By Cecil Hoge
On the morning of November 9th, 2016, I decided to go for a row. What perhaps would make this unusual for most people was the fact that at the time I went, 5:15am, it was still pitch black and about 45 degrees Fahrenheit. Most people do not go rowing at that hour or in that temperature, but I am a little strange and going at that time in that temperature is not unusual for me.
Many people would think that it is quite cold and perhaps dangerous to go when it is dark and relatively cold, but I paddle or row almost all year around and about the only thing that stops me is ice or driving rain or driving snow. To be sure, I was not wearing a short-sleeved knit shirt with someone’s nifty logo or a bathing suit. Rather I was wearing a new Duluth Grab jacket, good gloves, warm socks, comfortable Croc mocs and fleece lined pants. When I go rowing, I am as snug as bug in a rug, warm and toasty, ready for a relaxing and energizing and warm row for an hour or more.
You might have noted that November 9th, 2016 was the day after Donald Trump was elected our 45th President of the United States. That’s true. And I will say that The Donald was on my mind. I had stayed up a good portion of the night before watching the election results. Around twelve the night before, when the outcome I dreaded was about to occur, I decided to get some rest. That worked until about 4:30 when I woke up, flipped on the TV and confirmed what I feared all along. Donald Trump had been elected President. That was the end of possible further sleep, so I decided to get up, have a cup of coffee with my wife who always gets up very, very early, ruminate a bit with her on the fate of the world and then go for a row.
Before heading out into the dark, I poured another cup of coffee into a special spill-proof stainless steel coffee mug from Starbucks that keeps my coffee nice and hot and I headed out. As mentioned, it was almost pitch black when I got to my dock, although I could make out the shadow on the dock that was my boat. In touching the plastic seat of my rigger arm rower, I could feel it was completely soaked with a cold dew. Fortunately, I keep a dry seat cushion in a small waterproof boat locker on my dock, so it was only necessary to pull it out and place it on the wet plastic seat. With coffee safely on board, I slid my rowing kayak off of my dock and sat down on my nice dry seat cushion. I was ready to head out.
The first thing I noticed on this dark and chilly fall day was the fact that there must have been a lot of Canada geese around. Somewhere in the dark I could hear them squawking and flapping away. I was not sure just where they were, but that quickly became evident when I kept rowing and several hundred birds started squawking in an increasing crescendo and then began to take off, flapping their wings, squawking and quacking as they became airborne. It sounded like a 747 taking off.
I kept rowing on. I am used to noisy geese and a multitude of other birds. As I came out of my bay and headed into Setauket Bay (the next bay over), I could see light beginning to brighten the back of the bay. It was still dark, but now I could see some slight awakening of the sky and some lights from houses. Above you will see a picture of that.
Rowing out through Setauket Bay towards Port Jefferson Bay, I began to think, for the first time clearly, about the momentous events that had taken place the night before. Unlike most people, I had anticipated that Trump would win. I had calculated that there was a vast sea of discontented voters out there and that Trump had managed to channel into their fears and their dreams. Whether Trump knew or understood or felt their pain was perhaps something different, but what was clear to me, is that he had identified their pain and had locked on to that discontent as a movement, as he quite truthfully said. So, no matter his motives, I knew Trump had recognized the discontent in the electorate, the economic angst that affected the majority of voters and had bent that to his own purposes.
As mentioned, just after I had woke up at 4:30, I had checked out the latest election stats and by that time, the game was over and Trump had won his long march to the White House. What would he do with his victory I wondered? I had my own doubts and fears about that. Now, out on the bay, alone in the dark on that quiet chilly morning I had some clean air to breath, some hot coffee still in my cup and some time to ponder what the new Trump Presidency might mean.
To me, for sure, it was a sea change in the world. In my own mind, it was a tectonic plate that had shifted and somehow re-oriented all the world. What that meant, where it would lead, really was impossible to say in early morning light of that new day.
