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Donald Trump made lots of big promises on the campaign trail last year, but they tended to be more about attitude than policy — “we are going to start winning again” is a hard statement to fact-check. One of his few specific policy pledges, though, was that he would declare China a “currency manipulator” on Day One of his administration. So it was striking when Trump told The Wall Street Journal this week that the Chinese are “not currency manipulators” and that applying the label to them could hurt the U.S. position in negotiations with China on other issues.
On the merits, Trump’s reversal is reasonable, albeit late. Starting around 2000 and up until just a few years ago, China was depressing the value of its currency, giving its manufacturers an advantage over American competitors. (A weaker currency makes a country’s exports cheaper for foreign buyers and makes imports more expensive for domestic customers.) More recently, however, China’s currency has strengthened, and most economists think the country no longer deserves the “manipulator” label. (The label is in any case mostly symbolic — it could in theory pave the way for tariffs or other punitive measures, but those aren’t automatic.)
But Trump’s comments are notable because they are just one of a number of recent examples of the president changing directions on major policy issues. There were two others in the Journal interview alone: He declared support for the Export-Import Bank, which he criticized during the campaign, and he expressed more sympathy for China on its handling of North Korean aggression, which he previously said was China’s problem to solve. Trump’s recent missile strikes on Syria also represented a shift away from his previous, more isolationist posture.
Trump is hardly the first president to discover that what sounds good on the campaign trail doesn’t always work in the Oval Office. But Trump, who came into office with no experience in government, has been unusually unabashed in his reversals. On North Korea, for example, Trump told the Journal that he had shifted his view after meeting with Chinese President Xi Jinping last week. “After listening for 10 minutes, I realized it’s not so easy,” Trump told the Journal. “I felt pretty strongly that they had a tremendous power [over North Korea] … but it’s not what you would think.”
The comments were reminiscent of ones Trump made about waterboarding shortly after the election, in which he said he was “surprised” when Gen. James Mattis — now Trump’s secretary of defense — told him the interrogation technique doesn’t work. Trump later said he would defer to Mattis on the use of torture, reversing his earlier pledge to bring back waterboarding and other banned interrogation methods.
There are plenty of issues, of course, on which Trump has held firm. He is moving forward with plans to crack down on illegal immigration, including by building a wall on the Mexican border, and to deport more undocumented immigrants who are already here. He is reportedly close to rolling out steep budget cuts across the federal government. His promises to repeal the Affordable Care Act and ban immigration from some Muslim-majority countries have stalled but not because Trump has abandoned them.
But the Journal interview, along with other recent evidence, suggests that the early line on Trump — that he is “doing what he said he’d do” — requires some updating. The laws of politics may not always seem to apply to Trump, but the rules of economics and geopolitics do; particularly on international affairs, Trump faces many of the same constraints as his predecessors. For one week, at least, Trump seems to be figuring that out.
Economic policy: Return of the conventional wisdom
Another sign of Trump’s evolution since taking office: the makeup of his economic policy team. Last week, Trump filled one of the last senior positions in his administration, nominating Kevin Hassett to lead his Council of Economic Advisers.
Trump’s selection of Hassett is notable first for the fact that it happened at all. Trump was at one point rumored to be mulling leaving the job vacant; he instead demoted the job from his Cabinet. He earlier flirted with appointing television pundit Larry Kudlow, who would have been an unusual choice for the job. But in the end, Trump settled on an utterly conventional candidate. Hassett is a mainstream, respected conservative economist, well-known in D.C. (and largely anonymous outside of it) as an expert on taxation and the budget. A researcher at the American Enterprise Institute, a right-leaning think tank, Hassett advised the last three Republican presidential candidates.
