BY JOHN MAULDIN
I was in Washington, DC, on Inauguration Day.
That gave me the opportunity to set up a few meetings with members from Trump’s transition team (many of whom read my free weekly letter, Thoughts from the Frontline).
During those talks, I gained some insight into what the first 100 days, the first six months, and the first year of the Trump administration might look like.
Here’s a summary of my impressions.
Let’s dive in.
Everything is planned out in detail
If you listen to the media, you might have the impression that the Trump transition team is in complete disarray. But my talks with leaders of the transition team certainly didn’t leave me with that impression.
They have broken the transition process down into over 30 departments and have created a “landing document” for each department. The analogy they are using is that this process is like planning an invasion... they’re going to hand the landing document off to the “beachhead teams” who will then execute the plans.
I was briefly allowed to look at (without actually being able to read) the plan for one cabinet-level department. It appeared to be about 100 pages plus of serious detail as to exactly what executive orders would need to be removed and added, what personnel would have to be replaced (both appointees and regular staff), what policies would need to be changed, and so forth.
I was told that this level of planning was being done for every department. My impression is that there are a lot of people from various think tanks and others with experience in the presidential transition process who are involved in directing the plan for each department.
That level of detailed planning doesn’t happen in less than two months. My guess is that some of that thinking has been going on for years, and now it can be implemented.
When I asked a key person how much of the overall plan would likely come to fruition, I got a rueful smile and a shrug. “If we even get half of this done in the first few years, that will be major reform.”
There seem to be two general types of agency plans
First, there are those where the culture of the department has to be changed, and then are those where the current staff seems to be doing its job, but the culture surrounding the department has to be dealt with.
Those are entirely different issues. The first can be handled to some degree by the executive branch, but the latter needs to be dealt with by congressional action.
Trump’s management style is going to drive the world nuts—until we get used to it
One person who has worked closely with Trump during the transition says it is a lot like the HBO show Entourage and not at all like the British sitcom Yes, Minister.
Trump will have people in his entourage competing to give him the pieces of information he needs. In his business organization, he sets the vision and hires people to execute that vision. He then goes back to doing what we have seen him do so well, which is to create the brand and image.
He is bringing in people to execute his vision, and he’s going to expect them to get it done. He will jump in when he thinks he’s needed or when he can add something to the process, but he will mostly be paying attention to his team’s performance.
One assessment suggests that there is going to be more than the usual amount of personnel turnover in the first six months. The media will be writing about how Trump can’t keep people and about all the chaos in the White House and other parts of government. But from Trump’s perspective, and given his management style, that’s not necessarily bad in terms of his longer-term goal of changing things.
We have not had a president with this type of management style in my lifetime. Since it’s not something that any of us are going to be familiar with, it is going to make some of us uncomfortable until we get used to it (and some people never will).
Everyone in the new administration and Congress agrees there is going to be significant tax reform
That is where the agreement ends. There is absolutely no consensus on what that tax reform should actually look like. Among members of the US Congress (and others that you’d think should know), the universal answer is “I have no idea.”
I will candidly admit that some of the tax ideas I’ve been reading about make me nervous. The wrong type of tax reform can do serious damage to the economy. One of the few things that nearly all economists can agree on is that getting the incentive structure correct is critical.
I am not sure that some of the people who seem to be in a position to influence the proposals really understand the importance of incentives and the impact they could have on trade and business.
Part of the reason the market is up and that optimism levels are up in all the polls is that people have high expectations about the nature and depth of the tax reform we’ll get.
Failure to deliver on something that at least comes close to meeting those expectations is going to have a significant negative impact,, not just on the economy but also on the markets. I don’t know how long the new administration will have to “stand and deliver.”
Everyone is convinced that Obamacare will be repealed—but no one knows how
There are considerable differences in the plans that would replace Obamacare. (I wrote a few ideas about this back in October in "How to Build Healthcare Right.") My guess is that we are going to get substantial relief for small businesses and move towards more significant health savings accounts.
There will not be a single mandate for an insurance company to cover all sorts of things. A 55-year-old woman is not going to have to purchase insurance that has prenatal care in it. People will have much more ability to tailor insurance to their own personal needs.
This should help a great deal on costs to individuals and businesses, but it doesn’t deal with the overall cost of the system.
Dodd–Frank is going to be restructured
It is also very likely that the new DOL rule on fiduciaries and ERISA plans will at least be will be postponed... if not significantly changed.
On a personal note, there are parts of the DOL fiduciary rules that make sense, and I support them. But it appears to me that DOL was trying to make a one-size-fits-all rule that was just a bridge too far.
Trump can withstand more resistance than we think
Steve Moore passed on a story to me. He and my friend Larry Kudlow were meeting with Trump, and Trump asked them if they would like to be part of his economic advisory team during the campaign.
They looked at each other and back at Mr. Trump and said something to the effect of, “You can’t use us. We believe in free trade.” And Trump then said, “But we agree on nearly everything else. Let’s agree to disagree on trade and figure out where we can work together.”
Not many presidents are willing to have that level of disagreement from the outset. That is somewhat comforting to me. I will admit that, having asked a few questions of people who have interacted with Peter Navarro, he still makes me very nervous.
The biggest problem will be bureaucracy
There is a general understanding on the part of nearly everyone I talked to that the biggest problems are going to be in dealing with the entrenched bureaucracy.
It is highly likely that Congress will pass legislation that requires any department making a ruling that could cost over $100 million to get congressional approval for that rule.
There are literally thousands of presidential appointees that don’t have to be approved by the Senate
But the proper procedure is to wait until the cabinet-level officers and senior management are in place so that they can have input on those appointments. If you expect appointees to run a department or agency, you need to give them the people they want.
We’ll see a lot of legislation passed in the first six months
Congress has been passing literally hundreds of pieces of legislation, knowing full well they would be vetoed and never see the light of day. Not all of these will be brought back up, as the Republicans were counting on Obama vetoing them.
But I think we will see a great deal of legislation passed in the first six months to one year. These are bills that have already been through committee and have enough support to get action.
On Monday, some 538 people who are the initial members of the transition beachhead teams will show up in offices all over the country, but mostly in DC.
It is going to be quite some time before we begin to see much change and can begin to figure out what that change will actually look like.
I’m not going to offer my thoughts on the inaugural speeches and events, as my political leanings are really not the focus of Thoughts from the Frontline (subscribe here for free). But in the areas where politics and economics intersect—an intersection that seems to be expanding—we may have to revisit the political arena again.
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