Trump Gives His State of the Union, and Yellen Bows Out

Any magician knows that the success to a good trick is to persuade the audience to look in one direction while the action is in another.

Donald Trump is not a magician. And despite his hyperactivity on Twitter, he is not particularly good at distracting attention. Yet it might be that as his first State of the Union address to Congress became front page headlines, the audience would have been better looking elsewhere.

The constitutional requirement for the US head of state to give a report to both houses of Congress is a long-standing one. The address in person is more modern. Presidents from Washington to Lincoln all gave their report on the state of the union by letter. It was only Woodrow Wilson who began the tradition of appearing in person before lawmakers.

Given Trump’s “modern-day presidential” addiction to social media, it is surprising he did not fulfill his legal obligation in 280 characters.

As it was the President declared a “new American moment” in a speech that boasted of promises kept while reaching out to Democrats as the country heads towards midterm elections that could be disastrous for his party.

Reading from an autocue and his delivery less than inspiring, Trump claimed credit for cutting and reforming taxes while obliterating regulations. He harked back to his nomination of Neil Gorsuch to the Supreme Court. He laid claim to tackling ISIS. This was not so much a state of the union as an extended conversation with his conservative base. Much of the braggadocio may come back to haunt him.

The stance might also ensure that Democrats, currently finding an unexpected unity as they fight the president, are more reserved in dealing with Trump. While he laid out vague plans on infrastructure and immigration, he expected a grand bargain between the two parties that encompassed border security and pathways to citizenship.

It sounded good. The sticking point is the president himself. He might have stuck to script as he gave his speech but he rarely does. His willingness to cross the road to start a fight is starting to catch up with him.

Even as he spoke, House Democrats groaned as he tried to speak about “migration flow”.

It shows how low pundits set the bar that any of this can be called “presidential”.

It’s a big agenda and, no doubt, THE SUN KING will be tweeting about it

Considering that Trump’s greatest boasts were on the economy, it was perhaps significant that as he was speaking, Janet Yellen was preparing for her final meeting as Fed Chair.

Unlike the State of the Union, there was no show, no drama. There was not even a press conference as Yellen’s four-year tenure ended. No with a bang but a whimper, eh? If Trump likes to claim credit for other’s acts, the outgoing chairwoman is shy about boasting about her own success.

Yet she leaves her post having met her target on maximum employment, with the jobless yet at 4.1% down from 6.7% when she assumed office; she has kept inflation in check; she wound down her predecessor’s Quantitive Easing scheme, ensuring that the Fed can again respond to future shocks by turning on the money supply.

Trump might brag that the stock market is at record highs under his presidency, but it is under Yellen that the market climbed more than 70% in four years.  

Once again the Fed refused to move interest rates (this time unanimously). Now Yellen’s successor, Jerome Powell, will have to decide whether to stick to his predecessor’s cautious policy or be more hawkish in “normalising” rates. Certainly observers are expecting a March rise - and at least two others later in the year.

As in politics, Yellen’s legacy will be as much affected by her successor as anything she did in her time as chairwoman. That she was not re-appointed to a second term was not surprising, give Trump’s animosity towards her on the campaign trail. However, his appointment of Jerome Powell as the new Fed Chair suggested more caution than is usual for this president.

Unlike Yellen, he is no economist but Powell has the ability to shape Trumponomics as much as the president himself.   

As the parties begin to face off for elections that could change the course of Trump’s presidency, top of Powell’s agenda will be how to react to the recent Republican tax cut, the impact in the decline in the dollar on global growth, and more generally how upgraded growth forecast across the world will affect domestic growth. It’s a big agenda and, no doubt, the Sun King will be tweeting about it.

The president spoke on Tuesday but it may be that the more significant event was on Wednesday. What does this say about his presidency? In his State of the Union Trump threw into the air a host of vague aspirations. The details he left to others. It may be that he has done the same with his economic agenda. Its success or failure lies with Powell.

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