So what I fell back on was the campaign promises that I had heard Trump repeat time after time and I tried to speculate where those promises might lead. Now, I know that many of things that I worried about, other people deliberately voted for. With that in mind, here are some of the things that I was worried about:
Tariffs – Having been all my life an importer of goods to the United States, I have always believed that trade is good, not just for me, not just for our company, but for our country and for the whole world. To me the interchange of goods is important in itself and the access to good value products at reasonable prices that would not be available otherwise is also important. I know that trade often results in dislocations of technologies and in the loss of jobs here in the United States. That said, I have always felt that the benefits coming from trade are greater than the harm done by trade.
And here I would like to make one important personal point, in my own particular case, we have never been a manufacturer of goods, so we never closed a factory in order to buy cheaper goods overseas. And that is simply because we never had an actual factory to manufacture things. Rather, we have always imported unique good quality products that simply would not be available in this country otherwise.
By the same token, I know many companies that did have factories in this country, that did move their production overseas and did end up firing American workers. So, first and foremost, I can say that it is desirable to keep as many factories here and to keep as many people working in factories here as possible. That said, I am terrified that raising tariffs on foreign goods will kill existing business without creating new factories and new jobs in this country.
As some of you know, in the first year of the Great Depression, we did institute a wide range of tariffs on foreign goods and that resulted in many other countries instituting a wide range of tariffs on us. This was the Smoot Hawley Tariff Act of 1930 which raised tariffs on over 20,000 different kinds of imported goods. The full results of this act are still debated by economists today, but most economic historians believe the Smoot Hawley Act greatly deepened the worldwide depression, caused a collapse of trade around the world and resulted in millions of people losing their jobs in this country and around the world.
Of course, that was a long time ago and we do live in a different age. I do not believe that history repeats itself exactly but I do believe that things that happened in the past can happen again in some different form in the future.
Now, I know Mr. Trump is thinking to use tariffs as a negotiating tool. But tariffs are a blunt instrument and sometimes the results from an action are different than the results you anticipate.
I will cite Obamacare as an example of this. President Obama and the fact that the outgoing administration anticipated that they would get enough young people signing on to Obamacare to pay for the older people who would also sign on to Obamacare. But they guessed wrong and their numbers were off. Specifically, they got far less young people signing up for Obamacare and far more older people signing up for Obamacare. As one administration official said, it seemed that young people preferred to drink beer rather than sign up for health insurance. The result of this miscalculation was that Obamacare was a financial disaster, that costs for health are rising sharply and that this miscalculation probably helped Donald Trump get elected President.
I am afraid of the same kind of miscalculation about tariffs. When we announce new tariffs on other countries (after all, how else will they believe us), I am afraid other countries will announce new tariffs on us. That, I think, could lead to a trade war and a collapse of trade around the world. I would like to repeat that in the past this actually happened when we last announced tariffs on other countries in 1930. So there is a precedent for this actually happening.
I also think that tariffs would raise the price of many imported goods coming into the United States. And that could mean that the cost of many, many things we buy goes up… in example, the price of shoes, shirts, coats, cars, food, oil, steel, vegatables, fruit and many, many other things. Having been to China many times, having seen their economy as recently as a few weeks ago, knowing that they too are suffering from many of the same problems we are, I wonder if they will sit meekly by when Mr. Trump announces he is putting tariffs on products coming from China?
Perhaps, China will say, go ahead, make my day! If you do, we will also impose tariffs on products coming from the U.S. And one more thing, maybe, it is time to cash in on those little pieces of paper you call bonds. That’s what I fear. I know this is a fear only, and I also know that we need to wait to see what actually happens.
I would like to report that the day after I went rowing, November 10th, Bloomberg reported that while stocks have risen in the last two days, bonds have sold off sharply and that long-term interest rate of 30 year bonds has gone up dramatically in just the last two days. Those of us who remember the 1970s, probably remember that bonds sold off almost every day for several years throughout the Carter administration and this resulted the prime rate going to 12 and half percent. At that time, people had trouble getting mortgages at 14% to 16% annual interest. Let’s hope that is a part of history that is not repeated.
