Markets warmed to the new man in the White House a lot quicker than most expected. But that does not mean there will not be some wobbles ahead. Donald Trump comes to the office with more history than any previous president. He has been a wheeler-dealing entrepreneur for over 40 years, a celebrity and a television star.
He has been through three marriages already, and no one knows how many relationships. He has now taken the job that comes with more scrutiny than any other in the world. Why he wants the gig, it is sometimes hard to understand. It is hard to believe there is not enough stuff in his past to launch an impeachment action.
Trump is so unpredictable, he may even flounce off in a tantrum. The result? It is possible that his vice-president Mike Pence might get to take over the job. The bookies are already offering short odds on Trump surviving, pricing the chances of an impeachment in the first year at just 4-1. Paddy Power have put a price of just 5-2 on his lasting his full four years. If it was a horse race, that price would make it the odds-on favourite. So what would a Pence presidency mean for the economy and the markets?
Judging by his record, he would govern with a far more conventional Republican agenda than the populist Trump. As governor of Indiana, Pence pushed through income tax cuts, balanced the budget, and resisted increases in the minimum wages mandated by federal law. In the past, he has supported constitutional limits on state spending. He has supported a flat tax. And he has opposed state bail-outs of banks and companies – even in the auto industry, even though that is a major employer in his home state.
Pence didn’t run for president himself, so he has never had to lay out a national agenda. But he would be working with a Republican Congress, and he is part of the mainstream of his party – certainly a lot more so than Trump, who spent most of his campaign being as openly contemptuous of the Republican establishment as they were of him. Pence would certainly listen to what the leadership in Congress wanted, and they in turn would listen to him.
Under his leadership you would expect to see major reform of America’s wildly uncompetitive corporate tax rate, which at 35% is now the third highest in the world. You could expect to see caps on spending, and across the board tax cuts, as well as concentrated effort to roll back the red tape and regulation that has slowed down the American economy to the extent that it no longer creates enough new small businesses to replace those that close down.
“Trumponomics” promises to be a weird mixture of ideas from the right and left. But Pence is a far more ideological conservative in the mould of Ronald Reagan, although without the old movie actor’s flair for a well-turned phrase. He would push for a far more traditional, small-state, free-market set of policies, and drop the protectionism faster than you could say “Make America Great Again”. Just as importantly, he would have the allies and the political savvy to get legislation passed.
Over the next four year, there will almost certainly be at least one major scandal for President Trump. There may well be lots of them. At some point, an attempt may be made to launch an impeachment. If that happens, the markets will inevitably wobble. But they can comfort themselves with the thought that the US may well, as a result, get the most pro-growth, pro-free-market president since Reagan left office. It would just be a very roundabout way of getting there.