What is 'Trumponomics'
Trumponomics describes the economic policies of U.S. President Donald Trump, who won the November 8, 2016 presidential election on the back of bold economic promises to cut personal and corporate taxes, restructure trade deals and introduce large fiscal stimulus measures focused on infrastructure and defense.
BREAKING DOWN 'Trumponomics'
|Skip to a Section|
|- Growth||- Inflation and Interest Rates|
|- Jobs||- After-tax Earnings|
|- Trade||- National Debt|
|- Trade||- Immigration|
|- Taxes||- National Debt|
|- Infrastructure||- Energy|
|- Healthcare||- Monetary Policy|
|- Regulation||- Budget|
Trump was not always clear and consistent about his policies, and when he was, they were often unorthodox enough to have unpredictable consequences. This resulting uncertainty helps explain the market reaction to his win in the early morning of November 9: Dow Jones Industrial Average futures plunged to a low 867 points below their previous close, and trading in S&P 500 and Nasdaq futures fell fast enough to trip circuit breakers. The Mexican peso, which had become a proxy for Trump's chances of success, went into free-fall. Treasury yields dropped by nearly 18 basis points as investors piled into the safe haven.
Then a funny thing happened. Except in the case of the peso, which continued to slump against the dollar, these initial reactions reversed themselves. Treasury yields stopped falling and promptly gained around 24 basis points as bearishness on government bonds took over. The Dow closed up nearly 257 points (futures closed up 305, for a 1,172-point reversal). The next day the index closed at a record 18,807.88. The following three sessions also saw record closes, and at the open on January 25, the Dow broke 20,000 for the first time.
Trump rewrote his tax plan twice. He had it both ways when it came to the Fed's low interest rate policy. A lack of consistency, coupled with an oratorical style that often leaves room for multiple interpretations, has made putting numbers on Trumponomics challenging.
Yet on a few points, Trump was perfectly clear: he wanted to put curbs on immigration and trade, lower taxes on individuals and businesses, and increase spending on infrastructure projects. Using these and other tangible promises, economists hazarded guesses during the campaign about the effect Trump is likely to have on economic growth, the labor market and the national debt. Unsurprisingly, these predictions vary widely.
Growth (skip to top)
During the third televised debate, Trump said of gross domestic product (GDP) growth, "we're bringing it from 1% up to 4%, and I actually think we can go higher than 4%. I think you can go to 5% or 6%." Treasury Secretary Steve Mnuchin is less gung-ho, telling Congress on February 23 and Fox News three days later that the administration's target is 3% or higher.
A few months earlier, in June, a team led by Moody's chief economist Mark Zandi had forecast that, if Trump were to implement his policies "at face value," real GDP would expand by about 0.6% annually from 2016 to 2020. That rate is considerably slower than Moody's baseline estimate of 2.3%. Assuming Trump has to backtrack on some of his policies due to a hostile Congress, Moody's projects 0.4% annual growth.
The Tax Foundation is more sanguine about Trumponomics' prospects. The right-leaning think tank projected in September that his policies would increase GDP by 6.9% to 8.2% over the long term (they did not give an exact time frame), in addition to the 19.2% baseline growth the Congressional Budget Office (CBO) forecast in August for 2016-2025.
The OECD is also optimistic. In its November economic outlook, it projected that Trump's fiscal stimulus will boost U.S. GDP growth in 2017 by 0.4 percentage points (ppt) from its baseline estimate, to 2.3%. In 2018 growth is projected to receive a 0.8 ppt bump to 3.0%. The OECD expects this added growth to spill over into other economies, pushing global GDP growth up by 0.1 ppt to 3.3% in 2017 and by 0.3 ppt to 3.6% the following year. The forecasts assume, however, that Trump's rhetoric on trade does not result in protectionist policies (see "Trade" below).
Jobs (skip to top)
The Peterson Institute for International Economics (PIIE) wrote in September that it expects Trump's policies, if implemented, to set off "a trade war that would plunge the US economy into recession and cost more than 4 million private sector American jobs."
Moody's is only slightly less pessimistic: Zandi's team wrote that Trump's policies would result in 3.5 million fewer jobs after four years, with unemployment rising to perhaps 7% from its current level of 4.9%.
