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People tend to forget this, but health care reform wasn’t just a shiny object on the Democrats’ wish list in 2009;  the health care system was creaking, and insurance premiums were soaring, at the time Obama took office.

Obamacare, of course, was based on Romneycare, an approach that had previously enjoyed the support of plenty of Republicans and even the Heritage Foundation.  Once Obama’s name was attached to it, however, GOP support for the concept completely vanished.

The legislative process was long and messy, perhaps unnecessarily so.  Remembering the Clintons’ grim experience with health care reform, Obama took pains to negotiate with insurance companies  and caregivers and gave plenty of authority to Congress to shape the bill instead of presenting legislation and demanding immediate action.  Important parts of the bill, such as the public option, fell by the wayside.  To make matters worse, the roll-out of the website was mishandled, some of the statements made to support the bill were demonstrably untrue, and the Supreme Court limited the scope of the bill in a terrible decision which made the Medicaid expansion optional.  Republican voters hated the program because they viewed it as just another redistribution/entitlement goody bag for the undeserving poor.  Consumers complained about rising costs and limited benefits.  On the whole, therefore, it was a political liability for the administration and for Democrats in general.

From a policy perspective, Obamacare has been a qualified success; the uninsured rate has fallen significantly, and the medical cost curve was bent.  The GOP alternatives to it all benefit the healthy and the wealthy at the expense of the poor and the medically needy.   The GOP is no longer in a position to make cynical and opportunistic objections to the status quo;  they will have full ownership of whatever new product they create.  The outcome of the 2017 legislative process is very much up in the air.

In the worst case scenario, all of the checks and balances in the system are no match for all of Trump’s worst characteristics:  his thin skin; short attention span; authoritarian temperament; lack of interest in policy details; and neo-mercantilist ideas.  The disasters that follow fall into three groups:

1.  No nukes is good nukes:  Threats to use nuclear weapons become a routine part of the Trump diplomatic arsenal.  When opponents refuse to back down, he is forced to follow through in order to maintain any kind of credibility.  As a result, the notion of a nuclear attack on our country is no longer unthinkable. Likely victims:  North Korea and Iran.

2.  The Great Recession, Part Deux:  Trump opts for the “Trade Warrior” economic scenario, with predictably appalling results.  The Fed jacks up interest rates; the dollar rises; exports and the housing market collapse; supply chains are disrupted; and the country falls into a recession.  To make matters worse, the GOP, as a result of its opposition to the Obama stimulus, is intellectually obligated to resort to Hoover-era remedies to the recession, which makes matters even worse.  Stagflation reigns.

3.  Ve have vays of making you talk:  Unable to deal with failure, Trump doubles down by wrapping himself in the flag and ignoring the Constitution. Using his Twitter account, he encourages his reactionary friends to harass and beat up his adversaries.   There is discussion about declaring martial law.  New forms of surveillance and interrogation are put into wide use, and the administration misuses its regulatory powers to stifle opposition.  The GOP leaders in Congress, of course, do nothing to stop this, because, after all, he gave them their big regressive tax cut, and the fate of the country is small potatoes compared to that.

The PM called Queen of the May

Gave her big speech on Brexit today.

Would it be soft or hard?

Now she’s shown us her cards.

It’s the hard one she’s chosen to play.

The HHS man named Tom Price.

To Obamacare’s friends, he’s not nice.

He says ACA must go.

What comes next, no one knows.

Where this ends is a roll of the dice.

The 45th President Trump.

He played the red voters for chumps.

They voted for change

Not a full rearrange

They’ll own it when stocks start to slump.

Obama’s efforts to combat climate change essentially came in the following three waves:

1.  As I noted yesterday, a portion of the stimulus bill was directed towards innovation in clean energy.  Sensitive to the allegation that the administration was “picking winners,” Obama directed funds to a wide range of companies in the hope of improving his chances of success.  Indeed, as expected, some of the funds were wasted, and he paid the price politically, but the cost of clean energy has come down significantly over the last eight years, and these investments are entitled to at least a small part of the credit.
2. In an effort to placate the GOP, Obama proposed a cap-and-trade program in lieu of a carbon tax;  after all, hadn’t McCain supported cap-and-trade?  In the end, however, an alliance of Democrats from energy-producing states and Republicans killed cap-and-trade.  Don’t expect either a carbon tax or cap-and-trade to be resurrected at the federal level in the foreseeable future unless the GOP-affiliated economists who support it in exchange for income tax cuts suddenly gain a lot more influence within the party.
3. In the absence of carbon pricing legislation, Obama did what he could through regulation and  international diplomacy.  It will take some time, but most of these efforts can be overturned if Trump is determined to do so.

