M. Scott Brauer for Bloomberg Businessweek

Trump’s Big Challenge: Getting Things Done Without Money

He may want to make America great again, but there’s almost no room for new spending.

Having won the election, Donald Trump faces the daunting challenge of getting something done. One of his biggest obstacles isn’t politics; it’s money. Trump has promised to cut taxes massively while keeping the government’s hands off Social Security and Medicare—autopilot programs that are consuming a growing share of the budget. “New spending would be more than 10 times larger than new revenue” under Trump’s plan, according to a Nov. 4 report from a pair of Washington nonprofits, the Committee for a Responsible Federal Budget and the Urban-Brookings Tax Policy Center. The biggest category of new spending in the Trump administration, the report says, would be interest on the national debt.

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Budget math points to a problem for Trump. He may have vanquished Hillary Clinton and doubters in his own party, but his administration can’t defy economic gravity. It’s a simple fact that cutting taxes will increase red ink. And a mature economy like that of the U.S. doesn’t suddenly begin growing at 5 percent or 6 percent annually, as Trump has promised—especially if its working-age population is trimmed by the deportation of undocumented aliens, as Trump has also promised. Interest rates soared on Nov. 9 as bond investors digested the election results.

Then again, Trump may not be wedded to his own tax plan. He appears to have few fixed ideas beyond his determination to make America great again. His style, honed from decades in real estate, is to stay flexible and leave the details to staff. “I never get too attached to one deal or one approach,” he wrote in The Art of the Deal. “It’s very difficult to know even what he intends to do,” says James Athey, an investment manager at Aberdeen Asset Management.

During the campaign, Trump hammered on cutting taxes, reducing regulation, making better trade deals, opening more land to drilling and mining, protecting gun ownership, appointing conservative Supreme Court justices, repealing and replacing Obamacare, pressing allies to spend more defending themselves, cracking down on illegal immigration, and of course building an impenetrable wall on the Mexican border that Mexico will pay for.

A First Look at Trump’s Agenda

Aside from trade and immigration, there’s a lot in Trump’s agenda for business to like. The problem for executives isn’t the platform so much as the crazy-making way Trump has of arguing his case—the exaggerations, the alienating language. (Case in point: Mexico has made clear that it’s not paying for any border wall.) Those extravagant promises are also a legacy of his background in the world of resorts and casinos. Again, from The Art of the Deal: “My style of deal-making is quite simple and straightforward. I aim very high, and then I just keep pushing and pushing and pushing to get what I’m after.”

His tax package is an example of aiming high. On its face, it’s a budget-buster, but viewed as the extreme opening offer in a tough negotiation, it’s a way to buy extra negotiating room for the Tea Party caucus on Capitol Hill. “You can get huge, classic supply-side stuff through,” says Chris Krueger, senior policy analyst at Cowen Group, a financial-services company.

Trump will enter office with the advantage of Republican majorities in both houses of Congress. President Obama had a Democratic majority in both houses for his first two years, which is when he pushed through many of his signature achievements, including the Affordable Care Act, the Dodd-Frank Act, and the rescues of General Motors and Chrysler. For Trump, infrastructure could be a quick and easy win. Both parties have circulated plans to couple it with a deal to lower the top federal corporate rate, which is 35 percent. Companies could be forced to repatriate foreign-held profits at a temporarily low rate, possibly less than 10 percent. A chunk of the resulting tax revenue would be committed to infrastructure.

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(L) M. Scott Brauer for Bloomberg Businessweek; (R) Jonno Rattman for Bloomberg Businessweek

Other issues will be tougher. House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell have been cool toward Trump, though Ryan was quick to credit him with preserving Republican control in Congress. In the Senate, Elizabeth Warren and Bernie Sanders can be expected to block Trump at every turn with parliamentary maneuvers, including filibusters. Tax cuts, health care, and immigration are just three areas in which Congress has a say. And Senate Democrats are likely to resist a Trump nominee to the Supreme Court, especially after Republicans blocked Obama’s choice, Merrick Garland.

Trump doesn’t need Congress to implement all of his agenda. He’s pledged to expunge Obama’s legacy by countermanding many of the executive orders and actions that Obama used to move his initiatives forward. Those include policy maneuvers to protect undocumented immigrants from deportation and committing the U.S. to worldwide efforts to fight climate change.

But Trump won’t have as free a hand when it comes to rolling back regulations the Obama administration has put in place. No president can unilaterally undo regulation, says Jason Grumet, president of the Bipartisan Policy Center: “He could start a notice of proposed rule-making, but that wouldn’t have the splendor he is looking for.”

Free-trade advocates will certainly be on the defensive for the next four years. Trump campaigned against the 12-nation Trans-Pacific Partnership—as did Clinton. Rufus Yerxa, president of the National Foreign Trade Council, says supporters of trade pacts such as the TPP need to communicate their advantages more effectively. “We cannot forget that 40 million Americans have their jobs tied to trade,” says Myron Brilliant, executive vice president of the U.S. Chamber of Commerce.

Because Trump has denigrated the Washington establishment, he can’t expect much support when the chips are down. The classic populist’s strategy is to bring one’s case directly to the people, and Trump is a master at that. What’s unclear is whether energizing his base will produce policy victories. His core constituency is white men, particularly ones without a college education. Their free-floating anger is hard to build a governing coalition on. “The Trump voter is frustrated and disillusioned,” says James Wallner, research chief at the conservative Heritage Foundation. “The question is, how do you bring that person into this larger conversation about what’s the path forward?”

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