26 Dec 2018

Winter in Washington. The events of the past six weeks have pushed Trump back to his base

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There has not been much festive cheer in Washington, D.C. this Christmas. There has been a partial shutdown of the Federal Government once again (the third in 2018), this time triggered by a dispute over whether a short-term funding package about to be enacted by Congress should or should not include additional provision for ‘border security’, a.k.a. ‘the wall’.

The President insists that it must include some version of such a measure. The (outgoing) majority in the House of Representatives is in lockstep with him. The Senate, on the other hand, which ordinarily requires a super-majority of 60 votes in favour of such a change, is nowhere near that figure. Democrats there insist that the White House will not secure a dollar towards its ambitions (even if it is redefined as a metal fence and not a wall as such) and have every incentive to resist making concessions before 3 January when the new majority in the House is sworn in and their hand is even stronger. Prolonged stalemate seems likely.

Some of this is simply what constitutes Business As Usual in the American capital city. The hardening of Donald Trump’s stance on this dispute is, however, part of a pattern which also includes suddenly announcing that all US troops would be withdrawn from Syria (prompting a spectacular resignation from his deeply respected Defence Secretary) and denouncing the Chairman of the Federal Reserve Board (again one of his own appointments) for increasing interest rates. In each instance, the Oval Office is attempting to reconnect itself with its own base rather than work with other actors. This is not a coincidence. It will continue in, through and beyond 2019. It has a brutal political logic to it.

It reflects the fact that the past six weeks have been unrelentingly bad for the Trump Administration.

In retrospect, the mid-term election results have been worse for the Republicans than it seemed

On the morning after the November mid-term elections it appeared as if the overall results were something close to a draw between the President and his opponents. The Democrats had retaken the House of Representatives, admittedly, but with a net advance, or so it seemed, of 30 seats and not the 50 or more that had been anticipated as a full-blown ‘wave’ victory a few months earlier. Meanwhile, the instant assessment of the Senate was that the Republicans had outperformed all expectations and not only held the chamber but looked as if they were to add four seats overall.

As it turned out, this was ‘fake news’. Almost all of the very close and very late election outcomes in the House went with the Democrats. Their overall win was a net 40 seats, not a wave admittedly but a pretty big splash all the same. In the Senate, Republican leads in Arizona and Montana disappeared and the final outcome was a modest two-seat advantage. This was much closer to prior assessments.

The political significance of this is considerable. A 30-seat Democrat gain in the House would have meant that if Mr Trump were re-elected in 2020 his party could be reasonably confident of flipping back the House of Representatives at the same time. The actual 40-seat Democratic surge means that a re-elected President would need an additional 17 seats in the House of Representative to take an extremely slender majority in that chamber.

Large changes in the House in re-election years are rare. That 17 seat margin would be bigger than the 16 House seats that Ronald Reagan won in 1984, when being re-elected in a massive landslide, or the 15 seats (12 Democrats plus three sympathetic independents) that Franklin Roosevelt obtained in his phenomenal triumph in 1936, or the 12 seats snatched by Richard Nixon in 1972, when again being returned by an absolutely vast margin.

All of which means that the working assumption in Washington today is that even if Mr Trump were to seize a second term he would probably be functioning with a Democratic House and so have very limited influence over domestic policy. This means that if there is any real chance of the President making progress over his wall (and there is not much), he has to have that fight as of today.

The economy and the stock market are looking more fragile than they did until very recently

Although Mr Trump’s approval ratings are underwhelming at this stage of his tenure, the reason that they are in the early 40%s and not the 30%s or 20%s is almost entirely down to the US economy. For most of 2017 - and especially 2018 - it has performed well and the decline in the unemployment rate has also been accompanied by rising real wages, particularly among the white working class. Added to this, the stock market has been on an astonishing bull run with a spectacular impact on the wealth of those who hold stocks. The President has hardly been shy in taking credit for this outcome. It has emboldened him to take a tough stance of trade policy believing that he was acting from strength.

Sentiment has shifted dramatically in a relatively short period of time. The risk of the Trump Boom turning in to the Trump Bust has become a matter of open speculation. The Treasury Secretary has felt obliged to reassure the markets about the health of US financial institutions (thus leading to less confidence on this matter). The Dow Jones has retreated from its October high. The erratic nature of the US stance towards China has spooked a number of international investors. These might prove to be temporary concerns, which are corrected by early 2019.

Yet anyone attempting to formulate any kind of re-election strategy in the White House and wider Republican Party for 2020 would rightly be unnerved by the notion that the economy might be anything other than an unalloyed asset for this President. Hence the need to reach out to his base or core vote with added emphasis and to start blaming others in advance in case the economy turns, unemployment increases, or wages retreat.

The combination of the above two factors plus the Mueller investigation are potentially fatal

As if a more difficult set of circumstances in Congress and an uncertain economy were not a bad enough set of events, there is the known unknown of the Mueller investigation into alleged collusion between Russia and the Trump campaign in 2016.

The Special Counsel has moved carefully and with considerable efficiency over the past few weeks. He has obtained guilty pleas from key figures close to the Trump 2016 inner circle as well as the President’s personal lawyer. His efforts have thrown up secondary material such as whether ‘hush money’ transferred to two women may be seen as illegal campaign contributions and the wider activities of Mr Trump’s commercial empire.

The President would dearly love somehow to shut this investigation down or find a means of limiting its scope but it is extremely improbable that he could do so without sparking a serious drive to impeach him. At an absolute minimum, it seems that the conclusion of the Mueller investigation will lead to charges being levelled at Donald Trump Jr. At the maximum, the finger would be pointed firmly at his father.

All of the above makes the President’s actions of late explicable. He is returning to the basic themes of his original election campaign, namely nativism, isolationism and protectionism. He is taking every chance to replace what was a comparatively balanced team of personal supporters and Washington professionals with a much more loyal cohort amongst his White House staff and in his Cabinet.

This has involved a staggering level of attrition. Of the top four appointees that he made in January 2017 (Secretary of State, Secretary of Treasury, Secretary of Defence and Attorney General), only one of them (Treasury Secretary Steve Mnuchin) is set still to be in place two years later. The White House itself has seen at least as much turnover.

There is no evidence to suggest that this frenzied order of hire-fire-retire will end any time soon. It renders the partisan atmosphere in the capital more toxic. The first week of 2018 saw the fourth coldest week ever recorded in the history of Washington, D.C. Politically, if not in terms of the thermometer, that record will almost certainly be broken in 2019.

Tim Hames,
Director General, BVCA


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