Trumponomics

On the night of November 8 to 9, when the counting of the votes in the election of the US president was still ongoing, but suddenly it became clear that the favorite of the race was no longer Hillary Clinton, but Donald Trump, the markets began to fall. Actually, this was the first powerful signal - the president will not be the one that the vast majority put on.

About an hour of that night Paul Krugman, the Nobel Laureate of the Economics and the furious critic of Trump, wrote on the New York Times : “Now it really looks like President Donald J. Trump, and the markets go down. When we can expect their restoration? Honestly, I don’t care, the catastrophe for America and the world has so many aspects, it has so many aspects, it has so many aspects, it has so many aspects, that the economic consequences are far from my list of reasons for fears.

Nobel laureate was wrong. The markets instantly turned around and went up, the Dow Jones stock index even showed record growth last week. The dollar has grown. Oil prices decreased.

Another critic of Trump, billionaire Warren Buffett in an interview with CNN said that stock markets will grow for decades, regardless of who will become the president. He called stupidity the assumption that the markets would fall after the election of Trump, and although he criticized the threats of the chosen president of the United States to introduce trading tariffs against Mexico and China, Buffett expressed doubt that this would lead to a recession

Numerous election forecasts that the markets will collapse in the case of Trump winning are probably the result of the overall confidence of experts and politicians that an extravagant businessman who rejected political correctness and accused of racism, conducting an extremely unindordial and amazing campaign, has practically no chance of victory.

Now, as after Brexit, there are many discussions of systemic mistakes in public opinion polls, almost the entire campaign predicted Clinton. However, as after Brexit, if the wine lies in polls, then only to a small extent. The confidence of experts, politicians and markets in Trump's defeat was incomparably greater than the chances that survey gave him. On the eve of voting in the UK, according to surveys, the number of supporters and opponents of the exit from the EU was almost equal, but most commentators were sure that Brexit was impossible. A few days before the election of the US President, especially after a new round of scandal with e -mail, Clinton’s advantage over Trump was reduced to almost a minimum - in polls, but not in the opinions of experts and markets. One of the most prominent electoral statistics of Nate Silver attacked colleagues for assessing the chances of Clinton and Trump to win only 2: 1. Markets and experts evaluated these chances in the region of 5: 1. Clinton as a result won a nationwide vote, but lost the electoral college, which determines the new US president.

Weak teams periodically win strong

The author of this article thought that Clinton would still be able to win. The economist, professor at the University of Chicago, Konstantin Sonin , also evaluated the possible election of the elections, with whom we have now talked about how the economy will look at Trump. The conversation began with the recognition of our general wrong. Sonin at the same time notes that in his blog in his blog and in an interview he would further emphasize: “Clinton’s 90 percent chances are not 100 percent. These are the chances of the victory of a strong football team over the weak, but the weak teams periodically win the strong, and this is nothing stunning. And part of the guilt is at the reader. In the modern world, his attention is very short. It was precisely reported that it is better, but the subtleties do not want to know, unequivocal predictions are perceived very carefully, and the reservations that indicate something in the other direction-with much less interest. "

The fall of markets on an elected night is a shock from surprise. Immediately growth after this, apparently, means two things: the markets realized the results of the elections (this is certainty after the extreme uncertainty of an extremely unusual campaign) and began to figure out that, in fact, such an economic policy under Trump - and, it seems, considered it good (possibly, closing the eyes to the features of the political program of the elected president).

During the election campaign, the economy did not come to the forefront, the focus of Trump was in the spotlight to build a wall on the Mexican border and prohibit the entry into the country of Muslims, insulting statements about women, skirmishes with other campaign participants, accompanied by a transition to personality and the like. Moreover, it was the economy, most likely, and brought Trump to the White House.

Trump is not a typical Republican

Trump’s victory steam locomotive was a white working class, people without education, on which globalization hit first of all. Their income did not grow, despite the restoration of the economy after the 2008 crisis under the Obama administration. Trump promises to increase jobs in the country by introducing protectionist measures and reducing taxes, deregulating the economy and increasing the cost of building infrastructure: roads, airports and the like.

Sonin says that this means finance economic growth due to the growth of public debt, and does not exclude that this will be a good recipe for the United States, but only Trump is more likely left than the right politician:

- Usually in America a divided government: the president - from one party, Congress is controlled by another, and economic policy is the result of a compromise. Now a rare situation: the Republicans control both the presidency and both the chambers of the parliament, and the House of Representatives with a significant majority. It would seem that everything they want can do. But Trump is not a typical Republican.

