one that fully embraces his views. The choice is his.

Saturday, December 3, 2016

Now, Europe

Francois Fillon at a rally in Paris - Ian Langsdon/EPA
With the dust of the U.S. presidential election settled, Europe is about face transformative elections next year. The Netherlands, France, and Germany are set to have elections in 2017. A referendum in Italy on December 4 will also determine the future. These three elections and the referendum could be a make or break moment for the European Union. Wobbling from Brexit, the EU can't suffer anymore setbacks.

The biggest political news has come out of France. Francois Hollande, the very unpopular incumbent, has decided that he will not seek a second term. This means that the Socialist Party, France's mainstream left-wing political party, will be open to many candidates. Even with a new candidate, the Socialists aren't in a good position. Hollande was a socialist in every sense of the word, but ran into many hurdles as his policies had to be abandoned or became very unpopular when implemented. He infamously imposed a 75 percent income on the wealthy, but had to reverse course later in his presidency. Personal scandals hurt his image. An affair with another women put the first lady in a fit of rage, leading her to destroy several important historic artifacts at the president's office.

Things look good for the Republican Party in France. Francois Fillon, a former prime minister and a devout Catholic, has won the primary will be the center-right party's president nominee. As of now, I think Fillon is the best option for the French people. He could be to France what Ronald Reagan was to the United States or what Margaret Thatcher was to the United Kingdom. France is the epitome of democratic socialism, the economic theory that Bernie Sanders campaigned on here in America. It is Fillon's intention to shrink the size of the bloated French government and get rid of the 35-hour work week. He is an opponent of multiculturalism and champion of traditional French values.

Fillon will have a difficult challenger Marine Le Pen of the National Front, who I've mentioned in previous posts. Le Pen is the Donald Trump of France. If elected, she will also be France's first female president. The platform of her National Front is similar to that of Trump's policy proposals, especially when it comes to immigration and national security. The oddest part of the French drama is that Le Pen is now running to the left on the economy assuming she and Fillon will be the two who advance to the second round. Le Pen is protectionist, like Trump, and opposes more globalization. Nevertheless, I wouldn't underestimate her. The National Front has enjoyed recent electoral successes.

Prime Minister Matteo Renzi at a November 18 press conference
The European Union has more pressing matters at the moment. On December 4, Italian voters will take part in a referendum that involves major structural reforms to their constitution. Matteo Renzi, the prime minister and leader of the center-left Democratic Party, has only been in power for slightly more than 1,000 days. He is finding it hard to govern his country. It's not just that governing a country in general is hard, but the Italy is uniquely hard to govern. Since the creation of the 1947 constitution after the fall of fascist dictator Benito Mussolini and the end of the Second World War, Italy has had a grand total of 65 different governments over the last 70 years.

Renzi decided that the constitution needed major reforms in order to make governing the nation, which has Europe's fourth-largest economy, easier. The reforms are supposed to be make running Italy more efficient, but his opponents have said that it just gives him more power and doesn't balance the system. What Renzi wants to do is implement the reforms in order to inject new funds into his country's weakened banks. If the referendum fails, then there is a risk of financial contagion across Europe.

A "no" vote will rock the EU further, but considering the current global political climate it appears the investors have already prepared for their side losing. Unlike with Brexit and the 2016 presidential election, opinion polls actually show the anti-establishment side winning. Maybe their win will be bigger than expected since polls are usually off. Otherwise, maybe it will be Renzi and "yes" voters who surprise everyone on the night of the referendum. If the referendum fails, however, he said that he may resign. Resistance to the constitutional reforms appears to be strong. A crowd of 50,000 marched through Rome on November 27 carrying signs and throwing red smoke bombs.

His main opponent is the comedian-turned-politician Beppe Grillo. Stop me if you've heard this one before. Grillo is a populist who wants to take on the political establishment and embark on a protectionist economic policy. Defeat Renzi in the referendum would be a big victory for Grillo, who has his eye on the next general election in 2018.

Geert Wilders at an event in Texas in May 2015 - Mike Stone/Reuters
The Dutch are set to have their general election on March 15, 2017. Prime Minister Mark Rutte will continue to lead his VVD into that election. The two mainstream parties are the center-right People's Party for Freedom (VVD) with 41 seats and the center-left Labour Party (PvdA) with 36 seats. The governing VVD is in a coalition with the Christian Democratic Appeal (CDA), another conservative party with 13 seats. There are 150 seats, so in order to win a party usually needs 76 seats in the Dutch House of Representatives.

As with many other countries, there is a populist on the rise. Geert Wilders leads the Party for Freedom (PVV) with his own nationalist and protectionist messages. Like other populists, Wilders has a problem with the refugee crisis and wants to stand up against radical Islam. His party currently has twelve seats, but it is polling ahead of the VVD, PvdA, and the CDA.

Even if Wilders doesn't governing the Netherlands, which is certainly possible since the establishment parties would likely govern together in a coalition, he has mobilized a large faction of Eurosceptic voters who are concerned over their national sovereignty. He has already won a big victory by having the House of Representatives pass a 2015 bill that allows the Dutch people to go to referendum on any issue as long as it has 300,000 signatures. This means that the nationalist movement in the Netherlands can get their referendum to leave the European Union even without Wilders as prime minister.

Merkel at a press conference following Trump's victory - Tobias Schwarz (AFP/File)
She has been a towering figure of European politics since first becoming the German chancellor in 2005, but she might be facing her toughest election yet. The good news for Merkel is that she is seen as an essential figure in German politics. No one in her own Christian Democratic Union or in the Social Democratic Party rivals her. Her greatest problem is that she is likely to lose many seats anyway to the right-wing Alternative for Germany. That means she will have to create a new coalition with even more parties than in her current government.

Merkel is the biggest symbol of the European Union on the continent, but her decision on the Syrian refugee crisis still plagues her popularity. She is starting to attack some parts of Muslim culture, saying that things like the burqa aren't compatible with German culture. She plans to increase the number of deportations on those who violate Germans laws, but it isn't clear if that will be enough.

Like the Party for Freedom in the Netherlands, the Alternative for Germany probably won't govern France, but they are likely to get representation in the Bundestag, which would be very successful for a new political party. Depending on how big their victory is in the federal election, Merkel may be forced into a position that involves a referendum within her own country, but it is too early to guarantee such a possibility at the moment.

Trump has said in the past that he may be less involved around the world. If he does plan to increase domestic spending on infrastructure while simultaneously implementing a tax cut, then it is likely that military spending will have to be slowed or slashed. This means that Germany might have to be the country that leads the free world. That depends on Merkel's international ambitions, which don't exist right now. If Trump falls behind, we will see if it is the Germans who lead the charge.