Trump lays out his plans

Donald Trump © Rex Features
Donald Trump: lining the pockets of the elite

In his first address to a joint session of Congress on Tuesday, Donald Trump “managed the unthinkable”: a “conventional speech”, says Rob Crilly in The Daily Telegraph. He packed a long “laundry list” into his 60 minutes, promising major changes to American healthcare, immigration, tax, trade and infrastructure, as well as “pouring billions of dollars into the armed forces”. For one night, Republicans “can be forgiven for thinking they have found the sort of populist who can transform the country” – and worry about how to pay for it “another time”.

Finding the money for the boost to the military won’t be easy. Trump’s budget is slated to include a $54bn increase – ie, around 10% – to Pentagon spending in 2018, on top of supplemental spending of $30bn this year. “We have to start winning wars again”, Trump explained on Monday, describing US military might as “depleted”, even though the current US military budget is equivalent to that of the next seven highest-spending nations combined.

Aside from money for new ships, aircraft and nuclear capability (he has promised to return the US to the “top of the pack” in terms of nuclear weapons, says Crilly), Trump reportedly wants to establish a “robust” presence in key international waterways, says The New York Times. This is at odds with his “rhetoric” about getting allies to take more responsibility for defending themselves while America focuses on securing its own borders, although – note Barney Jopson and Sam Fleming in the Financial Times – he has also vowed to “straighten out the mess in the Middle East” and destroy Isis.

So where will the money come from? A “revved up economy”, according to Trump, and cuts to non-defence spending. According to one official, the state department’s budget could be cut by as much as 30%, reports David Smith in The Guardian. The foreign aid budget will also be cut, as will that of domestic agencies including the Environmental Protection Agency. Trump’s chief strategist, Steve Bannon, says that the “deconstruction of the administrative state” is a key priority.

As more information emerges, the meaning of Trump’s “America first” motto is becoming painfully clear, says Catherine Rampell in The Washington Post. It really means “Americans last”. “Making it easier to pollute hardly seems to be in most Americans’ best interests” and, although social security and Medicare are to be ring-fenced, means-tested programmes such as food stamps, Medicaid and housing assistance are probable targets.

Moreover, one might argue that spending on foreign aid furthers domestic security aims by helping to “strengthen democracies, deter war and contain epidemics”. Indeed, says The New York Times. The same goes for the State Department. “Slashing support for diplomacy would leave the government with fewer tools to prevent conflict.” America is not made safer by “over-investing” in the military, but by seeking peaceful solutions to conflicts and “respecting the democratic institutions that Mr Trump is working to erode”.

Of course, Trump may not get very far with his proposal. Although Republicans control both the House and Senate and Republicans traditionally support higher defence budgets, a core group of House Republican budget hawks are “likely to balk at such large increases”. Whatever happens, the writing is on the wall, says Edward Luce in the Financial Times. The White House is “drawing up plans for across-the-board deregulation, tax cuts and a new generation of defence contracts”. The biggest winners will be Wall Street, the fossil fuel energy sector and defence. Trump is adept at “sounding off against the elite while lining their pockets”. Watch what he does; not what he says. “They are often two different things.”

66% off newsstand price

12 issues (and much more) for just £12

That’s right. We’ll give you 12 issues of MoneyWeek magazine, complete access to our exclusive web articles, our latest wealth building reports and videos as well as our subscriber-only email… for just £12.

That’s just £1 per week for Britain’s best-selling financial magazine.

Click here to take advantage of our offer

Britain is leaving the European Union. Donald Trump is reducing America’s role in global markets. Both will have profound consequences for you as an investor.

MoneyWeek analyses the critical issues facing British investors on a weekly basis. And, unlike other publications, we provide you with the solutions to help you turn a situation to your financial advantage.

Take up our offer today, and we’ll send you three of our most important investment reports:

All three of these reports are yours when you take up our 12 issues for £12 offer today.

MoneyWeek has been advising private British investors on what to do with their money since 2000. Our calls over that period have enabled our readers to both make and save a great deal of money – hence our position as the UK’s most-trusted investment publication.

Click here to subscribe for just £12