It’s well known that Donald Trump has a background in real estate, and that he states his love for “doing deals.” But I’m not sure commentators have taken this information seriously enough.
I’d like to lay out a scenario for the Trump presidency, based on extrapolating his deal-making background. This isn’t a firm prediction, just a filling out of the menu of possible alternatives.
One common feature of many real estate deals is that they are based on selling to different groups of people at different prices, but in sequence. Say a developer has produced a series of office buildings, condominiums and town homes to be sold, or hotel rooms to be rented out. It is common practice to sell (or rent) the more desirable units first at relatively high prices. As units leave the market, new lower-valuation buyers are recruited for cheaper and lower-quality units. Finally, as the process nears its end, there may be a kind of fire sale to clear out the remaining items and finish up the project. If pulled off successfully, this will yield a lot of profit for the developer.
Arguably the most valuable trading asset Trump holds is his ability to approve tax cuts, as the Republican Congress wants very much to deliver lower taxes to some of its supporters. So Trump might “sell” this asset to congressional Republicans for a high price, for instance support for infrastructure spending, approval of his appointments and an acceptable compromise on international trade and foreign affairs. (Rather than just starting a trade war, Trump may try to pass an export-subsidizing tax reform incompatible with World Trade Organization obligations; if Republicans vote for that tax reform, in essence they have bought into the deal.)
Other assets that Trump may sell to the Republican majority include Supreme Court appointments, corporate tax reform, Obamacare repeal, Dodd-Frank reform and deregulation. These might be bartered for successively lower prices, in order of their priority to Republicans in Congress. Trump might receive cover for some dramatic immigration moves, tolerance of his commercial conflicts of interest and a cozy relationship with Russia. Maybe the independence of the Federal Reserve fits into these deals, too.
From Trump’s point of view, these would be great deals, if only because he probably doesn’t have strong, detailed preferences over how exactly to govern. Details on policies like changing Obamacare can be left to Congress.
If those trades take up much of the legislative calendar over the next year or two (while the Republican majority remains secure), what might Trump then do next? He hardly seems like a caretaker president or someone who would enjoy presiding over gridlock.
Like a good real -state magnate, the next step then would be to turn to the lower valuation buyers — namely the Democrats in Congress — and offer them some lesser deals at lower prices. The Democrats are the buyers who will value dealing less because many (but not all) of their voters are less enthused about working with Trump, and also they value less what Trump might plausibly offer. Still, there will be room for further exchange.
If Trump, perhaps working with his daughter Ivanka, crafted a reasonable federal child-care or preschool policy, many Democrats would jump on board. They wouldn’t become Trump supporters in return, but they would moderate their criticism, as they would have a victory to take home to their voters.
In short, the second half of the Trump administration might consist of Trump offering a series of smaller but still significant trades to Democrats, taking care to bring along some Republican votes as well.
And what might the final fire sale consist of? Imagine Trump in his fourth year, essentially running for re-election as an independent, feeling he has nothing to lose and intent on showing that he has broken gridlock. Imagine a Trump whose ideology remains fluid and who loves to make deals more than to adhere to an ideological line. Could he also “sell” climate change legislation and a higher federal minimum wage to Democrats and a smattering of swing-district Republicans?
I don’t find all of the polemics against government gridlock persuasive, but maybe you do. If so, how much will you love this new art of the deal? Will the whole package cheer you up or send you scurrying to the Federalist Papers for consolation? There is a chance we are going to find out.
– Cowen is a Bloomberg View columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. His books include “Average Is Over: Powering America Beyond the Age of the Great Stagnation.”