The views of Trump and Republicans on some issues diverge, Sonin continues: investments in infrastructure, social security, international trade (Republicans traditionally advocated relative freedom, Trump - for protectionism). Formal one-party members will have to find some kind of compromise, but which is unknown.

Trump was not very intelligible about social security, but it seems that he advocates the preservation of all social programs, Sonin says: “Moreover, people whose voices brought him victory are the white elderly Americans, who were left without work due to globalization, partly due to technological progress, whose voices, visconsin and Michigans provided Trumpu Plesho,-just this group-just this group. It is terribly sensitive to social security. This position of Trump is also in conflict with the plans of the Republicans in Congress.

What Trump and Republicans coincide in (and therefore it can be expected that this will be accepted, Sonin believes) is a proposal to radically reduce taxes: "Reducing federal taxes is actually a decrease in taxes on the rich, because the federal income tax pays less than half of the population."

The world does not collapse

As a result, Sonin does not expect changes in the level of social security under the Trump administration and is waiting for tax reduction. And this automatically means the growth of public debt: "There is a cruel thing, arithmetic. If you do not reduce government departments and reduce taxes, then a budget deficit increases. So, you will have to increase the debt."

Sonin points to the irony of fate, according to him, the idea to increase the debt and invest in infrastructure without reducing social security (that is, Trump's points), is very close to what Paul Krugman, one of the main left -gentrist economists, is one of the intellectual leaders of levocentric policy: “I’m afraid, Krugan himself does not recognize this, but so far, but so far, but so far, but so far, but so far, but so far, but so far, but so far that the fact is that the fact is that the fact that the fact is that the fact is that it It looks likely in the Trump program - this is such left centrism. "

In response to the assumption that the markets survived the shock of uncertainty, looked closely at Trump and saw that he was satisfied with them, Sonin grins: "I am a university professor, I want to start everything with reservations."

- The markets understand a lot of things, but we must remember that when the First World War began, the financial markets continued to work for several weeks, that is, they did not understand that there would be a war, even when it had already begun, the whole world collapsed. There is nothing wrong with Trump in economic policy, on the contrary, this is perhaps a rather progressive agenda in favor of growth. Reducing taxes, protectionism without reducing expenses, that is, investment at the expense of debt is a policy in favor of economic growth and in favor of financial markets. The markets fell at the beginning, because financial markets do not like uncertainty. Maybe what reassured them - in the very first hours it became clear: yes, Clinton wins by the number of votes, Trump becomes the next president, but the world does not collapse. His victory is not some catastrophic change in preferences, but only that several hundred thousand people who used to vote for democrats in three states voted for Trump. And the market realized that it was expected to be completely inroot policy.

Trump has the opportunity to implement what Obama wanted to implement

- How will the economic policy of Trump from the economic policy of Obama, which gave an increase in the economy, albeit slow? Wait for rapid growth, Trump was right when he promised this to his voters?

- I think Trump has the opportunity and plans to do the same thing that Obama tried to do: stimulate the American economy with the help of expenses. But Obama had much less a range of opportunities, he had a Republican Congress. The key thing that has expanded Trump's capabilities in the field of economic policy is that he won the republican primaries. The Republican Party greatly depends on it and its voters and was forced to accept such progressive, partly centrist, even left -giant economic plans. Trump has the opportunity to implement what Obama wanted to do. I do not think that he will be able to increase growth to the promised 4 percent per year, but even if he increases from the current 1.5–2 percent to 2.5-3 percent - this will already be a long growth for America and compared to other developed countries.

- It sounds strange. Trump is perceived by the opposite of Obama, but from your words it follows that he could take Krugman as his unspoken adviser.

- Imagine that the Republican like Jeb Bush won. Then, under the Republican Congress, the policy would be approximately this: to reduce taxes and reduce expenses or at least reduce the growth of social expenses. That is, a balanced budget, plus a decrease in taxes. Trump differs, it is much more central, to reduce taxes, but not to reduce costs. In a sense, it looks like Reagan, because Reagan did not reduce state expenses for all his anti-government rhetoric, he reduced taxes and left expenses, all this was funded by debt. Now even a more convenient time for Reagan policy is to finance expenses at the expense of debt-due to the fact that the basic credit rate is very low, you can take another 10 trillion dollars without any problems for the American economy.

