Monday, 06 March 2017 14:25

First 45 days of Presidency: Efficiency Fact Check Shows Us What to Expect Regarding Policy Featured

The US stock markets, and the banking sector in particular, have been on a tear since Trump's election. Here's a factual look to determine if all of the capital appreciated hoopla is really worth it.Trump Obama and the markets.png

When I state that Trump has been relatively inefficient in his communication and pursuit of policy, tend to get political and partisan comments in return. Let’s look at Trump’s accomplishments from an empirical perspective, and leave partisan politics to the wayside. In this fashion, we can more accurately gauge the probability of the Trump administration timely accomplishing the tax and stimulus proposals that have (allegedly) driven up (primarily band and financial services) stocks so far, so fast. If it becomes apparent that Trump will not be able to follow through timely, or an existential shock to the system occurs, not only will those rapid gains be rolled back, but a sharper correction or worse is in store.

At the very least, expect to see a changing rate environment.

Keep in mind that both presidents came into office with majority control of the full legislature which makes things easier to get done (relatively).

Obama Trump
Legislation “Lite”– For Trump, lighter legislation was mostly reversals of the Obama Administration  
Obama won approval of a congressional budget resolution that put Congress on record as dedicated to dealing with major health care reform legislation in 2009 Block a coal-waste targeting Stream Protection Rule
  Requirement for oil companies to disclose payments to foreign governments
  A bill awaits the President’s signature and would repeal a rule that bars individuals deemed mentally incompetent to manage their own Social Security payments from purchasing firearms.
Major Legislation requiring material fiscal commitment & bipartisan support
President Obama’s most significant legislative accomplishment in the first month was the signing of the American Recovery and Reinvestment Act. This was close to a trillion dollars stimulus package aimed at arresting and reversing the economic crisis of the Great Recession. It can be argued that this was less a result of Obama’s political statesmanship and more the result of a bipartisan desire to combat the effects of the market crash and economic malaise. While this is likely true, Trump has also ran on the campaign rhetoric that America was in very poor economic shape. While prudent speculators should take this as mere campaign rhetoric, frequent and extreme off-the-cuff comments such as this detracts from general credibility and invokes uncertainty. Infrastructure overhaul appears (from media reports) to be encountering partisan politics, being pushed to 2018 to pressure vulnerable Democrats_
The Children's Health Insurance Reauthorization Act was another early accomplishment scored by Obama that expanded a federally funded medical insurance program to cover roughly four million additional children and pregnant mothers. ACA (Obamacare) repeal and replace has not shown any material progress – from a public facing perspective, at least. It is likely that this is too massive and complex a piece of legislation to repeal and replace without considerable collateral damage, thus chance are it will be “fixed” instead. While this is, by far, the more logical and practical move – it will result in a distinct failure to follow through on one of the primary Trump campaign promises.
Obama signed the Lilly Ledbetter Fair Pay Act, thus extending the statute of limitations for presenting equal-pay lawsuits – primarily for women. Plans to materially and dramatically reform the tax code have yet to emerge. There is not a clear consensus on border taxes.
Executive Orders: From Trump’s perspective, pretty much a follow through of what Obama and Bush have implemented
Obama implemented a new set of ethics guidelines designed to significantly curtail the influence of lobbyists on the executive branch. This apparently broke with actions from the Bush Administration. Trump issued and executive memo whose “ethics pledge” and “lobbying ban” was essentially drafter from Obama’s orders signed in his early days.
Obama supported the UN declaration on sexual orientation and gender identity Trump reinstated the Mexico City Policy, blocking federal funds from NGOs that provide access to abortion abroad and nationally. This is not unique policy and is apparently standard operating procedure in the GOP as every republican president in recent history has done so after taking over from a Democrat – including Reagan and both Presidents’ Bush.
Followed through on Bush's Iraq withdrawal of U.S. troops (King: S)econd 100 days will be bigger test for Obama, CNN, John King) Trump implemented Federal hiring freezes similar to that of Presidents Reagan and Carter – bipartisan.
lifting the 7½-year ban on federal funding for embryonic stem cell research.[8] Trump’s most notorious executive order briefly halted travel from seven Muslim-majority countries. His acting DOJ head (hold over from Obama admin) advised against the order, and when she refused to defend it in court, he fired her. This ended up as a fiasco, as no less than three federal judges stayed the order and hundreds of thousands if not millions protested around the country. Even companies associated with the order (ie. Uber) lost business. Trump is expected to release a new, revamped order this week.
President Obama’s early executive actions sought to mitigate what his administration saw as the overreaches of the Bush anti-terror strategy. One banned the use of torture in interrogation, insisting that “in all circumstances [prisoners] be treated humanely and shall not be subjected to violence.” Another order called for the closure of the Guantanamo Bay detention facility within a year, an interesting case study in the limitations of a president to achieve policy outcomes by decree. In a departure from what some might have expected, President Obama also ramped up the troop commitment in Afghanistan by 17,000 soldiers in the early days of his presidency. President Obama also repealed the previously mentioned Mexico City Policy. Trump’s orders to limit migration across the southern border, if followed, could be massive in fiscal scale and policy impact. Estimates of the cost of a U.S.-Mexico border wall now exceed $20 billion, and additional measures detailed in recent DHS memos (1, 2), including a major increase in immigration enforcement personnel, may cost billions more. While there is a great deal of executive discretion that contributes to the scope and speed of deportation efforts, the text of DHS memos broadly expands the “prioritized deportation” categories to include individuals found guilty of non-violent crimes and misdemeanors.
Obama ordered the closure of the Guantanamo Bay detention camp Trump has signed additional EOs, although several of them have not yet had a material effect, ie. Moving HSBCs from under the purview of the Dept. of Ed. to directly under the supervision of the White House.
President Obama lifted some travel and money restrictions to the island.[7]  
Obama signed an order requiring the Army Field Manual to be used as guide for terror interrogations, banning torture and other illegal coercive techniques, such as waterboarding.[109]  
Obama signed two Presidential Memoranda concerning energy independence, ordering the Department of Transportation to establish higher fuel efficiency standards before 2011 models are released and allowing states to raise their emissions standards above the national standard.[111]  

