In the movie “Saving Private Ryan,” multiple brave soldiers give their lives to save one (the last-surviving of four brothers) in World War II. During a final, chaotic and riveting battle scene, Ryan is miraculously saved, but with tremendous loss of life. A bloody and dying, married, teacher from Pennsylvania – Captain Miller (played by Tom Hanks) – tells the farm boy from the Corn Belt – Private James Ryan (played by Matt Damon) – to “earn it.” “Earn” the sacrifice!
In his twilight years, Private Ryan, now a grown man with wife and family, stands by the grave of Captain Miller in Normandy, France and asks his wife if he has been a “Good Man.” He wants to know if he earned the sacrifice that his fellow soldiers made.
The reason we bring this up is that supporters of the new 45th President of the United States, Donald J. Trump, may feel as if they sacrificed for his victory. They were (and are) called deplorable, racist, divisive, and stupid. And, in an unprecedented effort, the sitting 44th President of the United States traveled around the country on Air Force One giving speeches that were in large part personal attacks on Mr. Trump and his supporters.
None of this mattered. Just like in the U.K. Brexit vote, the commoners have defied the experts. Donald Trump reshaped the electoral map, and upset the status quo. Now he has to “earn it.”
The experts and the elite are shocked. U.S. stock market futures were down as much as 5% overnight. The French Ambassador to the U.S. said, “A world is collapsing…,” and China state media suggests US democracy is in crisis compared to the stable Authoritarian China. The mainstream media is stunned.
In some ways, we understand the market’s consternation. What comes after 60 years of government growth? Can it, or will it, be unraveled? What will a new world look like?
At the same time, we don’t understand the stock market swoon. Huge government growth has never created wealth anywhere in the world. Shrinking government would be a huge positive for economic growth and capitalism in general. That’s why we think the markets post-election swoon won’t last long and is a buying opportunity.
Let’s describe it this way. In the past, when Mr. Trump bought a hotel, he didn’t fire the chambermaids and the airconditioning guys, he fired the management. The US government has involved itself in every area of the economy. As one measure of this, compare the size of the non-defense federal budget to GDP – back in the early 1950s it was roughly 7%, today it is 18%. No wonder politics has become so nasty. Multiple trillions of dollars are at stake, and people will fight hard to keep them.
If Mr. Trump tries to roll-back government (and we hope he does) he will be fought by the stakeholders of government at every turn. Those stakeholders include the bureaucrats who run the programs and exercise regulatory control over so many industries, the mainstream media who get access to the bureaucrats, and the actual beneficiaries of government spending programs. That’s a large, powerful and noisy group.
Mr. Trump ran on a populist platform, especially when it came to trade. He wants to yank support for TPP – the Trans Pacific Partnership – a new trade bill negotiated with Asia. He also wants to unravel NAFTA – the North American Free Trade Agreement – a free trade agreement with Canada and Mexico signed in 1994.