The OECD, on the other hand, projected in November that the unemployment rate would fall by just under 1/2 ppt by 2018, owing to Trump's proposed fiscal stimulus. Those projections come with an important caveat, however (see next section).
Trade (skip to top)
It may come as a surprise, then, that the OECD projected in November that real growth in global trade would accelerate by 1/4 ppt to 2.9% in 2017 and by 1/2 ppt to 3.2% in 2018, as a result of Trump's policies. Canada and Mexico, the think tank wrote, would reap particular benefits. In light of Trump's rhetoric on trade, however – and especially trade with Mexico – those forecasts come with a crucial caveat: "worsening protectionism and the threat of trade retaliation could offset much of the fiscal initiatives' impact on domestic and global growth, leaving countries with a poorer fiscal position as well."
Inflation and Interest Rates (skip to top)
The OECD forecast in November that fiscal policy stimulus would add 0.1 ppt to inflation in 2017 and 0.4 ppt in 2018, causing consumer price inflation to rise to around 2-1/2% by the end of that year. According to the Bureau of Labor Statistics, the consumer price index (CPI) rose 1.6% in the twelve months to October.
The OECD expects rising inflation to impact monetary policy, with the upper bound of the federal funds rate's target range rising to 2% from its January 2017 level of 0.75%. Trump's expected fiscal stimulus accounts for 1 ppt of this projected increase.
After-tax Earnings (skip to top)
The Tax Foundation wrote in September that it expects Trump's plan to increase after-tax earnings in every income quintile, though the effect will be significantly larger at the top of the scale: the bottom 20% will see their after-tax incomes rise by 1.2% (or by up to 8.1%, taking growth forecasts and other factors into account), while the top 20% will see theirs grow by at least 4.4% and by up to 12.3%. The top 1%, meanwhile, will see their after-tax incomes rise by at least 10.2% and by as much as 19.9%.
The Tax Policy Center reached similar conclusions in October: each income quintile would see its after-tax earnings rise under Trump's plan, with the benefits concentrated at the top. Households making over $3.7 million in 2016 dollars, the top 0.1% of the population, would see their tax bills fall by $1.1 million in 2017, or 14% of after-tax income; the poorest fifth of households would get a 0.8% tax break, worth $110. The overall average tax cut would be 4.1%, or $2,940.
The Tax Policy Center found that taxes would rise for many single-parent and large families, however, due to Trump's plan to repeal personal exemptions and the head of household filing status (see "Taxes" under Economic Policies below). Lily Batchelder, a visiting fellow at the think tank and ex-deputy director of Obama's National Economic Council, told Fox News in November that around 7.9 million households – 5.8 million of them led by single parents – would see their taxes rise under Trump's plan.
|Tax Policy Center: 2016 tax rates under current law and Trump proposal|
|Single filers||Childless married couples filing jointly|
|Adjusted gross income (up to)||Current marginal rate||Trump marginal rate||Adjusted gross income (up to)||Current marginal rate||Trump marginal rate|
|Over $425,400||39.6%||33%||Over $487,650||39.6%||33%|
|Note: only applies to filers who take the standard deduction; bold typeface denotes a tax hike under Trump's plan|
According to Fox's report, a single parent with three children can use the head of household deduction and three personal exemptions to reduce $75,000 in taxable income to $53,550 under current law. Under Trump's plan, those provisions would be replaced by a $15,000 standard deduction, resulting in $60,000 of taxable income and a tax bill that is $2,440 higher.
National Debt (skip to top)
The Tax Foundation estimated in September that Trump's plan will lower federal tax revenues by $4.4-$5.9 trillion over the next decade on a static basis. Incorporating the boost to GDP growth the think tank forecasts, federal tax revenue may decrease by $2.6-$3.9 trillion.
The fiscally hawkish Committee for a Responsible Federal Budget forecast in September that Trump's policies would decrease revenue by $5.8 trillion over ten years; the public's share of federal debt – at that time $14.3 trillion or 77% of GDP – would rise to over 105% of GDP over the same period, compared to a baseline forecast of 86%.
As of January 26, the total national debt is just short of $20.0 trillion, or 107% of annualized third-quarter 2016 GDP.
