Donald Trump’s Resounding Victory
Donald Trump won a decisive victory for a second term, prevailing in both the electoral college and the national popular vote.
Donald Trump won a decisive victory in his bid for a second term, securing not only a comfortable majority in the electoral college but a likely majority in the national popular vote as well.
President Biden won in 2020 on a platform of political moderation and a pledge to reunify the pandemic scarred country after the turmoil of Mr. Trump’s first term. However, rather than chart a moderate course, the left wing of the Democratic Party took immediate command resulting in unprecedented deficit spending which fueled ruinous inflation. Even as the stock market reached new highs this year, putting the top deciles of Americans in an enviable position, far more Americans of modest means have suffered terribly, and few were fooled by increases in nominal income which failed to match the skyrocketing cost of living.
The American people also did not take kindly to being constantly lied to by the Biden Administration and the mainstream media regarding the President’s cognitive decline. Tens of millions of Americans have witnessed cognitive decline in their own families and long suspected that President Biden was losing a step mentally. The Presidential Debate in June made this reality impossible to ignore and it soon became clear that the mainstream media was complicit in trying to gaslight the American people. After several agonizing weeks, President Biden was forced out of the race and Democratic Party bosses simply installed Vice President Harris as the nominee without a single Democratic primary voter having a say in the matter.
Vice President Harris was complicit in the coverup of President Biden’s condition and failed to do anything during her campaign to differentiate herself from the policies of the administration. She ran away from her prior unpopular positions, avoided unscripted events, and made the baffling choice of declining interviews on immensely popular podcasts such as Joe Rogan’s show. Meanwhile, Donald Trump continued to hold unscripted rallies and sat for countless interviews. Granted, his unscripted moments often created controversy and were not free of cringeworthy moments, but at least he seemed real and authentic while Vice President Harris seemed stage managed and fake.
Immigration and crime took center stage for many voters who felt that our country has become increasingly lawless since the pandemic. The usual accusations from the left of racial and ethnic animus on the part of those who simply wish to preserve law and order did not work. Neither did the outlandish accusations of fascism or comparisons of Donald Trump to Adolf Hitler, a tactic that is profoundly insulting to many voters who have ancestors who were victims of the Nazis. Insisting on a “America First” attitude on matters of immigration and foreign policy is not automatically “fascism” and is mostly common sense. Americans rightly insist on having a say on who enters this country, and voters are tired of billions of dollars of taxpayer money funding endless wars abroad where American interests are not clearly defined and where miscalculations could lead to a civilization ending third world war.
Donald Trump has many real character flaws and he has done much to alienate tens of millions of voters since he emerged on the political scene a decade ago. He is prone to bloviation, exaggeration, and obviously tells lies of his own on a frequent basis. Many of his policy prescriptions are made without any sort of analysis, and this is of particular concern when it comes to tax policy. For example, Mr. Trump came up with idea of making tips tax exempt while he was interacting with tipped workers in Nevada. His claims to be able to dramatically cut the budget deficit or even pay down the national debt have no credibility absent the presentation of concrete plans. The numbers simply don’t add up at this stage.
It is worth considering the likely impact of Donald Trump’s victory on tax policy over the next several years. As of mid-day on Wednesday, November 6, it appears that the Republicans are likely to control both houses of Congress. This means that Mr. Trump will be in a position to extend his 2017 tax cuts beyond their scheduled expiration next year. However, he has indicated that he wishes to cut taxes even further and some of the measures meant to curb revenue losses, such as the limitations on the deduction of state and local income taxes (SALT) might be dropped.
It is likely that the 21% corporate tax rate will remain the same at the very least, since it is not one of the taxes set for expiration and Mr. Trump has floated a possible cut to 15%. This could be one of the reasons for the strong rally in the stock market and could particularly benefit companies, such as Berkshire Hathaway, with large deferred tax liabilities which would immediately be reduced if the corporate tax rate is cut.
Bond yields jumped on news of Mr. Trump’s victory, with the ten year treasury yield rising fifteen basis points to 4.44% as of mid-day on Wednesday, November 6. This is a sign that the bond market anticipates higher fiscal deficits in a second Trump term. Higher inflation could also result from deficit spending monetized by the Federal Reserve and as a result of higher tariffs if such costs are passed on to consumers. Mr. Trump will have to thread the needle carefully on fiscal policy to avoid stoking inflation, and it will be interesting to how his posture toward the Federal Reserve develops over time.
I applaud Mr. Trump’s instinct to cut taxes, but I also favor major cuts to Federal government spending programs, starting with repealing all of the massive expansions of spending that took place during President Biden’s term. We should again take seriously the notion of subsidiarity, allowing the people of each state to tailor the size and scope of their respective governments based on their own priorities, as the tenth amendment envisioned. I fear that Mr. Trump will be aggressive on tax cuts while giving in to the many lobbies for government spending. The net result could very well be accelerating inflation.
It is usually a mistake to make major changes to investment policy based on the results of an election, and this time is no exception. It does seem likely that higher budget deficits, inflation, and interest rates are on the horizon, but anyone who thinks that they can capitalize on anticipated changes in interest rates is likely to end up in tears eventually. Obviously, the reaction of financial markets on the day after an election is not a meaningful indicator of the future.
There is a sense of relief every time an election cycle is over because many of the “unknowns” that people have been wondering about have been resolved. That’s obviously true this year, but I am even more relieved that the results were not close which spares the country from another weeks-long drama over the outcome.
In the final analysis, I believe the election was primarily a verdict on the economic failures of the past four years, with social and foreign policy issues taking a back seat in the minds of most voters. Many citizens who previously were reluctant to vote for Mr. Trump changed their mind this time. I count myself among this reluctant group. From an idealistic perspective, voting for the “lesser of two evils” is not an attractive prospect, but sometimes the stakes are too high to cast a protest vote. Time will tell whether the majority of citizens were justified in giving Donald Trump another opportunity to serve as our President.
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