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Leadership

Here’s What Will Happen to the Economy If Trump Keeps His Promises

By
Tory Newmyer
Tory Newmyer
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By
Tory Newmyer
Tory Newmyer
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November 9, 2016, 3:36 PM ET
Election Day 2016: Donald Trump Speaks After Becoming 45th President
NEW YORK CITY - NOVEMBER 9: Donald Trump slaps hands with supporters as he celebrates his Presidential win at his Election Night event at his election night event at the New York Hilton Midtown in New York City on Nov. 9, 2016. Republican Trump defeated Democrat Hillary Clinton to be elected the 45th President of the United States. (Photo by Jessica Rinaldi/The Boston Globe via Getty Images)Photograph by Jessica Rinaldi—Boston Globe Boston Globe/Getty Images
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Donald Trump’s shocking victory in the presidential contest left many more questions than answers about what comes next.

Never before has the nation elevated to its highest office a candidate without prior experience in public life or the military. And in Trump, Americans compounded the unknown by electing a candidate who offered only the fuzziest details of his policy intentions—and frequently reversed himself on fundamentals.

To the extent Trump’s domestic agenda has a focus, it’s trained on his twin populist priorities of cracking down on illegal immigration and rolling back free trade agreements. How he tackles both will provide important early clues about his as-yet untested leadership approach.

Trump’s charged rhetoric about undocumented workers—he famously labeled them predominantly rapists and drug dealers in the June 2015 speech kicking off his bid—and his promise to deport them en masse and build a border wall to keep them out formed a through-line of his candidacy. But the president-elect’s own commitment to the cause is belied by some of his relatively recent comments on it. In media appearances in 2012, for example, Trump talked up the need for Republicans to embrace comprehensive immigration reform, one that presumably included a path to citizenship. He described himself to CNBC at the time as “down the middle” on the issue and endorsed a qualified amnesty for those who’ve proved law-abiding and productive.

Even assuming that an empowered Trump wants to push a line as hard as the one he staked out on the trail, he’d face significant practical and political obstacles. The economic toll alone would be significant: a May report by the right-leaning American Action Forum estimated that removing all undocumented workers and barring their reentry would cost somewhere between $400 billion and $600 billion, while reducing real GDP by over $1 trillion. For that reason in part, the plan would run into headlong resistance from the Chamber of Commerce wing of the party, which has favored a path to citizenship. The extent to which business-minded Republicans in Congress adjust their views to match Trump’s position will test how deeply his win rewires traditional conservative orthodoxy.

And if Trump backs off his maximalist stance, he still has options to reverse Obama-era liberalization. With the stroke of a pen, Trump can and likely will rescind the current president’s executive order allowing about 800,000 immigrants who came to the U.S. as children to stay here on two-year work permits. Obama signed that order—officially known as Deferred Action for Childhood Arrivals, or DACA—as a half-measure after House Republicans stuffed his ambition of a comprehensive reform package.

Trump could feel more emboldened to push his anti-trade program, considering how he assembled his electoral majority. Rust Belt states with heavy concentrations of working class voters shocked prognosticators by breaking with a generation of voting tradition and lining up behind the Republican. That base—in Ohio, Pennsylvania, Michigan and Wisconsin—will agitate for Trump to make good on the protectionist measures he pitched as a salve for decades of deindustrialization. And the president-elect has talked up a range of aggressive actions, including labeling China a currency manipulator, slapping tariffs on goods imported from China and Mexico, and renegotiating or walking away from trade deals like the North American Free Trade Agreement. (Perhaps needless to say, the Trans-Pacific Partnership, the 12-nation pact that Obama was eyeing as a capstone on his second term, is now deader than dead.)

Enacting the full sweep of Trump’s proposals on rolling back free trade would pitch the U.S. economy into recession and wipe out more than 4 million private-sector jobs, according to a September analysis by the pro-trade Peterson Institute for International Economics. The president has a wide berth to pursue those ends unilaterally. As the study notes, a pile of laws over the last century authorizes the president to impose tariffs or quotas on imports. To walk away from NAFTA, Trump would only need to provide written notice. And there isn’t much trade boosters could do about it: Those hoping to slow him down through lawsuits or legislation would have trouble keeping pace with retaliatory measures from our erstwhile trading partners. That is, Trump, if he wants, can start a trade war without much formal resistance before anyone can stop him.

He’s also promised to move swiftly to repeal the Affordable Care Act. But there, uprooting a thicket of finished rule-making, and the adjustments that various health sectors have already made to the six-year-old law, would seriously complicate the project.

Trump will find more Congressional support for his plan to slash tax rates, though it isn’t going to win much Democratic backing. The proposal, which would add $5.3 trillion to the debt over ten years, would provide a short-term lift to growth followed by a much heavier drag. By 2027, his rejiggered code would push GDP down by 0.43% and cost some 692,000 jobs, according to a study conducted jointly by the Penn Wharton Budget Model and the Tax Policy Center.

There is one area that would afford Trump the opportunity to launch his presidency by unifying lawmakers of both parties. Late last month, his campaign released a proposal that economic advisors said would inject $1 trillion in new spending into infrastructure. The idea would be to get Congress to authorize $137 billion in tax credits that private developers would leverage to build roads, bridges and other projects that could generate revenue. Hillary Clinton’s jobs plan centered on new infrastructure spending. Plus, there is broad agreement among economic hands across the spectrum that the investments are both needed to shore up crumbling public works and a cheap and effective way to boost economic growth.

Of course, Trump’s economic agenda will only occupy part of his attention upon taking office. Some of what commands the rest is up to him. In the campaign, Trump described elaborate plans to exact revenge on his political enemies—by appointing a special prosecutor to reinvestigate Clinton’s use of a private email server, establishing a super PAC dedicated to attacking Republican rivals, and suing women who accused him of sexual assault. He can choose whether he steers clear of those self-destructive wastes of time.

Other challenges will be out of his immediate control. Foreign powers with designs on expanding their influence if not their territory—think China, Iran and Russia—will be looking for opportunities early on to test Trump’s isolationist instincts. That could include precipitating a crisis with a U.S. ally that invokes a defense commitment.

And then there are the unknown unknowns sure to present themselves as Trump works to find his footing. After last night’s results, all bets may be off, but turbulence ahead remains a safe one.

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By Tory Newmyer
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