What is President Donald Trump going to do?
That is a multi-trillion-dollar question. The man is notoriously hard to read, and he likes it that way. As a keen dealmaker, he favors "unpredictability," which is smart game theory.
Any administration, even a Trump administration, needs to focus on a handful of priorities that it pushes and tries to get through Congress in the first 100 days in office. But Trump has made many promises, some implausible, some contradicted by later promises, and almost all of them poorly fleshed out. What's going to be the main policy focus of the upcoming Trump administration? Here are some hopeful possibilities:
1. Enforce America's immigration laws. Implement a points-based system. The United States has for decades pursued a formidably hypocritical policy of open borders in practice and regulation. In my heart of hearts, I still believe that illegal immigrants who have been peacefully in the country for a long time and want to assimilate should be granted amnesty. But it's also the case that, as President Obama reminded the nation after Trump's election, the rule of law is a cardinal value in a democracy, and any democratic nation has the right to decide and enforce its own immigration laws. Too many of the American people — not just Trump voters, but Bernie Sanders voters and Democratic voters who stayed home — believe that their elites have failed them and don't control the country anymore. Actually showing that securing the border and enforcing immigration laws is feasible would go a long way towards restoring citizens' faith in government. This most definitely does not mean sending millions of people away. But stepping up enforcement just a bit, particularly on businesses, would be enough to push many more illegal immigrants to "self-deport."
In parallel, Trump should push for a legal immigration system the likes of which even restrictionists agree on, which is an Australia- or Canada-style points-based immigration system, one that still protects refugees after "extreme vetting." And what about the infamous wall? President Trump should start by suspending NAFTA. Then Mexico will come to the table.
2. Enact smart tax reforms. Trump's tax plan is a disaster. It's also anathema to everything that Trump has campaigned on. It represents the worst part of the typical Republican agenda, with its solicitousness toward the rich and business elites. It's frankly quite strange that Trump's official tax plan includes a tax cut so massive, particularly on the rich, that it makes even many committed supply-siders blanch.
Don't get me wrong. Tax cuts are awesome! But Trump should definitely keep higher income tax rates where they are. He should also punish coastal DINKs by capping the mortgage interest deduction or turn it into a flat credit. Trump should get rid of the state income tax deduction (which would push blue states to live within their means), raise the rate on short-term capital gains, get rid of the carried interest loophole (which favors private equity and hedge fund barons), and get a nice, big, fat child tax credit refundable against payroll taxes. Turning an expanded EITC into a wage subsidy program would also Make America Great Again by encouraging working-class employment.
3. Introduce pro-family policy. The smartest and best thing Trump did during his campaign was to come out forcefully for pro-family policy. Recall that his policy involved deductibility of childcare expenses from income taxes — a child tax credit will accomplish what that measure seeks to accomplish in a way that favors working-class families more — and mandatory paid maternity leave, paid for by the government. That last measure should be a non-negotiable point in the first bill relating to economic or social policy that Trump signs.
4. Focus on infrastructure. It's heartening that this is the only policy item that Trump mentioned in his acceptance speech. After a round of Obama stimulus spending that delivered a lot less than advertised, it's important to get this right. Infrastructure can provide a short-term boost to the economy, but more importantly, infrastructure is a key component in global competitiveness and attracting manufacturing jobs, a topic at the heart of the Trump agenda. I wrote previously that an infrastructure plan should focus on high-speed internet, nuclear power, and ambitious projects like the Hyperloop. I would add an additional point: Companies contracted to do infrastructure work should get bonuses if they hire long-term unemployed workers who have earned a qualification at the end of the contract. Those companies should also get a waiver from laws against hiring people with a prison record.
5. Rein in China. There's no need to start an outright trade war. But it is actually the case that China has been ripping us off. Although the situation has recently improved, China has eroded the West's industrial base by artificially deflating its currency. Chinese exporters get an incredible raft of explicit and implicit government subsidies that have no equivalent in their trading partners. Foreign investment in China is highly restricted. The outright theft of intellectual property by Western companies' Chinese "partners" is rampant and it is an open secret that this is something the Chinese government encourages. This is not "free trade." But it's rich material for negotiations and potential WTO actions, in the spirit of "win-win cooperation" that Chinese President Xi Jinping called for upon Trump's election. The Trump administration should actively explore former Intel CEO Andy Grove's proposal for a tax on offshored labor used to fund a bank that would support American companies, if only as a negotiating chip.
In the meantime, there is a very easy way for the American government to stimulate the American economy and make American exporters more competitive: monetary expansion. Trump shouldn't start a trade war, but he should definitely start a monetary war.
6. Help inner cities. Trump spent more of his campaign than recent Republican nominees talking about the plight of inner cities, if in that Trumpian way of his. This is an opportunity to do some good and unveil an agenda for those communities populated by the forgotten Americans that now have Trump as their champion, even if they overwhelmingly voted against him. These communities need, first of all, the rule of law. This means no abusive cops, but also no crime. Even though progressive activists keep trying to retcon tough-on-crime policies as the Klan in all-but name, historically, many of these measures, including broken windows policies, were supported by black Americans and welcomed by the black community, which, in many cases, bears the brunt of inner-city crime. Intelligent reforms to policing should be paired with more cops on the beat.
Making America Great Again also obviously involves economic renewal, which is why Trump should dust off an old Republican idea: designating economically depressed areas as special economic zones, with extremely low taxes, particularly on work, and with a light-touch regulation regime, especially with regard to rules on hiring former felons and, most of all, occupational licensing. It's almost certain that Trump will get absolutely no political credit from his ideological enemies for a program like this. But in some ways, that's why it should be done.