The hope is palpable. There is so much that this Republican Congress and White House could do together to repair much of the damage done over the last eight years. They could also deliver on much needed reforms. But the truth is that there is also a lot that can go wrong on the small-government policy front.
Let’s start with the hopes:
Together, Trump and Congress could repeal and replace Obamacare. I mentioned the use of the reconciliation process on Monday as a logical pathway to achieving this incredible goal. I say “incredible” because we don’t usually manage to get rid of bad policies that fast — no matter how obvious it is to most people that this is a bad policy.
They have an opportunity to replace Obamacare with a plan that is much closer to a real market solution. As I noted earlier, I hope they will use health-savings accounts rather than a tax credits, which have a mandate problem and are better described as “Obamacare Light.”
They also have an opportunity to implement fundamental tax reform at the corporate and individual levels. There is a debate right now between the president-elect’s adviser, Steve Moore, and some Senate Republicans about whether this is better achieved through one bill or two.
They have a real opportunity to block grant Medicaid. Vice President-elect Mike Pence will likely play a big role on that front.
They have a real shot at growth-enhancing deregulation. The Wall Street Journal has a great piece on all the ways how the president-elect can do that if he wants to when he gets into office.
Here are the fears:
The president will oversee major infrastructure spending — and in the worst possible way. Don’t get me wrong, there are growth-enhancing infrastructure-spending policies, such as letting the states be the main players and financiers in the decisions, investing in maintenance rather than big ego-boosting public-works projects, or getting rid of regulations that keep private companies from investing in infrastructure projects. Instead, though, I am afraid that Trump will have the federal government spend a lot of money on the wrong things, that he will create many distortions in the capital market in the name of encouraging private investment through tax credits and an infrastructure bank. These were bad ideas when President Obama or Hillary Clinton pitched them — and they are still bad ideas now. Not all infrastructure spending leads to growth.
In the name of making American great again, there is a real chance that President Trump will double down on the misleading idea that the federal government should subsidize exports and penalize imports. I can see him becoming a believer — like Hillary Clinton and President Obama became — in the Export-Import Bank, even though it would hurt the constituents who have helped elect him.
Then, we have all the policies that President-elect Trump says he believes in that are straight out of the Democratic playbook. On top of infrastructure spending, we have “child tax credits, paid maternity leave and dismantling trade agreements,” as this New York Times article reminds us.
I have more policy fears, but I’ll spare you. The main question is: How will a Republican Congress be able to reason with President Trump or, if need be, stop him. Or will the Republican Congress simply go with the flow and allow these policies to be implemented? As we have learned in the past, the government doesn’t necessarily get smaller under unified Republican rule.