US President Donald Trump continues to have a credibility chasm with the American media. Even when he does something right, like calling the victims of the Florida massacre to the White House and listening to them (something that Obama never did ), everyone only concentrates on his idea of arming teachers. Trump knows that a total ban on guns requires a constitutional amendment—removing the Second Amendment. The chances of that succeeding are less than zero. What he is proposing are tougher checks and bans on certain weapons. He may yet become the first president to achieve some degree of gun control.
Perhaps, the most striking part of the Trump’s presidential campaign was his bold infrastructure plan. Unlike other candidates, who stuck to the usual short-term issues, Trump had thought about the long-run crisis of America’s infrastructure. No serious investment had taken place since the 1950s, when President Eisenhower laid the foundations of America’s stunning system of motorways and turnpikes and airports. Eisenhower managed to invest 5% of GDP, through the Federal budget during his administration, and delivered balanced budgets more than once.
Trump’s championing of the infrastructure was bold and much needed. He was unorthodox in his open advocacy of incurring extra public debt to repair the infrastructure. This was sound economics, which allows or even advocates that there be public borrowing to finance investment but not for current expenditure. It was normal when Eisenhower did it, but by 2016, economists had become much more fiscally conservative. Trump was an outlier. It has taken some time before Trump has been able to address this issue. Upon assuming office, his priorities were repealing the Obamacare and tax cut before he could get to his infrastructure plan. Also, separation of powers means that the president can merely propose a spending programme. It is Congress that has to implement such parts of the president’s message as it likes by passing appropriations.
Tax cut has been passed and that would stand as a significant triumph for the President. But, one effect of the success is that the trajectory of public debt has already raised anxieties in the Congress, especially among the conservative Republicans. The tax cut is, however, and, indeed will forever, remain popular with the Republicans. The debt trajectory has forced Trump to send a message to the Congress, which is quite nuanced. It is based on the realisation that the federal government has limited ownership of infrastructure facilities; it is the individual states and municipalities, which are the primary owners. The Trump plan, thus, offers $200 billion as ‘pump priming’ to incentivise states and municipalities to raise the additional funds that would all add up to a $1.5-trillion spending programme.
It is not clear, at the moment, whether the Congress would give the president what he wants. In his message of February 12, 2018, Trump has proposed postponing the date of balancing the budget from 2029 to 2039. Thus, the fiscal hawks among the Republicans,( including the speaker of the House, Paul Ryan) will worry about this. This is all a bit of grandstanding. The American Federal budget has been out of negative territory only three years since 1960. Eisenhower had two years of small budget surplus. After that, apart from a small surplus in 1969, the next time the budget surplus occurred, it was in Clinton’s two final years. So a 40-year slog to balance the budget is quite normal. Even so, debt remains a powerful totem pole. The Congress has to extend the debt limit periodically to keep the government able to borrow, so it can function.
The crucial decision will be made by the Congress. In 2018, there is a slim majority in both houses of the Congress for the Republican party. There have already been two episodes of the Congress having to prevent or reverse the shutdown of the government due to a failure to extend the debt ceiling. The Congress may not be in a mood to struggle to get majority behind the president’s proposal in 2018. The issue is whether the results of the midterm elections in 2018 will renew the Republican majority. American political conventional wisdom tells us that the party, which has the White House as well as majority in the Congress, tends to lose seats in the midterm election. But, this conventional wisdom may not work , as it did not in the presidential elections of 2016. If the Republicans return with a majority, they are most likely to take up these proposals, as it would have been proved by then that Trump is a winning president. So, look to 2019 for implementation of the ambitious infrastructure proposals.
Then, of course, the final outcome will depend on how the states and municipalities react. There is a lot of money in the sovereign wealth funds and pension funds, that would be attracted by such a long-run proposition. As much as $340 billion has been mentioned. Trump may yet end up as the saviour of the American infrastructure.