The Tax Policy Center estimated in October that Trump's tax plans would reduce federal revenues by $6.2 trillion over the first decade and an additional $8.9 trillion in the second decade. The think tank collaborated with the Penn Wharton Budget Model to produce two sets of estimates that take into account the macroeconomic effects of Trump's plan. Both estimates forecast a short-term boost to GDP growth, which would offset the costs of Trump's plan for five to eight years; one sees GDP lagging behind the baseline estimate beginning in 2024. Neither accounts for promised but unspecified spending cuts. When rising interest payments are factored in, the federal debt rises by $20.7-$22.1 trillion (49.9% to 55.5% of GDP) over 20 years. In other words, it more than doubles.
Trump entered the White House flanked by Republican majorities in both houses of Congress, but his prior clashes with Republican leaders, particularly with House Speaker Paul Ryan, suggest that he may have trouble passing his entire legislative agenda. Democrats, meanwhile, may act to block some of Trump's proposals, despite their Congressional disadvantage. What the following policies will look like when – and if – they become law is difficult to say, but here are the positions Trump has espoused during his campaign and the executive actions he's taken as of January 30.
Trade (skip to top)
U.S. trade policy, and the manufacturing jobs Trump blames it for shipping overseas, were at the center of the president's platform. On his campaign site Trump promised to "negotiate fair trade deals that create American jobs, increase American wages, and reduce America's trade deficit."
Mexico and NAFTA
Mexico has come in for particular criticism; Trump repeatedly threatened to slap 35% tariffs on cars imported from Mexico, beginning the day he announced his candidacy in June 2015. At $74 billion, vehicles were the largest category of imports from Mexico in 2015, according to the U.S. Trade Representative's website.
Trump has also singled out the North American Free Trade Agreement (NAFTA), which he called the "single worst trade deal ever approved in this country" during the first presidential debate in September. The deal, which Bill Clinton signed in 1993, reduced trade barriers among Mexico, the U.S. and Canada. Between 1993 and 2015, the nominal value of goods imported from Mexico rose 643% to $296.4 billion, according to the Census Bureau; adjusted for inflation using the CPI, the increase was 353%. The U.S. had a $67.5 billion trade deficit with Mexico in goods in 2015, but a $9.6 billion surplus in services.
Trump is expected to call for NAFTA to be renegotiated or to withdraw from it altogether; he appears to have authority to pull out of the agreement by giving six months' notice, according to article 2205 of the treaty. Some experts believe he would need Congress' support, however.
The New York Times reported on January 26 that Trump plans to charge a 20% tax on Mexican imports in order to fund the construction of a border wall, which he had ordered the previous day.
The Trans-Pacific Partnership (TPP), a trade agreement that the U.S. signed but did not come up for a ratification vote in Congress, would have reduced trade barriers among 12 Pacific Rim nations. The pact's prospects were already dim before Trump's election made it a dead letter. On January 23, in a mostly symbolic move, he ordered the U.S. to withdraw from the deal.
The TPP, which excluded China, formed the economic leg of the Obama administration's "rebalance to Asia," which Hillary Clinton spearheaded as secretary of state. Her Democratic primary opponent, Senator Bernie Sanders of Vermont, and Trump repeatedly attacked Clinton for backing the deal, leading her to retract support for it. China has stepped into the vacuum with an alternative 16-country trade pact, called the Regional Comprehensive Economic Partnership.
The president has also criticized China, claiming that it suppresses the value of its currency, the yuan, in order to gain an export advantage. While China maintained a dollar peg that held the yuan's value down from 2008 to 2010, the evidence now suggests the government is intervening to lift, rather than lower, the yuan's value. The country's foreign currency reserves fell from nearly $4 trillion in March 2014 to just over $3.1 trillion in October. Even so, Trump promises to declare China a currency manipulator and impose tariffs of up to 45% on its exports.
Trump announced the formation of a new White House National Trade Council on December 21, naming a vocally anti-China economist, Peter Navarro, to head it. Among other books, Navarro has authored "Death By China: Confronting the Dragon – A Global Call to Action" and "The Coming China Wars: Where They Will Be Fought and How They Could Be Won."
Between winning the election and taking office, Trump unleashed a barrage of tweets calling out individual companies for outsourcing jobs. On November 17 he tweeted that he'd received a call from Ford Motor Co. (F) chairman Bill Ford, "who advised me that he will be keeping the Lincoln plant in Kentucky - no Mexico." The company's plan, according to NPR, had been to shift Lincoln production to Mexico in order to increase production of Ford Escapes in Louisville, which it said would have had no effect on jobs.