How much of the Obama legacy will endure?  Probably less than we would like, but more than we think.  The major polluters have made investment decisions that cannot easily be overturned, and they will probably view the current situation as a regulatory blip, given the state of the data and opinion in the rest of the world.

The best case scenario assumes that Trump ultimately winds up governing more or less as a generic Republican with–shall we say–some major stylistic differences.  This results in the following:

1. The inevitable big regressive tax cut is not accompanied by major entitlement cuts, and the trade war quickly fizzles due to fierce opposition both at home and abroad.  The country consequently experiences what I have labeled the “Funhouse Reagan” economic scenario:  a skyrocketing deficit; higher interest rates; and a recession. It isn’t as bad as the “Trade Warrior” scenario, however.
2. Resistance from Republicans in Congress and members of his own cabinet causes Trump to give up on the Unholy Alliance with Russia.  The Trump foreign policy is conventional, albeit hawkish.
3.  The North Korea war follows the script I posted a few days ago.  Kim does not launch suicide attacks against South Korea and Japan.
4. Trump backs away from his confrontation with China in exchange for some cosmetic changes on trade.
5.  Most of Obama’s climate change measures prove to be irreversible.
6.  Trump violates some constitutional norms, but his efforts to stifle public opponents are limited to Twitter attacks and the odd libel suit.  Our freedoms remain intact.
7.  Dodd-Frank is not repealed, and there is no major banking crisis.
8.  Obamacare is watered down somewhat, but is not truly repealed.

This scenario will only occur if the GOP establishment gains control of the administration due to Trump’s short attention span and lack of interest in policy. Don’t bet the ranch on that.

If I recall correctly, the principal GOP presidential candidates in 2008, even including John McCain, supported some sort of stimulus in the face of the deepening recession.  This was in keeping with past practice, including the period after the bursting of the tech bubble during the Bush Administration. When the Obama Administration proposed a stimulus, however, the GOP completely changed course and complained bitterly about waste and pork.

The stimulus essentially had five parts:  additional safety net payments; aid to state and local governments; temporary tax cuts; a public works program; and investments in clean energy.  The safety net payments effectively reduced misery and propped up aggregate demand. The aid to state and local governments similarly worked to maintain governmental service levels, while boosting demand.  The tax cuts, which were largely an unsuccessful attempt to bring Republicans into the fold, were a mixed bag;  large portions of the proceeds were predictably used for savings or to pay down debt, which didn’t help with the short-term problem.   The public works program was conceived as an updated version of New Deal programs, but the approval process for infrastructure projects is far more convoluted than it was in the 1930’s, and infrastructure is no longer built by armies of strong men with shovels, so this part of the stimulus was a bit of a disappointment.  Unlike the rest of the package, the energy investments were not really viewed as a short-term mechanism to create jobs and boost demand, so their effectiveness needs to be viewed on a longer-term basis.

Taken as a whole, the stimulus was a moderate success;  with the exception of a few GOP ideologues, there is a consensus among economists that it saved millions of jobs.  Left-wing critics, such as Paul Krugman, who complained that the stimulus was too small ignored both political realities and the weaknesses in its public works component.  The real question now is whether the GOP, by its vocal opposition to the Obama program, has precluded its own stimulus in the likely event of a Trump slump.  If it has, things could be even worse than I have predicted, which is saying something.

Imagine that you are a Republican senator from a red state.  Your margin of victory was larger than Trump’s.  You have serious doubts about his qualifications, his personality, and his free-flowing ideology, so you said as little as possible about him during the campaign.  On the other hand, your base includes a large number of his followers, you fear being singled out by him on Twitter, and you are genuinely fired up about his plans for deregulation and tax cuts for the wealthy.  What are you to do?

Continue to treat him as you did during the campaign:  not as a real Republican, but as a third party candidate, or perhaps a force majeure, for whom you have no ultimate responsibility.   Keep your distance and use him to get what you want, but don’t tie your fortunes to him too tightly, because you don’t want to be in the cart when it rolls into the ditch.

Your UK vacation gets cheaper by the day, but the vampire squid will have to find a new place to live.

Obama campaigned in 2008 as the man who could bridge the red/blue divide, and he meant it;  he continued to reach out to the GOP years after it became clear that he could only make deals with them by using leverage.  His administration was remarkably clean.  His family life was beyond criticism, even from the religious right.  The economy improved dramatically, and the deficit fell, during his tenure.   For all that, red America hated him with a passion, and the divide was worse, not better, when he left office.  Why?