In the same Bloomberg program talking about declining bonds and rising stocks, Bloomberg interviewed a lawyer from Hogan Lovells.
The lawyer being interviewed was asked what promises could Donald Trump legally make good on. Somewhat to my surprise, the lawyer said with the executive powers that Congress had granted the President, Donald Trump could, without consulting Congress or the Senate, immediately impose tariffs on Mexico, China or any other country he chose of 45% or more. The lawyer went to say that the new President could also cancel Nafta or any other trade agreement presently in place and finally, he could also cancel Obamacare and our treaty with Nato. In short, this lawyer said President Trump could enact many of his promises by the end of January. That would indicate that we should know just how serious President Trump is about his campaign promises pretty soon.
But tariffs, Nafta, Obamacare, Nato are not my only concerns:
The Wall – I know that Donald Trump is great builder and he has built hotels and post offices and skating rinks and apartment buildings in many parts of the U.S. and around the world. So Donald Trump probably knows how to build a wall better than anyone.
That said, I am dubious that Mexico will pay for it, as President elect Trump has promised. I can see Donald announcing 35% or 45% tariffs on Mexican goods and no doubt that will produce some revenue for the US, but if Mexico also institutes tariffs on our American goods going into Mexico, like I-phones, like computers, like American cars, like America steel, like American copper, like American wheat, perhaps the tariffs instituted on both sides will reduce the sales of goods on both sides and perhaps the revenues from the announced tariffs will disappear as imports and exports collapse.
And then there is the little matter of the cost of the wall. Let me try to give you an idea of what that might be. I happen to have a little wooden fence that I need to replace. It is about 30′ long and 4′ high. I recently asked a local builder what he would charge me to replace my 30′ wooden fence. My local contractor said he would do it for $3,000. That was cheap, he assured me. Of course, my 30′ fence is only 4′ high and made of wood. I know for sure that Donald Trump is going to build a really beautiful wall and that wall is going to be at least 30′ high and 1989 miles long and, I am guessing, it will not be made of wood.
So, let’s do a little math: 4′ into 30′ is 7.5 times. So if my wood fence was 30′ high and 30′ long, it would cost, if all other things were equal, $22,500. Now there are 5,280 feet in one mile. That means there are 10,501,920 feet in 1989 miles – I have a powerful calculator that can figure these things out. Are you following me? Now if I then divide 10,501,920 feet by 30 feet, I get 350,064 30′ x 30′ wall sections. And then if I multiply 350,064 by $22,500, I come up with the calculation that it will cost $7,875,000,000 to erect a 30′ high wood fence. Of course, I think Donald Trump would select a different material. And while I know his preferred material is gold, I am guessing in this case the Donald would settle for steel, either powder coated or stainless steel.
Now, I do not know how much more a stainless steel or powder steel powder coated 30′ wall 12″ thick (I am guessing Donald would like it to be at least one foot thick) would cost more than a 30′ high wooden fence. I am gonna say that will cost at least ten times more, making the cost for the beautiful Mexican Wall $78,750,000,000. And when you think about it this really is that much. I mean that is less than the yearly sales of Amazon. That’s doable, isn’t it? Well, yes, but I think we have add a few other costs.
It seems to me that this beautiful wall will need some high tech cameras and lights for surveillance. Let’s say one camera every 300 feet, so if you have a border of 10,501,920 feet, that means you are going to need 35,000 cameras and lights to scan the wall night and day. So let say our President gets a good deal with Amazon or Best Buy and each camera is just $300, including installation. Well, that’s an another $10,500,000 for cameras. That’s still chump change.