Presidential Approval Rating

65% <40% - It should be noted that this is the lowest approval rating of any early term president since the ratings have been tabulated.
Trump Obama and the markets.png
Cabinet Appointees & Personnel
By the end of January 2009, nine out of fifteen of President Obama’s cabinet appointments had been approved by the Senate.

By the end of January 2017, only three out of fifteen of President Trump’s cabinet appointments had been approved. Trump also had the resignation of National Security Advisor Gen. Michael Flynn and the recusal of his newly minted head of the DOJ for matters related to the Russian interference probes & inquiry.

Trump has also fired his head of the DOJ, and is currently facing a direct rebuke by his head of the FBI over allegations that the Obama administration wiretapped Trumps private residence.


In Conclusion

Maintaining an apolitical stance and without opining on actual policy itself – just measuring the effective implementation of policy - It is quite clear from an empirical perspective that Obama has accomplished significantly more in the short period of time following the inauguration than Donald Trump has. To be fair, a portion of this can be explained away by the contextual atmosphere of the times. There was a material political “willingness” to deal with the fallout of the Great Recession. By the same token, those Fiscal Stimulus measures that passed were done so without any GOP support at all. The stimulus package passed in the House of Representatives on January 28 without a single Republican vote. The Republicans developed opposition without developing consensus on an alternative plan.[126]

Another, more unassailable, conclusion is that the priorities of this administration (or at least the energies expended) are more focused on immigration policy than economic, tax, trade and education policy. Now, the constitutional separation of powers prevents the POTUS from acting unilaterally, but nearly all immigration-related policy pledges are in the process of enactment, while there is not material progress shown on fiscal stimulus, tax or economic policy. This should raise a red flag to all of those who feel that the recent stock market runup has any sort of fundamental “legs”.

Even if the POTUS were to switch course and start implementing said policy immediately, the time to actual enactment will be several (if not many) fiscal quarters away, leaving extremely high and unsupported valuation multiples in it’s wake.

Time will further elucidate what this administration’s true policy goals are, but for now it definitely does not seem to be those that support either the campaign rhetoric nor the stock market run-up.

Reasons for Trump’s relative underperformance?

·       Trump still does not have a full cabinet, likely due to his selecting very divisive cabinet nominees, inciting unnecessary agita and debate. In addition, many nominees apparently didn’t have proper paperwork in place (relative to Obama’s nominees who had papers in order), at least according to the opposing party.

·       Trump has, in my opinion, unnecessarily and to his detriment, started a “war” with the press and even his own intelligence staff and officials. By challenging a machine with significant and aggressive investigative abilities, a large captive audience, and (at least now) an inherent incentive to “catch” the administration in wrongdoing, Trump has (at best) created a very significant distraction that saps the administration’s time, attention and resources - and at worse, forms the machinations of his potential downfall/impeachment. At the end of the day, there was very little reward to be received in declaring a “war” on the press and intelligence agencies (his own, who work directly for him) considering the risks taken.

·       Trump is Inexperienced at crafting and implementing policy (literally had zero experience upon inauguration) and it shows

·       Either Trump is easily distracted by the media, or he gives the impression of such.

This is has been an attempt to gauge, from a factual and non-partisan perspective, the probability of Trump actually pushing through the policy that has presumably driven share prices so high, so quickly. The short answer from what we’ve seen so far… Nahhh!


See also:

  1. Is Time to Short America? Macro Risks + Unpredictable Administration / Geopolitical Uncertainty = ?
  2. Is It Time to Short America?, Part 2: Crony Capitalism Leads to Socioeconomic Stratification - the Rich Get Richer!
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