The easy, but incomplete, answer to that is that he was African-American.  I think there are three better responses:

1.  Everything about Obama screams “cosmopolitan” and “urban.”  His race is part of that, but only part;  his education, interests, and demeanor are part of it, too. He didn’t show much interest or sympathy for rural voters and culture, and he occasionally demeaned them on open microphones.
2. His support for Black Lives Matter, gay marriage, and criminal justice reform made it appear that he was taking the blue side in the culture war.
3. There were plenty of prominent GOP politicians and media figures who thought  that they could benefit by throwing gas on the fire.  They were right; it worked.  The GOP is now in complete control of our government.

Calling out business owners in public.  Doing his best to muzzle the media. Starting wars and swaggering to maintain his popularity.  Encouraging rivalries among his advisers, distancing himself from day-to-day decisions, and firing unpopular subordinates with great fanfare.  Using corruption as a mechanism to maintain discipline.  Trying to remain unpredictable.

Is it Putin or Trump?  You decide.

 

Trump, like many of his countrymen, was looking forward to a showdown with the ayatollahs in order to avenge the humiliation of the hostage crisis in 1979.  He was persuaded by his advisers that tearing up the nuclear agreement was a mistake, however, and he was preoccupied with other issues, so an uneasy peace prevailed in 2017.  Things would be much different, however, in the following year.

Trump seized his chance after a minor confrontation between Iranian and US vessels in the Persian Gulf in early 2018;  he demanded an apology and the payment of reparations.  When the Iranians refused, he ordered airstrikes on military and political targets in Tehran.  The Iranians looked to Putin for assistance, but, not wishing to relinquish the fruits of his alliance with Trump in eastern Europe, he declined.

Lacking any other way of retaliating, the Iranians mined the Persian Gulf and announced they were restarting their nuclear program.  Worldwide oil prices skyrocketed, much to Putin’s delight.  Facing a severe recession, Trump ordered an all out missile and air assault on Iran.  This included the use of some low level nuclear weapons.

The Islamic Republic was destroyed.  Monuments were built to Trump in Saudi Arabia and Jerusalem.  Debate began on funding one in Washington.

There was, to be sure, a reasonable case for immediately confronting North Korea:  all of the peaceful efforts by previous administrations had failed to change the regime’s behavior; the regime’s efforts to build an ICBM were dangerously close to success; and no one could be sure that Kim Jong Un could be effectively deterred once he had a weapon in hand.  Nonetheless, in keeping with his essential character, Trump saw the war primarily as a cheap way to gain popularity and stifle criticism in light of his domestic failures and low poll numbers.

In March, Trump sent a message to the Chinese and North Koreans.  The essence of it was that North Korea must agree to dismantle its nuclear program within a month or face annihilation.  That could be done in any number of ways, including turning it over to the Chinese, but the demand was not negotiable.  The North Koreans, of course, refused the ultimatum and swore to turn South Korea and Japan into lakes of fire.  The Chinese also protested vigorously, but Trump ignored them, predicting that Beijing would not risk a military confrontation on behalf of such an unreliable ally.  The South Koreans and Japanese just held their breath and prayed.

On the appointed day, Trump launched air strikes against the regime’s nuclear facilities.  They were completely successful.  He concurrently sent a message to the North Koreans and Chinese promising not to broaden the war or engage in regime change, but assuring them that all of North Korea would be turned into a cinder if the government tried to retaliate against Japan and South Korea. Lacking any concrete promises of massive military assistance from the Chinese, Kim was faced with a dilemma:  lose face and deal with a potential coup; or face the destruction of his entire country.  It was a close and nervewracking call, but in the end, he opted for more threats, but no action.

The war was thus contained, and was a big public relations victory for Trump, who had shown himself to be a “winner.”  His poll numbers skyrocketed.  The Chinese government was humiliated, and decided to retaliate by stepping up its provocative activities in the South China Sea.  Trump, emboldened by his success, looked forward to a high stakes confrontation with Beijing over trade and navigational issues.  A much more dangerous crisis between the superpowers loomed ahead.

In a lot of ways, the auto bailout was the most remarkable accomplishment of Obama’s presidency.  It was an issue that didn’t play any part in the campaign, but he had to deal with it almost immediately after taking office.  There was no established playbook for dealing with the situation, and the risks were very high.

By any reasonable standard, the bailout was a huge success.  It is not at all clear that the auto industry as we know it would still exist in the Rust Belt states without it.  It was not the fiscal disaster the right predicted, and the price imposed for it was adequate to address the moral hazard question in the future.

The auto workers then showed their gratitude by voting for Trump.