The Bear’s Lair: What if Trump had won?

The United States and the world as a whole have fallen into a difficult period in the last year, with war in Ukraine, rising inflation and almost certainly a coming recession as interest rates soar. Many blame President Joe Biden for this, but I thought it worth carrying out a thought experiment: what if Donald Trump had won the 2020 election that he narrowly lost? To what extent would today’s outcomes be different?

We can immediately assert that today’s troubling levels of inflation are not the result of President Biden winning in 2020. Trump was equally in favor of ultra-low interest rates and sloppy monetary policy, because of his background in real estate. Today’s inflation results from the Fed’s excessively stimulative policy from early 2020 to the end of 2021, with zero interest rates and massive bond purchases.

A better President would have appointed better Fed governors, but with the exception of the admirable Judy Shelton (who had to pretend to Trump a “funny-money” proclivity she in reality lacked) neither potential President qualified in this area. Indeed, while some 20th century Presidents grudgingly acquiesced in a moderately sound Fed policy, the last President to campaign on a monetary policy that truly made sense was William McKinley in 1896.

Federal spending and excessive budget deficits have also contributed to inflation, albeit less directly than monetary policy. Here again, there is little substantive difference between Trump and Biden; both are inordinately fond of spending other people’s money, albeit on different things. While Biden’s “Build Back Better” legislation has failed to pass Congress, his initial $1.9 trillion stimulus passed with little difficulty and his infrastructure bill was at least to some extent bipartisan.

In a Trump second term, assuming roughly the same balance of forces in Congress, the infrastructure bill would equally have been bipartisan, while at least the $1,400 additional payment to individuals of the first Biden stimulus would have been supported by the President. Whereas with Biden, the Congressional Republican party is primed to resist spending, with Trump as President there might well have been a bipartisan consensus in favor of several large-ticket spending items.

Thus, in domestic monetary and fiscal policy there would have been little difference between Joe Biden’s presidency and a theoretical Trump second term. However, there would have been a major difference in regulatory policy. Trump, whatever his defects in the monetary and fiscal sphere, was a true proponent of deregulation, far more so than either Presidential member of the Bush family. The Keystone pipeline would by now have been completed, reducing the upward pressure on oil and gas prices, far more new oil and gas wells would be being drilled, doing likewise, and at least in the energy area, price increases would have been less astronomical than under Biden. It is also likely that we would have avoided Biden’s absurd decision to mandate E15 ethanol for automobiles, an environmentally nonsensical decision that endangers the U.S. food supply at a time of likely global shortage.

In summary, under a second Trump term, while interest rates would still be rising rapidly to defend against inflation (over a furious squawking noise from the White House) the likely recession those rate rises will cause would be both shorter and shallower than under Biden, with less increase in unemployment and reduction in GDP. That however is a prediction for the near future rather than a comparison in the present.

The other major difference between Biden’s Presidency and a second Trump term would be in foreign policy. Biden has shown himself both conventional and feeble in foreign policy, whereas it was Trump’s greatest strength – no doubt the decades of dealing with the low-lifes that infest New York real estate gave him good preparation for those that infest the world scene. In particular, Vladimir Putin’s strong hint in January that he needed long-term assurances that Ukraine would not join NATO would very likely have been met with a far more helpful response from Trump than the blank incomprehension shown by Biden.

Trump was no great fan of NATO; he was also more aware than any other American statesman just how unilateralist and over-aggressive U.S. foreign policy has been since the attack on Serbia over Kosovo in 1999. It is easy to dismiss the stale rhetoric about NATO being an entirely defensive alliance, when it has shown unwarranted aggression on several occasions, most notably in Libya in 2012. That intervention brought catastrophe to Libya itself, yet it is one that neocons such as John Bolton still remain proud of (his wanton destruction of Trump’s attempt to build a more normal relationship with the paranoid Kim Jong-un of North Korea being the most damaging demonstration of this.) With Trump understanding Putin’s point of view and being less unnecessarily contemptuous than Biden of Putin himself, the latter’s catastrophic invasion of Ukraine might have been avoided – much to the benefit of the world.

Ukrainians most of all should thus regret the absence of President Trump from the foreign policy scene. He had no regard for them, and disliked their leader, yet his unconventional foreign policy approach might well have left them far better off than they are today.

Overall, the balance is only moderately tilted towards wishing Trump had won in 2020. Indeed, when I say Trump “narrowly lost” the 2020 election, I do not entirely reject the possibility that the election was stolen, although I am sure that at this stage we will never have enough evidence to prove that it was. While the state-by-state details of the result appear plausible, the overall popular vote totals do not, suggesting to my merchant banker instincts that something very funny went on in the blue bastions of California, New York City and Illinois.

Moreover, with Zuckerberg money undermining the integrity of local election procedures and endless far-left riots, the election was undoubtedly “rigged” and we can doubtless expect further such rigging in future elections. It must also be remembered that in 1972, a landslide election victory for President Nixon was nullified by the left by means that appear increasingly questionable. That is something we will have to live with in the future, consoling ourselves with the thought that if Ukraine is considered a full democracy, so by the same standards is the United States.

Nonetheless, whereas poorly-handled inflation and a recession may doom Democrat chances in 2024, the only slightly better scenario likely under a re-elected President Trump might well have doomed Republican chances in 2024, electing a Democrat perhaps with a solid majority and a better life expectancy than Biden, to perpetuate wokery and socialism far into the future.

Herbert Hoover, Republican President unlucky enough to be caught by the Great Depression in 1929-32 (and foolish enough to make it worse) was doing a great deal to elect Democrats election after election until President Reagan’s victory in 1980. We can thus hope that Biden will do the same for Republicans until 2072, the equivalent distance in the future. All we need is an equivalent of FDR to win in 2024, to capitalize skillfully on Biden’s mistakes and cement Republicans in the public mind as the party of economic and political recovery.

Regrettably, I don’t think Donald Trump is the man for that job, if only because of his policy errors in the monetary and fiscal areas. In any case, with Trump starting a second term in 2025, Republicans would have a very tricky transition to make in 2028. They will therefore in 2024 have to find an alternative to play FDR.

(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)