A week later Trump tweeted about negotiations with United Technologies Corp.'s (UTX) subsidiary Carrier, which announced on November 30 that it would not follow through with plans to move an Indiana plant to Mexico. Trump said he'd saved over 1,100 jobs. WTHR, an NBC affiliate in Indianapolis, reported that the plant would only retain 730 factory-floor jobs and 70 salaried positions, with 553 jobs still heading to Mexico. Another Carrier plant in Indiana, meanwhile, still planned to send 700 jobs to Mexico. Vice President Mike Pence, who was governor of Indiana at the time, offered Carrier $7 million in tax incentives over 10 years to secure the deal.
Trump continued to target individual companies, including Rexnord Corp. (RXN), for moving jobs to Mexico; Boeing Co. (BA), for cost overruns on its replacement for Air Force One; Lockheed Martin Corp. (LMT) – twice – for cost overruns on its F-35 project (in his second tweet Trump called on Boeing to "price-out a comparable F-18 Super Hornet," driving Lockheed's share price down 2.3% intraday); General Motors Co. (GM), for shipping Mexican-made Chevy Cruzes to the U.S. ("Make in U.S.A.or pay big border tax!"); and Toyota Motor Corp. (TM), for building a plant in Mexico to produce Corollas for the U.S. market.
He also tweeted about his wins, saying on December 6 that SoftBank Group Corp.'s (TYO: 9984) CEO Masayoshi Son had "agreed to invest $50 billion in the U.S. toward businesses and 50,000 new jobs." He added, "Masa said he would never do this had we (Trump) not won the election!" Similarly, he thanked Ford after the company announced on January 4 that it would ditch plans to build a $1.6 billion plan in Mexico. Instead it would invest $700 million in its Flat Rock, Michigan plant, creating 700 new jobs. CEO Mark Fields told CNN the move was a "vote of confidence in Trump's pro-growth policies and promises to decrease the regulatory burden on businesses – despite the fact that its cars are 40% cheaper to produce in Mexico.
Some economists have questioned whether Trump's approach to repatriating jobs is sustainable, given the scale of his deal-making compared to the scale of the economy. The country added 156,000 net nonfarm payrolls in December alone. For every deal Trump strikes with a Ford or a Carrier to add or maintain a few hundred jobs, other firms quietly follow through with plans to move jobs abroad. The Wall Street Journal reported on December 1, the day after the Carrier deal was announced, that Caterpillar Inc. (CAT), Rexnord (despite Trump's tweet), Manitowoc Foodservice Inc. (MFS) and CTS Corp. (CTS) were still shifting operations abroad.
Taxes (skip to top)
Trump's tax plan reduces the current seven brackets to three and applies these to federal income and capital gains taxes. He plans to raise the standard deduction for joint filers from $12,600 to $30,000. Itemized deductions will be capped at $200,000 for joint filers. These amounts will be halved for single filers. Trump plans to eliminate head of household filing status and personal exemptions.
|Trump plan tax brackets|
|Joint married filers||Single filers||Income tax||Capital gains tax|
|Up to $75,000||Up to $37,500||12%||0%|
|$75,000 to $225,000||$37,500 to $112,500||25%||15%|
|Over $225,000||Over $112,500||33%||20%|
|Source: Tax Foundation|
Trump plans to repeal the gift and estate taxes, which he calls a "death tax," while taxing capital gains over $10 million that are held until death. His plan prevents contributions of appreciated assets into private charities, which can be used to avoid capital gains taxes.
Trump's tax proposal would eliminate a contentious loophole by taxing carried interest as regular income, though the net effect on private equity and hedge funds might not be that large, since they would likely qualify for the lower business rate (see below). He also promises to repeal the alternative minimum tax and the tax on investment income applied by the Affordable Care Act. The proposal offers a deduction for children under 13 and elder dependents, limited to those with joint incomes below $500,000. It also creates Dependent Care Savings Accounts with $2,000 annual contribution limits; 50% government matching at up to $1,000 per year is available for lower-income families.