What can we know about Trump now?

- The liberals violently denied that Trump resembles Reagan, who is perceived as one of the greatest US presidents of the last century. What, Trump can have similar prospects, at least if we talk only about economic policy, and take the rest by brackets?

-( Laughs. ) It is interesting to discuss the prospects of some US president two months before his office. There are two good examples. One does not like to remember, but, it seems to me, he looks like Trump - this is Jimmy Carter, a man who was elected in 1976, when American voters rejected the current president, the current elite, and completely rejected the elite of the opposition party. After Watergate, the voters hated everyone, elected an extremely inexperienced policy with minimal political experience. For four years he was a weak president, even with his “his” Congress, and four years later he lost the election with a bang.

Another option is George Bush Jr., who became the president, losing the national vote of El Gorus. The first year he went according to the Karterovsky path, the unpopular president, whom the majority despises, the media elites despise. After the attacks of September 11, he completely rejected himself as a warring president, won the re -election on this. What can we know about Trump now? Different things can happen. I think that it will be unpopular, its popularity will decline the first years, because there is hardly something in the arsenal of economic policy, which can help the white elderly non-qualified people in Pennsylvania, Wisconsin.

- What you described for the American economy, what does this mean for the global economy? Maybe President Trump, pursuing some policy that is beneficial to the American economy, while somehow negatively affect the world economy?

- Maybe. America is one of the three countries in the world, and the first among them, which can afford isolationism: if it ceases to trade with the world, it is not a fact that it will become much worse. Inside the United States, one will become worse, the other is better, but in the whole country it will not hurt. In general, any country becomes worse from isolationism and the transition to Autarchy, but America is almost the only country (the second, possibly the European Union), which can afford it without any global losses. We saw how hard the course for isolation affects the Russian economy, there is no such threat to America. But for the rest of the world, it will be a big test. Because a lot in world markets and in different countries depends on the availability of a huge buyer of goods. For China, this will be a challenge - this does not mean that they will not be able to accept this challenge, but whether Chinese growth and the Chinese model will remain if America is seriously engaged in isolationism, an open question.

The economic problems of Russia are not related to external factors

- And for Russia? For example, the Russian economy is highly dependent on oil. What does Trump mean for oil? Why did the price of oil begin to fall?

- Trump for oil is a relatively simple question. Trump advocates the deregulation of oil production within America. The Republican Party supports this. That is, we can expect more export, greater production within America and around, the construction of additional pipelines and greater freedom of oil trade. Accordingly, this increases the global oil supply, creates pressure downward, towards the lower price. The American course on isolationism can hit China’s economy and Chinese growth, and then this will also become a negative factor for the oil market. Of course, the election of Trump will act on Russia through the oil market. But it must be understood that the economic problems of Russia are not related to external factors: global problems are the tenth business compared to what is being done within the country.

- How great is it that Trump will really pursue a policy of economic isolationism, that a certain deregulation of the economy will be carried out?

- The American president has a lot of opportunities to influence the country's trade relations, he can act in many issues without the approval of Congress. The same applies to the regulation of the American economy. He has the opportunity to cancel a lot of what Obama did without consulting with anyone. I think the deregulation will be carried out and some measures will be taken to tighten isolationism. But how far they will go is a big question. Over the past 30 years, world trading barriers have decreased so much, even if they roll back very much, the world will still be much more global than then. From Trump, it seems to me that many expect a completely reasonable and brave economic policy. Other things related to Trump make you look more pessimistic at the future. But for now, the general feeling that the first is outweighed, so the markets react so positively to it.

- Many liberals betray Trump anathematize and, it seems, believe that nothing good can be connected with him. But do you think that it may well have a positive effect on the American economy?

“Yes, because in the field of economic policy he has a very centric program, in a sense he is a long-awaited centrist, something intermediate between the preferences of the Democrats and Republicans,” says Konstantin Sonin.

On Friday, Paul Krugman acknowledged the mistake in his statement that the markets will never recover from Trump's victory. In his blog at The New York Times, he called on all Trump's opponents not to change his mind due to the victory of that in the elections. Кругман утверждает, что Трамп приведет к катастрофе, но не прямо сейчас: "Есть искушение предсказать немедленный экономический или внешнеполитический коллапс; я поддался ему во вторник ночью, но быстро осознал, что [делаю ошибку]. Я отзываю те слова. Это возможно, что увеличение бюджетного дефицита ненадолго укрепит экономику".