(Cartoon courtesy Terry Wynne)

Many who voted for Trump wanted him to shake up Washington and "drain the swamp", but Trump is subjecting the U.S. to a stress test, writes Dr Kim Sawyer.

ECONOMISTS use the term "opportunity cost" to calculate the cost of an opportunity foregone. The opportunity cost measures the cost of the lost opportunity.

The Trump presidency, more than any other, is showing us the cost of not electing the other person.

It is not just the cost measured against a presidency of Hillary Clinton; it is the cost measured against any alternative.

We can now start to estimate the opportunity cost of President Trump. When the Trump healthcare plan was announced, the Congressional Budget Office estimated 14 million people would lose insurance coverage and 5 million fewer people would be covered under Medicaid.

When President Trump announced the United States would withdraw from the Paris climate accord, the pledge to cut U.S. greenhouse gas emissions by 26 to 28 per cent below 2005 levels by 2025 was no longer binding and neither was the commitment to $3 billion in aid for poorer countries by 2020.

When the Treasury Secretary foreshadowed a weakening of the Consumer Financial Protection Bureau, the $12 billion returned to borrowers since 2011 became an estimate of the cost to future borrowers.

But the cost is not restricted to domestic matters.

In foreign relations, diplomacy is being replaced by isolationism. In isolating Iran, Cuba and by default Qatar, Trump is levying costs on some unlikely bedfellows, among others Cuban entrepreneurs, Iranian educators and U.S. intelligence agencies. They are the costs when the dialogue of diplomacy is replaced by the monologue of singularity. Perhaps Trump did not learn from "glasnost" and "perestroika". The past has shown that defining the international chess board by good and bad seeds new generations of adversaries. The risk is not priced until the future — and channelling international relations through the business interests of a president increases that risk.

The first 150 days of a presidency is typically a time when political capital is used to explore future ideas. However, the first 150 days of the Trump presidency has been dominated by the Russian investigation, not just in the commentary but also in the cost. The direct cost of the investigation is not the problem; using previous investigations as a benchmark, the direct cost should not exceed $100 million.

The problem is the cost of indecision; of decisions not made that should have been made; of appointments not accepted that should be accepted; of policies not proposed that should be proposed. The cost of indecision is the highest cost of all and it is now being priced by the currency markets. Trump has become a negative for the U.S. dollar, not because of policy but because of uncertainty. Global capital no longer regards the U.S. as a safe haven — the political risk is too high. The scenarios that Americans discuss every day – whether Trump will be impeached, resign or forced from office – are now priced by the currency markets. Trump is now seen as a risk. He wanted the U.S. dollar to fall and he has succeeded.

The risk of Trump is best understood when it is considered to whom his presidency is most commonly compared: the second term of the Nixon administration. The analogies are obvious — the appointment of a special prosecutor, the sacking of senior law officers, the lack of transparency and accountability. But while there is substantial evidence of obfuscation and authoritarianism, as yet there is no evidence of criminality. What we are observing is the cost associated with an individual insensitive to the demands of public office.

In the second term of the Nixon administration, there was a deep recession with three quarters of negative growth; it was followed by a decade of stagflation. To be sure, other factors were in play; there was the decoupling of the dollar from gold, there were oil shocks and there were wage-price controls. But the political uncertainty of Watergate was not helpful. "Animal spirits" may not be everything, but they are nearly everything. Too much uncertainty is not good for an economy.

Many of those who voted for Trump wanted him to shake up Washington, to drain the swamp. They wanted uncertainty but did they want this much? Trump is putting the United States through a stress test. It is not just a test for the institutions of government and for the judiciary, it is also a test for the economy. The outcome of that test will determine his fate.

Dr Kim Sawyer is a senior fellow in the School of Historical and Philosophical Studies at the University of Melbourne.

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