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…..the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear.
During his campaign and after his unexpected election win, Trump managed to turn what should have been fatal liabilities, such as sharp reversals in his policy views, erratic and impulsive behavior, open disrespect for grandees of the party to which he’d hitched his star, and surprising displays of ignorance about how the Beltway and the office of the Presidency worked, into elements of performance art that somehow worked for him or at least didn’t result in anywhere near the level of damage that it should have. Mind you, had the Democrats gotten out of their echo chamber and recognized that their strategy of kicking the lower orders to the curb was backfiring and they needed to run a candidate who could more credibly fake having their interests at heart (as well as being less openly corrupt) than Hillary Clinton, Trump should have been handily beaten. But the New York billionaire focused on the voters that Clinton and her surrogates repeatedly denounced, and kept his eye on the Electoral College gameboard.
Trump’s shape-shifting has allowed him to take advantage of the uncertainty about what his Presidency might amount to. He’s put very few stakes in the ground beyond shifting America’s trade policy to a more pro-jobs, and hence protectionist stance, cracking down on undocumented workers, “reforming” as in cutting taxes, and “investing” in infrastructure, which is likely to take the form of putting money where the looting is best, as opposed to where the need is greatest, of public-private partnerships.
But a remarkable amount of what Trump might stand for remained not well defined, and radically so. What could you possibly make of a President elect who in all seriousness has as Secretary of State candidates two foaming-at-the-mouth egomaniacs who lack the good sense to recognize that they don’t remotely have the temperament or judgment to take the job, in the form of Rudy Giuliani and John Bolton, versus Mitt Romney, who excoriated Trump for many of the right reasons, but is politically savvy enough to do at least an adequate job?
While Trump hasn’t settled on all the members of his team, the picture that is emerging is that Trump prizes personal loyalty highly, and when his thin bench requires him to go outside his circle, he not surprisingly hires in his image. While he has turned to some Republican insiders, he has a large representation of very wealthy men like his Treasury Secretary pick, former Goldman partner Steve Mnuchin and his Commerce Secretary nominee, distressed investor Wilbur Ross, who like Trump have never held a government post before.
The question is what the Democrats will do about Trump’s choices. If they want to retain a shred of credibility, they need to make a stink about the ones they regard as the worst, and better yet, bar some nominees or mark them up so badly as to curtail their effectiveness. But that likely means picking their spots. Trump is threatening to break enough rice bowls that the Democrats, particularly in the Senate, could pick up the few Republican votes they need to block Trump initiatives, like his tax plan (which will hurt importers and the residential real estate business by ending the mortgage interest tax deduction [correction, this is in the House plan, not Trump’s plan, but some experts think that that and not the Trump version will be the staring point for tax sausage making) and dismantling Obamacare (which insurers may quietly oppose, since they spent a good deal of money adapting to the new law and despite their whinging, can game it well) 1
While some very important Trump picks have yet to be made, such as his Attorney General, so far, two particularly dodgy ones are Steve Mnuchin and his Health and Human Services nominee, Congressman Tom Price a stalwart foe of not just the Affordable Care Act but also Medicare. Mind you, that doesn’t mean that the others should get a free pass. For instance, one of his less terrible choices, Wilbur Ross for Commerce Secretary, is widely seen by old fart Wall Streeters (as in old enough to believe in noblesse oblige) as far better than the other financiers in Trump’s orbit. As we pointed out, Ross was one of the few distressed debt investor to buy mortgages, do deep principal modifications successfully, and try to get other investors and policy-makers to emulate his approach, since it was a win-win for investors and homeowners. But on the flip side, the press has taken no notice of the fact that a mere three months ago, Ross paid $2.3 million in SEC fines and “voluntarily” paid back $10.4 million of “excessive private equity fees, plus interest. It wasn’t all that long ago that merely not paying your nanny’s Social Security taxes was problematic enough to keep a Presidential nominee from taking office. But after Turbo Timmie was forgiven for a pretty implausible failure to report taxable income, it’s going to be harder to bar a guy like Ross from office just for what he may be able to depict as an isolated lapse.