The top marginal business tax rate will fall to 15%, from 35% today, under Trump's proposal. He has also proposed a tax holiday for corporations to repatriate profits held overseas at a 10% rate. These changes are expected to reduce incentives to increase the proportion of foreign earnings relative to domestic ones, to hoard cash overseas, and to shift tax bases to other countries through corporate inversions. Manufacturing firms will have the option to expense capital investment in exchange for giving up the corporate interest expense deduction. After three years, this election becomes permanent. Trump's plan will also increase tax incentives for employers to provide onsite childcare facilities.
Infrastructure (skip to top)
Trump has promised to dramatically increase infrastructure investment. His most notable project is the wall he has promised to build along the border with Mexico. On January 25 Trump ordered the wall's "immediate" construction and instructed Secretary of Homeland Security John Kelly to identify an allocate "all sources of Federal funds" to begin work. Trump insists that Mexico will reimburse the U.S. for the cost of the wall, which he has estimated at $5 billion to $10 billion. Independent estimates and Senate majority leader Mitch McConnell have put the cost as high as $25 billion.
Trump's initial proposal to force Mexico's hand involved amending the Patriot Act to disrupt the flow of remittances to Mexico, which his plan valued at $24 billion per year. Trump said that move would force the Mexican government to make a one-time payment to fund the wall's construction. In his January 25 executive order, Trump instructed executive agencies to identify all aid to Mexico, including humanitarian and military funds, suggesting those could be a source of funding for the project. The next day press secretary Sean Spicer suggested that taxing Mexican imports at 20% could earn "$10 billion a year and easily pay for the wall just through that mechanism alone."
Beyond the border wall, Trump has made early moves to encourage other infrastructure projects, including a flurry of executive actions on January 24, one of which set up a process to identify high-priority projects and expedite environmental and other approvals. The order specifically named improvements to the electrical grid and telecommunications systems, as well as repairs and upgrades to highways, bridges, ports, airports and pipelines.
Pipelines were the focus of three additional presidential memos, signed the same day. Two of the memos cleared the way for the construction of the controversial Keystone XL and Dakota Access pipelines, both of which the Obama administration had rejected. A third mandated that pipelines be built using American materials, specifying that steel and iron products must be made in the U.S. "from the initial melting stage through the application of coatings." Whether that stipulation will affect the economics of pipeline projects or run afoul of trade rules (in Keystone XL's case) is unclear.
In a "contract" laying out promises for his first hundred days in office, Trump proposed $1 trillion in infrastructure investment over 10 years, adding that the spending would be "revenue neutral." In August, he floated the idea of funding an $800 billion to $1 trillion investment through infrastructure bonds. His campaign site says the money will come from private-public partnerships, cutting red tape, eliminating wasteful spending, and "leverag[ing] new revenues." Despite his promise not to increase the deficit – and occasional promises to eliminate the national debt – few observers expect the infrastructure plan to be revenue neutral.
Healthcare (skip to top)
In the early days of Trump's administration, there was little clarity about what would replace Obamacare. Trump had proposed measures during the campaign such as expanding the use of Health Savings Accounts (HSAs), funding Medicaid through block grants to states, allowing insurers to sell across state lines, importing drugs, forming high-risk pools, cutting back on costs through stricter immigration policies, allowing patients to deduct insurance premiums from their tax returns and allowing them to shop around for the most cost-effective treatments.
A number of these proposals overlap with the "Empowering Patients First Act," a bill introduced multiple times from 2009 to 2015 by Tom Price, a U.S. representative and physician who was confirmed as the administration's Health and Human Services Secretary in February. Price's bill also focuses on protecting doctors from "lawsuit abuse."
Despite uncertainty about what would replace Obamacare, Trump and congressional Republicans moved ahead with repeal efforts. The week prior to the inauguration, Senate Republicans passed a budget resolution that would allow them to repeal much of the health law with a majority vote – that is, without the risk of a Democratic filibuster. The House approved the resolution, which did not require President Obama's signature, the following day.
In his first day in office, a Friday, Trump signed an executive order instructing agency heads to "exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications."
The order appeared to be intended to allow parts of the law to lapse due to lack of enforcement. In a press conference the following Monday press secretary Sean Spicer declined to say whether the administration would enforce the individual mandate, which penalizes those who do not obtain insurance.
