Embracing HOPE over despair and reality

Business Leaders having amnesia, feeling despair, being seduced or just plain embracing hope…?

During the 2016 election cycle no major business organization (e.g. Business round table, National Association of Manufacturers, Chamber of Commerce) supported Donald Trump. Normally these organizations passionately support the Republican nominee. Similarly, unlike previous Republican nominees, very few CEO's of Fortune 500 companies were out campaigning for him. Even the right-wing Koch network distanced themselves from him.

There was a brief moment of business leader despair on election night when the Trump victory seemed inevitable and Dow futures dropped 1000 points, but recovered to a 4% gain at year end.

Since the election an unimaginable case of amnesia has developed and most business leaders have forgotten that it was once unthinkable that they stand beside a man who propagated the values Trump did during the campaign.

At investor conferences, blue chip Wall Street firms (whose leaders will be key executives in the Administration) are telling investors that business will be good, now is the time to buy stock. They base this on the two pillars of the Trump economic doctrine. First, a big twin fiscal stimulus through increased infrastructure & defense spending and reduced taxes (read lots of deficit spending). Second, a structural stimulus of decreasing imports and reducing regulation.

At industrial conferences there is chatter that orders are up and business is good. Some even talk about a 'Trump effect'. By several measures consumer confidence is up. Since the consumer drives the economy this maybe the most hopeful sign yet, but this may be a consequence of the low unemployment rate, strength of US dollar, low inflation, rising wages, wealth effect of a rising stock market, items largely unrelated to the 2016 election.

The business community has been seduced now, as the media was during the campaign and its hope for the success of the Trump doctrine far exceeds its better judgement. This gap has created a bubble in consumer expectations and stock market which will inevitably burst.

The only item on the Trump economic doctrine that is likely to be enacted by a Republican congress is lower taxes for the wealthy. But since the spending of wealthy is not constrained by their taxes, this will result in a minimal fiscal stimulus for the economy. The wealthy will just have more to invest and save. Increased defense spending that will create jobs is impossible in the short term. Over 70% of DOD expenses are on manpower, pensions, and healthcare. New weapon systems require years to develop and new manpower to hire and fund. Similarly, infrastructure requires years of planning and funding before blue collar workers are hired. The Trump infrastructure proposal if approved by congress (unlikely) simply grants tax giveaways to existing infrastructure projects and will create no new net jobs but make investors in current projects wealthier, under the assumption that these investors will then reinvest their windfall in future infrastructure projects. The two structural stimulus ideas are reducing regulations and decreasing imports. By reducing regulations companies will be able to reduce costs by reducing safety measures in the plant or environmental costs, so while this may benefit affected companies it is hard to see how his will benefit the overall economy. Decreasing imports (through tariffs or quotas) will in all likely hood lead to a reduction in exports (& jobs) as other countries retaliate and increased inflation as consumers bear the increased costs. Hard to see how any of this is good for business.

So, on rational dispassionate reflection if one concludes that the Trump economic doctrine is likely to crash and burn why are business leaders who disdained him because of his toxic social values now embracing him?

Could it be that they see reality and it is so dark that they embrace HOPE?!