July 17th, 2018


Can Trump's art of the deal make America great again?

Niall Ferguson

By Niall Ferguson

Published Jan. 24, 2017

Can Trump's art of the deal make America great again?
President Donald J. Trump's favorite Twitter hashtag is #MAGA, which of course stands for Make America Great Again.

For many of Trump's supporters, this is another way of saying Make It the 1980s Again. For those older age groups that broke decisively for the Republicans in November, this is one last chance to turn the clock back to when they and their country were in their prime.

Friday's inaugural address by Trump was thus fascinating both for its similarities to Ronald Reagan's 1981 inaugural and for its differences.

Both men painted a picture of economic stagnation. Both men put some of the blame for the nation's economic troubles on the federal government. And both men identified themselves as populists by making direct appeals to "you, the people."

Likening Trump to Reagan is a dangerous thing to do. But my point is not that they are the same. It's just that their circumstances are similar. The left despised Reagan as they despise Trump. Both men had become famous on the screen before entering politics. Both succeeded a Democrat who was seen as weak on foreign policy.

It's not accidental that Trump has talked about a summit meeting with the Russian President Vladimir Putin, perhaps in Reykjavik.

Yet this is not "morning again in America," as Reagan's famous 1984 television ad put it. In Trump's America, it feels more like twilight - the twilight of the era of economic globalization that the Reagan administration kicked off. For the most striking feature of Trump's inaugural address was its overt protectionism. "Protection will lead to great prosperity and strength," said Trump, once again using the 1930s isolationist slogan: "America First."

Trump blamed globalization, not government, for America's economic ills. By contrast, Reagan saw free trade as part of the solution.

Like all presidents, Trump will be judged by how far he makes good on his pledges. In one of his debates with Hillary Clinton, he talked of raising the US growth rate "from 1 percent up to 4 percent" and perhaps to "5 percent or 6 percent." He intends to achieve this not only through protectionism but also through tax reform and deregulation.

It is important to distinguish between the real and the imaginary obstacles Trump now faces. In the latter category are the leftist hooligans who ran amok in Washington on Friday, the liberal journalists who insist that Hitler has come to power, and the Hollywood stars who can't shut up about how triggered they feel. What these people fail to understand is that Trump is anti-fragile in relation to their attacks: they make him stronger.

The real obstacles are as follows. First, voters - especially the independents and late deciders who voted for Trump on November 8 - are fickle. Polls show that the new president's approval rating fell between his election and inauguration, which almost never happens. No president has entered the White House so unpopular.

Secondly, key Republicans, especially in the Senate, feel little loyalty to Trump. Paul Ryan and Mitch McConnell will to a large extent control the direction of the Trump administration wherever legislation is required.

Thirdly, precisely because this not the 1980s, the economy may not deliver. The Federal Reserve expects growth to be between 1.9 and 2.3 percent this year, and slightly worse next year. That's roughly half Trump's target.

Meanwhile, Congress may enact tax cuts but no additional revenue, leading the deficit to balloon. The Fed may then tighten short-term rates, following the upward move we have already seen in the bond market.

Finally, there's China. The other big speech last week was Xi Jinping's defense of globalization at Davos. "Pursuing protectionism is like locking oneself in a dark room," said Xi. "No one will emerge as a winner in a trade war."

"The Art of the Deal' was published by Donald Trump in 1987. "My style of deal-making is quite simple and straightforward," Trump wrote. "I aim very high, and then I just keep pushing and pushing and pushing to get what I'm after."

Starting this week, the artist of the deal will start to get acquainted with what could prove to be his two biggest foes. One is the political class of the Washington Beltway, personified by Frank Underwood, the anti-hero of "House of Cards': "Proximity to power deludes some into thinking they wield it," says Underwood in one episode. "The president is like a lone tree in an empty field: he leans whichever way the wind is blowing."

Trump's other big foe could be China. "The Art of War' was written by Sun Tzu 25 centuries before "The Art of the Deal.' "So it is said that if you know you enemies and know yourself, you will not be put at risk even in a hundred battles," writes Sun Tzu. But "if you only know yourself, but not your opponent, you may win or may lose."

No one should underestimate Donald Trump. But MAGAlomania alone will not be enough if he underestimates his enemies.