American Health Care Act
On March 6 House Republicans unveiled a plan to replace Obamacare, a bill called the American Health Care Act (AHCA). The proposed law would scrap the individual mandate, the Obamacare provision that has come in for the most criticism from Republicans. In order to prevent younger, healthier people from going without insurance and driving up premiums for remaining customers, the proposal adds a 30% penalty to premiums for individual-market insurees who have let their insurance lapse. The bill would also eliminate the employer mandate, which penalizes businesses that have 50 or more full-time employees and do not offer insurance.
The AHCA would get rid of subsidies for out-of-pocket expenses in 2020 and change the way that premium subsidies are provided. For example, according to the CBO, a 21-year-old with an annual income of $26,500 (175% of the federal poverty level) would receive $3,400 in tax credits under current law. Under the Republican proposal that subsidy would fall to $2,450; however, due to lower premiums, that individual would pay $1,450 altogether, compared to $1,700 under current law.
A 64-year-old with the same income would receive $13,600 in premiums under current law; under the AHCA they would receive $4,900, meaning they would pay $14,600, compared to $1,700 under Obamacare. A 64-year-old with an income of $68,200 (450% of the poverty level) would receive the same subsidy and pay the same premium as someone their age making 40% of their income; under current law they would receive no subsidy and pay $15,300.
|Obamacare vs AHCA: subsidies for nongroup health insurance|
|Individual with $26,500 annual income (175% poverty level)|
|Current law||Premium||Tax credit||Net premium paid|
|21 years old||$5,100||$3,400||$1,700|
|40 years old||$6,500||$4,800||$1,700|
|64 years old||$15,300||$13,600||$1,700|
|AHCA||Premium||Tax credit||Net premium paid||Change|
|21 years old||$3,900||$2,450||$1,450||-$250 (-15%)|
|40 years old||$6,050||$3,650||$2,400||+$700 (+41%)|
|64 years old||$19,500||$4,900||$14,600||+$12,900 (+759%)|
|Individual with $68,200 annual income (450% poverty level)|
|Current law||Premium||Tax credit||Net premium paid|
|21 years old||$5,100||$0||$5,100|
|40 years old||$6,500||$0||$6,500|
|64 years old||$15,300||$0||$15,300|
|AHCA||Premium||Tax credit||Net premium paid||Change|
|21 years old||$3,900||$2,450||$1,450||-$3,650 (-72%)|
|40 years old||$6,050||$3,650||$2,400||-$4,100 (-63%)|
|64 years old||$19,500||$4,900||$14,600||-$700 (-5%)|
|Source: Congressional Budget Office (CBO)|
The AHCA would increase contribution limits to HSAs and allow insurers to charge older patients five times more than they do younger ones, rather than the current ratio of three. It would maintain the current Medicaid funding scheme (for states that chose to expand the program under Obamacare) until 2020. After that it would reduce funding for new sign-ups and capping federal funding on a per capita basis.
The proposal would keep some Obamacare provisions, allowing children to stay on their parents' plans until age 26, for example, and preventing insurers from denying coverage based on pre-existing conditions.
Effects on Insurance Coverage, Premiums and the Deficit
According to an analysis the CBO published in mid-March, the AHCA would result in 14 million more Americans lacking health coverage by 2018. The figure would rise to 24 million by 2026. In 2024, a total of 52 million people would lack insurance, compared to a projection of 28 million under Obamacare. Much of the reduction in coverage would be due to younger and healthier patients' choice to forgo insurance in the absence of the individual mandate.
Shortly before his inauguration, Trump told the Washington Post, "We're going to have insurance for everybody. There was a philosophy in some circles that if you can't pay for it, you don't get it. That's not going to happen with us."
Premiums would initially be higher than under current law, but within a decade they would be around 10% lower. The CBO did not project that either Obamacare or the AHCA would destabilize health insurance markets.
The CBO projects that the federal deficit would be around $337 billion lower from 2017 to 2026 under the AHCA than under current law.
Regulation (skip to top)
Trump has railed against what he has characterized as excessive, stifling regulation. In an executive order signed on January 30, Trump instructed agencies to identify two regulations to be eliminated for every new one they adopted, a first step to fulfilling a campaign promise. He also mandated that the incremental cost of new and eliminated regulations not exceed zero in fiscal 2017, which ends on September 30, 2017. Because repealing rules often involves a process nearly as complex as the one involved in making them, however, it may be difficult to keep costs that low.
