Within hours of assuming office, Donald Trump began issuing executive orders and policy proposals to fulfil his campaign promises. But if Trump really wants to “make America great again”, is he addressing the long-term structural problems that sorely need fixing?
In the initial days of his presidency, Trump appears focused on trade and immigration; other issues popular with his constituents are waiting in the wings
Yet as in Europe and Japan, US policy needs a far-reaching overhaul, and it is unclear whether Trump will enact the structural reforms needed to restore the American dream
Among the areas in need of strategic reform are the soaring costs of education and health care, unsustainable pension promises and ballooning entitlements
The United States has a new president who has clearly set out his policy priorities for the first 100 days, including repealing “Obamacare”, reforming the tax code, boosting infrastructure and defence spending, renegotiating trade agreements and cracking down on immigration – measures that many view as “red meat” for his political base.
Yet while Trump vows to “make America great again” with these headline-grabbing initiatives, we believe the longer-term health of the US can only be addressed by long-term structural reforms that will re-energize the American dream, which has been somnambulant in recent decades. But this demands the kind of far-reaching and critical policy overhaul that has so far eluded Japan, Europe and the US as they all try to recover from the Global Financial Crisis.
Eight Areas in Need of Strategic Structural Reform
2 Health care
3 Consumption and trade
5 State and government pension obligations
6 The Federal Reserve and the US banks
8 DC politics
Will the president’s populist prescription work?
As befits a country that boasts both the world’s largest economy and one of its best-established democracies, the challenges facing modern America are complex and deep-rooted. Many presidents and public servants before Donald Trump have tried to solve its issues, with varying degrees of success.
Yet in the minds of Trump and his supporters, the status quo is a failure and a direct result of politicians who have been busy protecting their own self-interested goals – not the people they were charged to lead. As a result, we are witnessing new policies and proposals that pander to popular concerns in not just Trump’s America, but in the post-Brexit UK and, potentially, in other countries to come. Whether these populist policy prescriptions actually result in the body politic’s short-term revival or its long-term health remains to be seen.
Don’t be Trumped by short-termism; invest for the long term
Some of Trump’s proposals may work, but they may also be short-sighted by design. In our view, unless governments and other institutions address a range of much-needed long-term structural reforms – whether in the US, the European Union or elsewhere – we believe economic growth will remain low, debt levels will increase and interest rates will stay lower for longer. All the while, ageing populations will continue to draw down on their entitlements while the working class will continue to struggle.
Of course, individuals can always circumnavigate some of these strategic challenges by doggedly saving for themselves, investing in their own futures and reducing their reliance on the system for welfare, health care and education. Owning high-quality companies with good dividends and returns on equity – and tapping into the power of long-term compounding – is a solid strategy that can also help buffer against burgeoning inflationary threats. More immediate-term saving, more long-term investing: That is one way to return at least some power to the people.