Most significant, Hassett is seen as a moderate on immigration and trade. Those views put him at odds with the man who had until now been the most prominent economist in Trump’s administration, Peter Navarro. Navarro, an outspoken critic of free trade in general and China in particular, remains in the administration as a top adviser on trade. But his influence seems to be waning. Gary Cohn, the former Goldman Sachs president who now chairs Trump’s National Economic Council, appears to have settled in as Trump’s top adviser on economic issues (and maybe other issues, as well). Cohn is pro-trade, pro-immigration and is (or at least was until recently) a registered Democrat.
Trump is also, according to his interview with the Journal, considering keeping Janet Yellen around as chair of the Federal Reserve when her term ends early next year. He had previously said he planned to replace her. Reappointing Yellen would continue a recent pattern of presidents keeping Fed chairs named by their predecessors. But it would also represent a remarkable shift for a president who once vowed to blow up Washington’s approach to economic issues.
Health care: Medicaid is still a battleground
While Congress is away for spring recess, Republicans are reportedly taking another stab at crafting a bill to repeal and replace the Affordable Care Act. As they debate payments to insurers and what kind of health insurance plans should be legal, there has been little discussion of one of the major sticking points within the GOP: what to do about Medicaid. Many Republicans, especially in the House, want to scale back the program for low-income people. But Republican governors, senators and House members in several states have spoken out against these cuts. Look no further than the opioid epidemic to understand why.
Opioid abuse has ravaged many parts of the country, and states have used Medicaid (and the federal dollars it brings) to tackle the problem by paying for people with substance use disorders to get treatment. The Department of Health and Human Services issued in a report in January (while Barack Obama was still in office), showing that states that expanded Medicaid saw a drop in hospitalizations for substance use among uninsured patients; states that didn’t expand Medicaid saw an increase. In West Virginia, the state with the highest death rate from overdoses, 45 percent of all drug-assisted treatment (considered the best treatment available) is paid for by Medicaid. In Ohio, it’s nearly 50 percent.
Ohio Gov. John Kasich has been vocal about the role Medicaid has played in tackling the problem in his state, and he leads a coalition of GOP governors who are against efforts to dramatically reduce the program. That argument may not win the day in the House, but it has gained traction in the Senate, where several members have said they will block any bill that doesn’t guarantee “stability” for Medicaid. So far, of course, GOP replacement bills have failed to make it through the House. But with Trump saying he plans to keep on fighting to repeal the ACA, the GOP is going to have to come to an agreement on Medicaid.
Environment: More power, fewer dollars
Scott Pruitt came into office at the Environmental Protection Agency with two big rhetorical agendas: Increase strict adherence to the rule of law, and ensure that regulatory power lies with the states, rather than the federal government. But if the administration gets its way, states will have to take up the regulatory mantle without much in the way of extra funding to help cover their additional costs.
Trump’s preliminary budget outline, released last month, proposed reducing EPA funding $2.6 billion. And a March 21 memo from the EPA’s Office of the Chief Financial Officer details a draft budget for 2018, showing which programs would receiving funding cuts (most of them) and which happy few could expect a financial boost.
The draft budget justifies cuts to federal programs on the basis of narrowing the agency’s focus to “enforcement areas that are not delegated to states” and refocusing the EPA on “supporting states and tribes as the primary enforcers of environmental laws.” But it also cuts the budget for many state and tribal grants — programs that help states manage the costs of monitoring and enforcement, and help local governments remain in compliance with regulation. For instance, the State and Local Air Quality Management grant program and its tribal equivalent are each set for a 30 percent funding cut, while a $14 million grant program for local lead abatement has been eliminated entirely.
The budget does provide increased funding for local water infrastructure, something the document touts as reflective of the administration’s commitment to infrastructure development. This includes $2.3 billion to a loan program called the Clean Water and Drinking Water State Revolving Funds and $17 million for a new Water Infrastructure Finance and Innovation program. But that’s only a small increase over the Obama administration’s $2 billion revolving funds budget in 2017, and the other new water finance program is dwarfed by a $489 million USDA water infrastructure funding pool that the Trump administration has proposed eliminating all together. Ultimately, the Pruitt EPA appears to be expecting the states to do more with less.