But of course, these 35,000 cameras and lights will have to be plugged in which means we will need some electric. Here, our President could go solar (I am not sure that would be his choice, but who knows), but there is an upfront cost for installing solar panels to power 35,000 video cameras and lights. Let’s say that is another $10,000,000. That puts us at $78,795,000,000. That’s still doable.
But someone is going have to look at the video the 35,000 cameras spew out. Presently, we have about 20,000 custom officials patrolling the Mexican border. So lets say we need another 20,000 folks to review the videos that 35,000 cameras spew out and help catch any offenders and let’s say each person costs the government $30,000 a year. Well, that’s another $600,000,000 a year. So now we are getting close to $80,000,000,000 for the first year of the wall. And of course, I am not talking about on going costs for electricity, camera replacement and payroll costs. Those costs would on for as long as the wall is standing.
It is still not big number stateside, but for Mexico? It happens I looked up Mexico’s Gross National Product for 2014. That was a record year. It was $1,294,690,000,000 or a little over a trillion dollars and $80,000,000,000 is only about 6% of their Gross National Product. So, if you believe what Trump says, Mexico is going to be happy to give us 6% of their gross national product. Me, I am worried that Mexico may not pay up and we may get stuck with the $80,000,000,000 cost, not to mention the yearly ongoing cost for maintaining and patrolling our beautiful wall.
Of course, I may must say that my method of calculating the cost of the wall may be flawed, even if it seems pretty solid to me. Whatever, it is a big number and somebody, Mexico or us, will have to pay it.
Tariffs and paying for the wall are only two concerns or I have doubts I have about other things that Trump may do.
I am skeptical he will send 11,000,000 Mexicans back to Mexico, especially if he is also asking Mexico to give us 6% of their gross national product. It seems to me taking back 11,000,000 Mexicans might be kind of expensive. For that matter, gathering them up and just putting them on a bus might be pretty expensive. Let’s take a crack at that. If you gathering up 11,000,000 and 60 people and their stuff fit in a bus, you need 183,333 buses to carry them back to old Mexico. Let’s say is the cost $300 on average to find each illegal Mexican and let say we make a deal with Greyhound Bus to pick up and transport each Mexican for $60 each. That would mean it cost $360. per Mexican to send them back to Mexico. Again, this is only what my father call a guestimate, but if it was correct (and I see no reason why it is not), that would mean that somebody would have to pay $3,960,000,000. Since I do not want to pay this, I am hoping that the Donald can use his deal-making power to get Mexico to cover the 4 billion dollar or so cost.
Thinking about, I am wondering 35 or 45% is enough of a tariff. Maybe, we need 60%.
Then there is the matter of replacing the Obamacare Healthcare System. I can understand that the present system is a true catastrophe, but I am just wondering what we will replace it with? Will more or less people have insurance? Will patients with pre-existing health conditions now have to pay extra for their pre-existing health conditions? In an interview with 60 Minutes, our President Elect has said he try to make sure pre-existing conditions are covered. I am still a little dubious this will actually be practical.
And what about taxes? Will corporate taxes really go down from 35% to 15%? I would love that, especially if I are going to have pay a 35% to 45% to 60% tariff on the goods we import, I am going to need a tax reduction.
I can only hope the Donald is telling us the truth on taxes, because I have the feeling we are going to need help to pay for some other things.
I cannot say if my doubts and fears are realistic. I can only say I have doubts and fears. It certainly is too early to make any prediction of what will actually happen and I do believe he was legitimately elected and we have an obligation to let him take his best shot at fulfilling his promises.
Fortunately, most of my thoughts and doubts and fears, drifted out of my mind as I rowed out into Port Iefferson Harbor. There I was greeted by a new dawn, a bright red sky rising above an all beautiful horizon. The view that stretched out before me was almost enough to make me forget my doubts and fears. You can see the picture below. In the meantime, I leave with an old nursery rhyme:
Row, row your boat,
Gently down the stream,
Merrily, merrily, merrily,
Life is but a dream.