Trump also promised to "cancel every unconstitutional executive action, memorandum and order issued by President Obama." He has been particularly critical of energy regulations meant to curb pollution and climate change; his nominee for administrator of the Environmental Protection Agency (EPA), Scott Pruitt, sued the agency a number of times over its regulations when he was Oklahoma's attorney general (see "Energy" below).
Shortly after his election victory, Trump promised to "dismantle" the Dodd-Frank Wall Street Reform and Consumer Protection Act, a 2010 financial regulation law that passed the House without a single Republican vote and the Senate with only three. Steven Mnuchin, Trump's pick for Secretary of the Treasury, said the law was "way too complicated and cuts back lending" in a November 30 interview with CNBC. He identified the Volcker Rule, which aims to prevent banks from making risky bets with consumer deposits, as a particular source of unneeded complexity. In an executive order issued February 3, he laid out principles he said should guide financial regulation; while the order did not mention Dodd-Frank, it was perceived as an attack on the law.
Immigration (skip to top)
Trump made immigration a centerpiece of his campaign from the time he announced his candidacy in June 2015. In that speech, he offered this description of Mexican immigrants: "They're bringing drugs. They're bringing crime. They're rapists. And some, I assume, are good people." He proposed building a wall along the southern border and changing federal law to prevent those born in the U.S. to undocumented parents from automatically gaining citizenship (it is not clear whether a change in the law would be sufficient to eliminate birthright citizenship, or if a constitutional amendment would be needed).
He initially advocated deporting all undocumented immigrants in the United States – an estimated 11 million people – and in December 2015 called for "a total and complete shutdown of Muslims entering the United States until our country's representatives can figure out what is going on." He later moderated those positions slightly, promising instead to deport "criminal aliens," whose number he put at two million (that estimate has been disputed). He also walked back his ban on Muslim immigration, calling instead for a suspension of immigration from "terror-prone regions where vetting cannot safely occur." He has called for "extreme vetting" of everyone entering the U.S.
In a pair of executive orders on January 25, Trump ordered the "immediate" construction of the wall, as well as new detention centers. He ordered an end to what he called "catch and release" and "asylum abuse," writing that parole should be granted only for "urgent humanitarian reasons or a significant public benefit." Carving out an exception to his earlier hiring freeze, he ordered 5,000 additional border patrol agents to be hired.
He ordered agencies to "employ all lawful means to ensure the faithful execution fo the immigration laws of the United States against all removable aliens," prioritizing criminals and those who "have abused any program related to receipt of public benefits." The order did not specify which benefits are meant – whether public schools count, for example – or what constitutes "abuse."
Trump also ordered the attorney general – his nominee Jeff Sessions is awaiting Senate confirmation – to cut off federal funds to "sanctuary cities" and called for the creation of a database detailing crimes committed by undocumented immigrants, who will be exempted from Privacy Act protections.
On the afternoon of January 27, a Friday, Trump signed an order barring the entry of all refugees for 120 days, shutting out refugees from Syria indefinitely, and imposing a 90-day ban of all entrants – "immigrant and nonimmigrant" – from seven Muslim-majority countries: Yemen, Iraq, Iran, Syria, Sudan, Libya and Somalia. The ban was rapidly enforced in airports across the country, which soon attracted protesters. Permanent residents were detained, since the administration did not immediately clarify that these were exempt.
Judges in four states issued emergency stays against the order over the following weekend, preventing those who had been detained from being deported. Few were released, however, and reports indicated that some people were being deported anyway.
The order caps fiscal 2017 refugee admissions at 50,000, less than half the Obama administration's goal for the year. It prioritizes applicants who are religious minorities and facing religious persecution, which some have interpreted as favoring Christians – in line with Trump's promised Muslim ban – but could in theory apply to Sunnis in majority-Shi'a Iraq, for example.
The order also creates another database documenting charges and convictions for terror offenses by foreign nationals, as well as cases of gender-based violence such as "honor killings." This database is in addition to one Trump created to track crimes committed by undocumented immigrants.
