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It’s been a week now, and the post-election narrative seems to be taking shape: Donald Trump’s shocking victory represents the revenge of the white working class over coastal elites. That narrative may be correct politically, but in terms of policy, it misses the mark in critical ways. Trump, if he sticks to his campaign pledges (a big “if”), will probably do little either to help the working class or to hurt the elites, at least economically. What’s more, this simple dichotomy completely leaves out the people who stand to lose the most, based on what little we know about Trump’s plans: poor and low-income families in urban and suburban areas.
Start with the elites: Sure, affluent, college-educated residents of big cities voted against Trump by overwhelming margins. (Hillary Clinton won 86 percent of the vote in Manhattan, up from the 84 percent that voted for President Obama four years ago.) But the reaction of the financial markets to Trump’s win is a hint that it isn’t the elites who have the most to fear in a Trump presidency. The Dow Jones Industrial Average rose 5.4 percent last week, its best week since 2011; other major stock indexes were up nearly as much.
Short-term market reactions don’t necessarily reveal much about the longer-term direction of the economy. But there’s a reason that investors are optimistic about a Trump presidency. Taken at face value, his policies contain plenty of good news for investors: tax cuts for the wealthy, lower corporate tax rates and much less regulation of banks, energy companies and other big businesses. And it isn’t just captains of industry who would benefit: Trump’s child-care plan, for example, would favor affluent families.
Of course, college graduates and other members of the coastal elite weren’t necessarily voting against Trump because they thought he would be bad for them economically. Many were more concerned about his history of racist and sexist comments; his positions on immigration, abortion and criminal justice; or his overall temperament. But many of Trump’s white working-class supporters did cite economic issues as a significant concern. In his campaign, Trump pledged to bring back manufacturing jobs, get tough on foreign competitors and deport undocumented immigrants who, he said, push down the wages of American workers. Many of his voters have said they plan to hold him to those promises.
They are likely to be disappointed. Many of the economic grievances of the white working class are legitimate: Manufacturing jobs really have disappeared, and those that remain often don’t pay as well or offer the same benefits as the union jobs that workers remember from decades past. Economists, who said for years that trade’s downsides were minimal, have more recently begun to acknowledge that foreign competition has done lasting damage to many communities (though they still say trade is good for the economy as a whole). But despite his rhetoric, Trump offered few specifics during the campaign for how he would change trade policy to benefit workers; the plan his advisers did offer was widely panned by independent economists, some of whom warned it would cause a recession.
The larger problem for Trump and his supporters is that there is very little reason to think that any set of policies could meaningfully reverse the long-term decline in U.S. manufacturing jobs. That decline has been driven by a combination of globalization and automation — forces that aren’t likely to reverse any time soon. As I’ve argued in the past, politicians and policymakers would be better off focusing on how to improve the wages and working conditions of the service workers who now dominate the U.S. economy — a subject Trump barely mentioned during the campaign. Trump had little to say about education, job training, entrepreneurship or other policy areas that might help workers in rural areas. And though Trump has said that lighter regulation will help the struggling coal industry, that will do nothing to change the low natural-gas prices that are coal’s biggest enemy. Indeed, Trump has also pledged to ease regulation of fracking, which will tend to boost oil and gas production, which will in turn tend to keep prices low. (Clinton, it is worth noting, had a detailed plan to help coal country, although many experts were skeptical about its effectiveness.)
Finally, there are the people who have gone practically unmentioned in the post-election coverage: low-income families outside of rural America and the Rust Belt. There were 43 million Americans living in poverty in 2015, and 36 million of them live in cities or, increasingly, suburbs. Poverty is higher in the South and West than in the Midwest, and it disproportionately affects African-Americans and Latinos, whose poverty rate is more than double that of non-Hispanic whites. Blacks and Latinos also face higher rates of unemployment, lower rates of high school and college graduation and higher rates of foreclosure than whites.
In debates and on the campaign trail, Trump talked — often inaccurately — about inner cities as pits of crime and despair. But he offered few policies for addressing the economic challenges facing minority communities. Trump, unsurprisingly, didn’t embrace traditional Democratic policies such as a higher minimum wage1 or stronger worker protections. (He has pledged to exempt small businesses from the Obama administration’s new rule making millions more Americans eligible for overtime pay.) But nor has he embraced proposals from Paul Ryan and other conservatives to address poverty through other policy initiatives such as the Earned Income Tax Credit. Trump’s plan to increase infrastructure spending and cut taxes could spur faster economic growth in the short term, which would help create jobs and boost wages (although over the weekend, former Treasury Secretary Larry Summers, one of the most vocal advocates for infrastructure spending, questioned whether Trump’s plan would be effective). But few of Trump’s policies would do much to help low-income communities in the longer run.
Even the most policy-focused presidential candidates always leave key details unresolved during their campaigns; Trump was, perhaps, the least policy-focused major-party nominee in decades. That means he will take office as something of a blank slate. It is possible that once he takes office, he will begin rolling out detailed proposals to tackle the economic challenges facing both urban and rural America, and that he will be unafraid to take on the elites in the process. But there is little sign of that in the policies he has proposed so far.
The Trump team
The post-election parlor game of “guess the cabinet” doesn’t usually matter much to anyone outside of Washington. But this year, it takes on added importance. Trump provided few details about his policy positions during the campaign, and he isn’t surrounded by a well-known group of policy advisers. So his choice of cabinet members and other senior officials will provide a key glimpse into the direction he plans to take his presidency. Trump’s economic team is a particular question mark because hardly any mainstream economists backed his candidacy — hundreds of them, in fact, signed a letter explicitly opposing his election.
Bloomberg on Monday reported that Trump was close to naming Steven Mnuchin as his Treasury secretary. Mnuchin, who served as national finance chairman for Trump’s campaign, is a former Goldman Sachs partner, hedge-fund investor and Hollywood producer. (Steve Bannon, newly named to a top White House job, is also a Goldman alum.) Trump’s team is also rumored to have reached out to JPMorgan Chase CEO Jamie Dimon and to Texas Congressman Jeb Hensarling. Trump is also likely to look to the private sector for other cabinet posts, such as the secretaries of commerce and energy.
It is less clear where Trump will turn to find people to fill other top economic posts, such as the chair of his Council of Economic Advisers. One name that is likely to surface: Peter Navarro, a University of California, Irvine, professor who coauthored a report explaining Trump’s economic policies.
Last week at FiveThirtyEight
A Trump win was predicted to crash financial markets. It didn’t. On Wednesday, I looked at why not.
Trump outperformed Mitt Romney in places that are struggling economically — and especially in places where jobs are most at risk in the future. On Thursday, Jed Kolko dug into the data. And on Friday, Andrew Flowers looked at the other demographic characteristics associated with “Trump Country”: a high proportion of residents who are white, older and less educated.
The foreclosure crisis hurt millions of homeowners. On Tuesday, Amelia Thomson-DeVeaux profiled a Supreme Court case in which cities are arguing that they, too, were harmed by banks’ alleged discriminatory lending practices.
Elsewhere
New companies are hiring fewer workers. Anna Louie Sussman writes in The Wall Street Journal that that’s bad news for the economy.
Binyamin Appelbaum asks what Trump will mean for Janet Yellen and the Federal Reserve.
Trump’s business empire could create unprecedented conflicts of interest, especially because he has resisted calls to put his assets in a blind trust. Bloomberg View’s Timothy O’Brien (who has a long history with Trump) looks at Trump’s complex family, business and political ties.