And the bigger reason for Ross probably not being a prime target for a fight is that Commerce historically has not been a nexus for major policy fights. And the current Commerce Secretary, Penny Pritzker, is not only also very rich but has been involved in seamy Chicago real estate politics, so it’s hard to make a case that Ross is all that different from recent incumbents.
By contrast, Mnuchin is unqualified. As Elizabeth Warren successfully argued in a bare-knucke fight over the number three post at Treasury, the undersecretary of domestic finance, that merely having worked at a financial firm was not an adequate background for assuming a regulatory post. Weiss has been a senior mergers and acquisitions banker for Lazard, later head of its Paris office. Weiss knew squat about the banking industry and banking regulation. It had heretofore been unheard of for this sort of position at Treasury to be treated as a patronage post. Weiss withdrew his nomination as Warren was moving more Senators into her camp on Weiss.
While Treasury Secretaries Robert Rubin and Hank Paulson hailed from Goldman, both had been heads of the firm, which gave them considerable exposure to regulatory issues and also regularly put them in contact with senior foreign officials. By contrast, Mnuchin, the son of a former Goldman management committee member, ran mortgage bond trading and was later the firm’s chief information officer and more recently, a successful movie producer. Impressive, yes. Relevant for heading Treasury, no.
Will the Democrats give Mnuchin a free pass because until recently, he was a large Democratic party donor and fundraiser, and they decide to regard him as acceptable? Warren is sure to put up a stink, but if other Democrats don’t follow, expect this to be the reason why.
By contrast, it would be an utter disgrace if they don’t put up a pitched battle over Price, since his desire to privatize Medicare should make it possible to rally opposition among moderate Republican voters, as well as call out Trump for reneging on a campaign promise. As Kaiser News points out:
Price, a Georgia Republican who currently chairs the House Budget Committee, was among the first to suggest that not just the ACA but also Medicare are on the near-term agenda for newly empowered Republicans.
Privatizing the Medicare program for seniors and disabled people and turning the Medicaid program for the poor back to the states are long-time goals for Republicans in Congress and the White House. They say the moves could help put the brakes on health spending. Opponents argue, however, that both changes are aimed instead at shifting the financial burden of health care from the federal budget to states and individuals.
Note that the case against Medicare rests on CBO long-term projections that are obviously cooked. As we wrote in 2012, two senior budget experts at the Fed issued a paper on the CBO projections that was about as blistering as you ever see for something written for publication in an academic journal. Among other things, they described how the CBO had flagrantly violated its own methodology to come up with results that were wildly implausible on their face. They are nevertheless treated as gospel in the Beltway. From our discussion of the paper:
… conventional wisdom is that Medicare does have a long term cost predicament, but the problem is not demographic, but that of the steep rise of health care costs in general.
The fundamental beef of Follette and Sheiner with the CBO model is that it naively assumes past growth in health care spending as the basis for its long-term projections. The result is that it shows that trees will grow to the sky. One of the things anyone who has built forecasting models will tell you is you come up with assumptions that look reasonable and then sanity check the output (for instance, does your model say in year 10 that your revenues will be 3x what you can produce given your forecast level in plant and investment? If so, you need to make some revisions). The Fed economists point out numerous ways that the model output flies in the face of what amounts to common sense in the world of long term budget forecasting.
I strongly urge you to read the post in full, since the badly-informed discussion over Medicare costs looks likely to become a front-burner issue.
We’ll see soon enough whether the Democrats and their allies in the punditocracy are prepared to go into effective opposition to Trump, particularly where he has clearly sold out on campaign promises, or whether they continue to engage in unproductive hysterics and dissipate energy on at best secondary targets. My expectations are low, but Sanders has stayed focused on the right issues, and his camp may be able to take advantage of the disarray among the corporate Democrats by staying focused on the needs of ordinary Americans.
1 No, we have not gotten all soft in the head and become Obamacare fans. But do not labor under the illusion that as flawed as Obamacare is, that Trump is not capable of making a bad situation worse. For instance, one clear positive feature of Obamacare was Medicaid expansion. The noises from the Trump camp are that they would be rolled back to a large degree.