Trump’s economic focus his strength and challenge

The US president-elect must help the aspirations of working families.

Paradoxically, it was Bill Clinton’s “war room” advice in the 1992 presidential campaign that proved decisive in Donald Trump’s defeat of Hillary Clinton 24 years on. “It’s the economy, stupid,” was the mantra Mr Clinton’s advisers drilled into him, driving him to the White House.

This week we saw how Mr Trump was able to capitalise on economic insecurities in states left behind by globalisation to defeat Mrs Clinton. In the once great motor city of Detroit in August, the Republican candidate gave a major speech focused on chronic unemployment, rampant poverty and families, especially African-Americans, despairing at the future. “In short, the city of Detroit is the living, breathing example of my opponent’s failed economic agenda,” Mr Trump said. “Every policy that has failed this city, and so many others, is a policy supported by Hillary Clinton.” He won the rust-belt states of Michigan, Wisconsin, Pennsylvania and Ohio, and is now president-elect.

This is both a great political lesson of Mr Trump’s triumph and a great hope. As former prime minister John Howard said on Thursday, all political leaders need to do more to help those adversely affected by globalisation, while they explain the benefits. “I think everybody has got to understand that it does carry a pain and penalty for some people, and while you should keep going forward with globalisation and freer trade, you’ve got to try to help the people who are disconnected,” Mr Howard said. With a clear mandate and Republican control of the house and the Senate, Mr Trump has an opportunity to deliver the strong economic recovery that has eluded the US so far. Living standards in Middle America have been stagnant, or even contracting, for more than a decade. This economic pain has been expressed at the ballot box. Not only Mr Trump but his nation and the entire world will benefit if he can help the aspirations of lower and middle-class working families.

Still, his policy prescription remains uncertain. During the campaign he suggested the Federal Reserve ought to be looking at raising interest rates to benefit those with moderate savings and prick the asset bubble enriching the very wealthy. As president, Mr Trump promises to shift the emphasis to fiscal policy, increasing US government debt to fund productive infrastructure. His economic strategy is for this stimulus to generate jobs and kickstart growth, in turn fulfilling his political strategy. He promises tax cuts for lower and middle-income families, as well as slashing corporate tax from 35c in the dollar to 15c. But he will need to cut some costs, too, to protect the budget.

Mr Trump and his transition team are in the early stages of assembling their cabinet team but it is likely to include former New Jersey governor Chris Christie and former New York mayor Rudy Giuliani, both executive leaders with reputations for decisive action. The crucial Treasury position is likely to go to experienced investment banker and Mr Trump’s trusted campaign finance chairman Steven Mnuchin.

The greatest concerns for Australia must be Mr Trump’s volatile rhetoric on trade and foreign affairs. While it appears likely that isolationist policies could again hold sway, direct policy prescriptions remain unclear. Certainly former prime minister Paul Keating was unwise to argue this was a time to re-evaluate the US alliance. On the contrary, it is crucial for Australia to use its influence to encourage a reinvigorated US engagement in East Asia. On trade, the Trans-Pacific Partnership is as good as dead and our politicians and diplomats must hope and work hard to ensure there is no clawback on other deals such as our mutual free trade agreement. Promised US tariff retaliation against Chinese imports is deeply worrying, lest we are caught in the middle of a trade war between our two main trading partners. Given his campaign, Mr Trump will need to deliver some reform on trade. Perhaps dumping the TPP and some adjustments to the North American Free Trade Agreement may suffice, although he will need to negotiate some accommodation with China.

There must be some hope that in his new post-election, conciliatory tone, the president-elect will moderate his agenda. It is worth remembering that the Republicans in congress are mainly establishment party politicians, so they should act as an ameliorating influence on their president. The relationship between the Hill and the White House should not be a mere rubber stamp, despite the party connection.

Yesterday’s 90-minute meeting between Barack Obama and the man who will replace him in January was encouraging. The President urged the country to unite behind Mr Trump: “I believe that it is important for all, regardless of party and regardless of political preferences, to now come together.” And the president-elect spoke generously about Mr Obama’s achievements and pledged to work co-operatively with him: “I very much look forward to dealing with the President in the future, including counsel.” Mr Trump also has shown a diligent and constructive approach meeting congressional leaders and placing a series of calls to world leaders, including Malcolm Turnbull. This is all as it should be — demonstrating the continuity of the American transition system — but it is especially reassuring given the divisiveness of the campaign which is still echoing on US streets in a string of anti-Trump protests.

The paradox of people protesting against democracy will not be lost on many Americans. Nor will the hateful and violent rants against Mr Trump. The US people have exercised their right to reject a flawed Democrat candidate and what looked like a continuation of the status quo. And in the privacy of the voting booth they have shown what they think of having their concerns ignored or of being labelled “deplorables” simply on the basis of their voting intentions. This, the world now knows, is the art of the vote.