What Would Donald Trump Do in a Second Term?

by Greg Valliere, AGF Management Ltd.

YESTERDAY WE LOOKED AT THE FIRST MONTH in a Biden presidency; this morning we’ll review likely policies in a second Donald Trump term.

SHORT ON DETAILS: Trump hasn’t been very specific. The GOP on Aug. 23 released a statement on second term priorities, with very few details. And in his raucous rallies, Trump doesn’t dwell on a second term agenda. But it seems likely that the following issues would be on the front burner:

Finish building the wall: Mexico won’t pay for it, but the Pentagon will. Trump will find enough money in the defense budget to achieve a signature victory — the Trump Wall.

More tax cuts: Many of Trump’s tax cuts that were enacted nearly three years ago are set to expire by the middle of this decade. A permanent extension will be a major Trump priority in a second term, and he has hinted that more tax cuts are forthcoming. The liberal House would be an obstacle.

A pandemic stimulus bill: If Trump wins re-election, he will push Steve Mnuchin to finish a deal with Nancy Pelosi, but she probably won’t get the $2 trillion that was on the table earlier this month.

A focus on infrastructure: We hear this every year — a massive infrastructure bill is imminent, an issue both parties can agree on. There could be progress in 2021, with a bill perhaps costing $1 trillion, and it will have a decent chance of enactment. How to pay for it? Higher gasoline taxes are unlikely. An infrastructure bill probably wouldn’t be paid for, like so much else.

More regulatory relief: Trump already is pushing to ease emissions standards, worker protections and financial sector rules, and that process would continue in a second term.

Pressure for a vaccine: Unencumbered in a second term by a need to moderate his rhetoric, Trump will put relentless pressure on the Food and Drug Administration to approve vaccines by late winter.

Pressure for a health bill: For months, Trump has promised to unveil a health care bill that could replace Obamacare. We think he will introduce a measure that will bog down in the House. Both parties agree on two issues: keeping the “pre-existing conditions” provision and curbing drug prices.

More conservative judges: This clearly is a major feature of a Trump legacy (and it’s the dominant narrative in a Mitch McConnell legacy). If Trump wins and the GOP hangs on to the Senate, another huge wave of young conservatives will win lifetime appointments to the federal courts.

No letting up on China: Trump and Xi Jinping have burned their bridges; a thaw in relations is unlikely. Even Democrats will endorse Trump legislation to reward U.S. companies that bring back jobs from China. Prospects are dim for a Phase 2 of trade talks.

Tariffs still a tool: Trump still believes foreign powers are taking advantage of the U.S., so more tariffs will be a weapon. Relations with Western Europe could stay rocky as Angela Merkel departs in October and Emmanuel Macron becomes the most powerful leader of the EU. A trade deal with Boris Johnson is possible, however.

COULD TRUMP AND DEMOCRATS AGREE ON ANYTHING? Yes. The one issue that seemingly unites them is an obliviousness to budget deficits. Trump is prepared to spend much more on defense, infrastructure, tax cuts, etc. The Democrats don’t care about deficits. Total U.S. debt is on a path to exceed $30 trillion by the middle of this decade, and no one seems to care.
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REMARKABLY STABLE POLLS: There hasn’t been much movement in this last week of the campaign; Biden leads by about 7% nationally, with steady but modest leads in Wisconsin, Michigan and — most significantly — Pennsylvania. Quite clearly, voters have made up their minds; only about 5 or 6 percent are still undecided.

TRUMP GOT A LAST-MINUTE BOOST from yesterday’s third quarter GDP rise, showing a 33.1% increase after the dismal second quarter. If Trump focuses exclusively on the economy and Biden’s high-tax agenda, the race could tighten over the weekend — but will Trump stay on message?

WE STILL EXPECT BIDEN TO COMFORTABLY WIN the popular vote, with a modest Electoral College victory. He seems to be on a path to win at least 290 to 300 electoral votes; 270 are needed, so this is still a close call. Democrats may take the Senate in a 50-50 tie or by 51-49, but that may not be clear until recounts are completed and Georgia has runoff elections on Jan. 5.

RESULTS ALONG THOSE LINES WOULDN’T BE A TIDAL WAVE: The Democrats aren’t headed for a blowout; if they control the Senate by a narrow margin, a handful of the party’s moderates could block radical changes to the Supreme Court or filibuster rules. We’re still thinking this will be a “light blue wave.”

The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

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This post was first published at the AGF Perspectives Blog.