We woke up this morning to a very different world than most of us expected twenty-four hours ago: the prospect of a Trump presidency and a Republican-controlled Congress. After four years of political gridlock, the odds have improved immeasurably that something will get done in Washington. You might not like the result, but the logjam will break. The ramifications for foreign and domestic policy are far-reaching.
Herewith are some preliminary thoughts on what a Trump presidency means for Virginia.
Energy policy. Trump famously declared global warming to be a hoax perpetrated by the Chinese, and he has campaigned on the promise to boost the U.S. energy economy and revive the coal industry. It’s safe to say that he will do what he can to scrap the Clean Power Plan, which is designed to slow global warming by reducing CO2 emissions from electric power plants. Whether he can do so with a stroke of the pen — issuing an executive order that reverses President Obama’s order — is not clear to me. But one way or the other, I expect he will modify the plan significantly if not kill it outright.
What does that mean for the future of Virginia’s electric grid? Coal is the big winner. Most likely, some coal-fired power plants in Virginia will enjoy an extended lease on life. In the case of Dominion Virginia Power, that implies the need for fewer natural gas-fired plants in the future (or at least a delay in their deployment), which in turn implies diminished future demand for natural gas. What does that portend for the proposed Atlantic Coast Pipeline and the Mountain Valley Pipeline? I’m not sure, but these are obvious questions to ask.
The future of solar and wind energy also is up in the air. Congress has extended hefty tax credits for the renewable energy sources well into the 2020s. Trump and Congress may spike those subsidies, and the political pressure will be off Dominion and Appalachian Power to boost their commitment to solar and wind. But the economics of solar and wind are steadily improving, and Dominion has stated its conviction that there is value in having a diversified energy portfolio. Furthermore, there is nothing to stop merchant power generators from building solar farms and wind farms and selling the energy into wholesale electricity markets, thus bypassing the established utilities.
In sum, while the pace of adoption may slow, the progress of renewable energy, electric vehicles, battery storage, voltage regulation and other technologies suggests that the electric grid will look very different ten years from now than it does today, regardless of what Trump does. Virginians need to prepare for that future, even if it is not imminent.
Medicaid. Trump campaigned on a promise to end and replace Obamacare. Repealing the program will probably be more difficult than Trump was willing to admit on the campaign trail– will he really yank benefits from the millions of Americans who benefited from the plan? — and his plan to replace it is still fuzzy. But it’s a safe bet that the option of expanding Medicaid under provisions of the Affordable Care Act in Virginia will be taken off the table.
Given the unpopularity of Obamacare with a majority of the population and the promise of Congressional Republicans to repeal it if they got the chance, General Assembly Republicans were wise to have rejected Medicaid expansion. Thankfully, Virginia maintained its safety net of hospital-provided indigent care, health clinics, health wagons, and other patchwork programs that provide at least a modicum of treatment for the poor and near poor. That safety net is inadequate but it’s better than nothing.
One thing Virginia can do to replace Obamacare is eliminate the dozens of mandated benefits that drive up the cost of open-market health insurance. One reason the plans in the Obamacare health exchanges are so expensive is that they are gold-plated with federally mandated benefits. If Trump and Congress repeal those mandates, state mandates still will stand in Virginia unless the General Assembly repeals them as well. Health insurers should be given the option of offering stripped-down, basic health coverage which, while less than ideal, would provide cheaper options than are available now.
Military spending. Virginia’s economy has taken a big hit from the reduction in military spending under the Obama administration. Trump has promised to rebuild the military. A Trump presidency undoubtedly will spare the state from further defense cuts, but given the budget box the country is in — a $19+ trillion national debt, rising deficits, and a Federal Reserve Bank seemingly intent upon nudging interest rates higher — it is difficult to see how the U.S. can ramp up military spending to anything close to Bush-era, war-on-terror levels. Relief may be coming, but the glory days are not returning.
Boomergeddon. Dr. Trump has been peddling a magical elixir of tax cuts, deregulation and a confrontational trade policy to get the economy rolling again. Let’s just say I’m skeptical. Trade wars will be disastrous. Tax cuts may goose the economy, but they will add to the deficit. Deregulation will help, but I think there are practical limits to what can be deregulated. Yes, deregulating the broadband sector and re-examining Dodd-Frank bank regulations could provide a stimulus. But most regulations are embedded in the economy and don’t make sense to scrap. Just to pick one example, are we really going to deregulate coal mine safety after mining companies have already created the technologies, developed the business practices and absorbed the costs of meeting those regulations?
While some economic sluggishness can be blamed on Obama administration policies, not all of it can. As I noted recently on this blog, the aging of the population and the lack of growth in the workforce are demographic trends impervious to public policy manipulation. Meanwhile, Trump has evinced no interest in reforming entitlements like Social Security, Medicare, Medicaid and the panoply of anti-poverty programs. Massive spending increases are baked into the cake. The United States is in a fiscal box that limits our economic options, and there is no politically painless way out of it.
Bottom line for Virginia: Don’t look for a miraculous restoration of economic growth and tax revenue. Budget austerity is the new normal. Trump won’t change that. We need to get on with the business of re-thinking the way state and local governments do everything.
