In two weeks Donald Trump will serve his one-hundredth day as President of the United States of America. He approaches that milestone with an approval rating of 40 percent, the lowest of any modern-day president at this stage of his tenure. The man who made his reputation, and part of any fortune he might possess, in front of the television cameras is acutely aware that on that day several television specials will air. And that most will probably have a less laudatory tone than he would prefer.
The president is making a two-pronged effort to prepare his responses. First, he told his staff to end their internal feuds and jockeying for position and give him some boasting points. Second, he converted from an anti-establishment president determined to “drain the swamp" of Washington politics to full-time wooer of the establishment he was elected to destroy, some say under the tutelage of this week's rising star, Gary Cohn, director of the National Economic Council and, it seems, reigning head of the Washington branch of the Goldman Sachs alumni association.
Trump needed help from Republicans in the Senate and got it when they united to confirm Neil Gorsuch to the Supreme Court, restoring the conservative-liberal balance to what it was before the death of conservative Justice Antonin Scalia.
He needed help from the military and got it when his appointees to the Departments of Defense and State, as well as national security officials and other posts, successfully carried out his orders to make Bashar al-Assad pay a price for his hideous gassing of his own people and used the military's new tactical freedom to obliterate a terrorist tunnel network in Afghanistan. Those acts reset American foreign policy, ending eight years of retreat from world responsibility and reliance solely on diplomacy. Our allies are reassured that Trump believes in at least half of Teddy Roosevelt's advice to future presidents, and is willing to wield a big stick. And Trump can take some satisfaction from proving that President Obama and Susan Rice were either ill-informed or being economical with the truth when they claimed that Assad had given up his chemical weapons "without firing a shot," as Obama proudly reported.
Now Trump needs some victories closer to home. His plan to complete the repeal and replacement of Obamacare, and a major cut in corporate and personal taxes within his first hundred days are in tatters. These goals are interconnected by the fact that tax cuts must be revenue neutral—they cannot add to the federal deficit. For arcane reasons and the peculiar definitions used by Washington budgeteers, replacement of Obamacare would provide space for about $1 trillion in tax cuts over the next 10 years. His first attempt to repeal and replace Obamacare failed when the Republican members of the House Freedom Caucus joined Democrats in refusing to go along with the substitute concocted by Trump and House speaker Paul Ryan. Ongoing negotiations might change that, but not in time for a 100-day chortle, or to pave the way for the lowering of corporate income taxes by then.
Still, Trump will be able to take credit for rolling back a host of regulations, putting together a first-class foreign policy/security team, pulling the Supreme Court to the center-right, making America a player again in world affairs, wringing a few trade concessions from the Chinese, and perhaps persuading Xi Jinping to rein in his North Korean comrades. That will get him through the one-hundredth day, although his base will be wondering how aiming Tomahawk missiles at Syria and the "mother of all bombs" at Afghanistan can help Make America Great Again. Then, it is on to the next test: the 2018 congressional elections.
If he can deliver health care and tax cuts by then, he will have much to tweet about. So far, those tweets have claimed credit for rising share prices and more jobs. But politicians who live by incoming data die by incoming data—crow over a good report, and prepare to eat it the next month if it is followed by a poor report. Or to ignore it, as the Trump team is doing with the very weak March jobs report—a mere 98,000 new jobs—after claiming credit for the much stronger February job performance of 235,000 new jobs. Take credit for a share price run-up, and prepare to take the blame for a subsequent collapse.
Once Trump gets past day 100 and the 2018 congressional elections, he might face a difficult economic environment, which is one reason he is threatening the Fed with a loss of independence if it continues to raise interest rates, slowing growth and keeping the dollar too strong to allow an export boom. He won't succeed in moving the Fed off its current path to a 3 percent funds rate by 2018, both because it is trying to end the era of zero rates without causing too much pain, and because it would like to reign in what appears to be excessive borrowing in several sectors of the economy.
We learned one thing from the 2008 financial collapse: We don't fully understand the interconnected nature of the financial sector. The collapse of Lehman Brothers created waves, not the ripples that policy-makers believed it would and that the financial system could withstand. Subprime household debt brought down more than the improvident lenders and borrowers.
Fast forward to today.
* Some 44 million borrowers have accumulated $1.4 trillion in student loans. More than 3,000 students default on their federal loans every day.
* Auto buyers have racked up $1.2 trillion in debt as lenders have relaxed credit standards. Nearly 25 percent of these loans are subprime, a word redolent of home loans during the near-collapse of the financial system.
* Credit card debt stands at more than $1 trillion, up 6.2 percent from a year ago. The average interest rate: close to 20 percent.
* Total household debt, at $12.6 trillion, is close to the levels at the start of the Great Recession.
* Banks have lent $2 trillion to developers of commercial real estate. As a concerned Fed puts it, "… valuations in the CRE sector appear increasingly vulnerable to negative shocks…." By one count, some 37 shops between 57th and 77th streets on New York's Madison Avenue stand vacant, and vacancy rates in the city's affluent areas are running at 20 percent, far above the 5 percent considered acceptable.
These debtors, who owe on the cars, or credit cards, or student loans, or CRE mortgages, are pikers compared with our corporations and our government. Corporate debt, long- and short-term, clocks in at over $11 trillion, the highest level relative to a key measure of earnings since 2002. Only Microsoft and Johnson & Johnson retain triple-A ratings, a notch better than the U.S. government. The national debt, which doubled during the Obama years, stands at over $20 trillion, and rising.
This mountain of debt does not necessarily portend another financial fiasco. But given how little we know about what causes ripples and what causes waves, we can at least take comfort from the fact that, thanks in part to regulations developed after the 2008 financial collapse, our too-big-to-fail banks have stronger balance sheets and closer supervision than in the bad old days.