National Debt (skip to top)
Trump repeatedly criticized the growth of the national debt – which stands at nearly $20.0 trillion as of January 30 – under the Obama administration. In March 2016, Trump told the Washington Post that he could eliminate the debt within eight years. During the vice-presidential debate, Mike Pence said, "when we get back to 3.5% to 4% growth, which Donald Trump's plan will do, then we're going to have the resources to meet our nation's needs at home and abroad, and we're going to have the ability to bring down the national debt." Independent analyses, on the other hand, see Trump's plan to lower taxes and boost spending on infrastructure and defense as adding trillions to the debt (see "National Debt" under Economic Forecasts above).
In May, Trump appeared to indicate that he would consider repaying less than the full amount the U.S. had borrowed. While his statements were unclear – and he denied he was "talking about with a re-negotiation" – he argued, "you can buy back at discounts, you can do things with discounts," and, "I would borrow, knowing that if the economy crashed, you could make a deal."
Energy (skip to top)
Donald Trump has repeatedly called climate change a "hoax," and in 2013 he tweeted, "The concept of global warming was created by and for the Chinese in order to make U.S. manufacturing non-competitive."
Given this stance, and his enthusiastic courting of voters in Appalachia's coal country, Trump's positions favoring fossil fuels shouldn't come as a surprise. In his promises for his first hundred days, he said he "will lift the restrictions on the production of $50 trillion dollars’ worth of job-producing American energy reserves, including shale, oil, natural gas and clean coal." His nominee to head the EPA, Oklahoma attorney general Scott Pruitt, has said the "debate" on climate change is "far from settled."
Shortly after taking office, Trump signed a series of executive orders and memos calling for the resumption of work on the Keystone XL and Dakota Access pipelines, which the Obama administration had rejected. In an order that laid out a process for expediting environmental approvals for high-priority projects, Trump named pipelines as an important category of infrastructure projects. A new requirement that pipelines be constructed from local content, however, could make them more costly (see "Infrastructure" above).
In May, Trump said he would renegotiate last year's Paris Agreement, which saw the U.S., China and 109 other states pledge to limit average global temperature rises to "well below" 2 degrees Celsius above pre-industrial levels. Later in the month he threatened to "cancel" it. His plan for the first hundred days includes a promise to "cancel billions in payments to U.N. climate change programs and use the money to fix America's water and environmental infrastructure."
Monetary Policy (skip to top)
Trump has been at his least consistent when it comes to monetary policy. He said the Fed was "creating a bubble" with low interest rates in August 2015. He warned the following May that raising rates could strengthen the dollar and cause "some very major problems," adding that the dovish Federal Reserve chair, Janet Yellen, is a "very capable person." By September he was back to criticizing low rates, as well as charging the Fed with doing political things and being "more political than Secretary Clinton."
The Fed has a Congressional mandate to generate maximum employment (4.5% to 5% unemployment) and steady prices (annual core PCE inflation of 2%). Aside from those requirements, however, it is independent, meaning it does not have to seek approval from any branch of government to change monetary policy. Given Trump's accusations that the Fed is acting politically, some have expressed the worry that Trump will attempt to curtail monetary policy independence, as several past presidents have done. Narayana Kocherlakota, who was president of the Minneapolis Fed until December, wrote the week after Trump's victory, "there is absolutely nothing in U.S. law preventing Trump from violating the Fed's independence, a post-1979 development that rests largely on the restraint of the president."
2018 Budget (skip to top)
On March 16 the Office of Management and Budget released a "skinny budget," the first stage of the administration's fiscal 2018 federal budget proposal, which limits itself to discretionary spending. The proposal increased Department of Defense funding by 10.0% or $52.3 billion to $527 billion. It funds this increase with cuts to the Department of Health and Human Services ($12.6 billion or 16.2%); to foreign aid programs run by USAID, the Department of State and the Treasury ($10.9 billion or 28.7%) and other programs. The overall level of discretionary spending falls by $2.7 billion or 0.3% to $1,065.4 billion. (See also, Trump Budget Funds Pentagon with Cuts to Health, Aid.)
The budget cuts the EPA's budget by 31.4%. The Departments of Labor and Agriculture would lose over a fifth of their funding under the proposal. It would also defund 19 programs entirely, including the Corporation for Public Broadcasting, the U.S. Trade and Development Agency, the National Endowment for the Arts and the United States Interagency Council on Homelessness. Early pushback from Congressional Republicans indicate it undergo significant alterations before it is passed.