Month: January 2017

2017 & Trump

All set to follow Donald Trump into 2017 and a new era in American history. I can’t wait to see how it turns out. An anti-government maverick is now the top man in the government. The head of a small, close knit, real estate development company is now in charge of the largest, most unwieldy bureaucracy in the world. The man who bashed Wall Street and big banks is bringing in Goldman-Sachs Wall Streeters  to help him drain the swamp and make America Great Again.

Two denizens of the swamp who are safe for the time being are Congressman Paul Ryan and Senator Mitch McConnell.  Congressman Ryan is a budget expert with right wing leanings and an established leader in the House. President Trump is going to need both of those assets. Senator Mitch McConnell kept the Supreme Court vacancy open for a Right Wing president. President Trump is going to be able to fill that vacancy with a proper conservative. Donald Trump owes Mitch McConnell. The two of them should be able to work together to push through an ultra-conservative agenda even though Senator McConnell has openly expressed his disdain for the incoming president.

The promised renaissance in American manufacturing is a safe target. American manufacturing has been on the rise almost since the day the last Republican president went into hiding. Neither George W. Bush nor Ronald Reagan produced as many manufacturing jobs as Barack Obama. The good news for President Trump is that the sitting president has little control over the growth of jobs. President Reagan could have fought harder to keep American companies from sending jobs overseas. President Bush could have done better in a lot of areas. But the growth of manufacturing jobs over the last eight years has more to do with global economic conditions than government policy. As long as the largest, most powerful economy in the world does nothing to alter those economic conditions, President Trump should get credit for a large increase in manufacturing jobs.

Tearing up trade agreements and imposing punitive tariffs are two things that could very well upset the favorable economic conditions. That is the bad news for President Trump and his supporters. He can’t make things better but he can make them worse.

President-Elect Trump’s announcement that he will cancel the contract for new presidential planes because the planes are too expensive brings up some issues. The current planes are 25 years old. Very important people use those planes. The planes should be replaced in a timely fashion instead of waiting for one to crash while carrying the POTUS across the country. Apparently President Trump plans to rent his private, personal airplane to us, the people, for use on government business. We have no say in the matter. We will get use of that plane on a no bid contract. There will be no referendum to ask whether taxpayers would rather be renting a plane from the president or buying new ones which presidents will be able to use for the foreseeable future. We will not be given a projected cost for modifying Mr. Trump’s plane to make it suitable for use on presidential business. All we know is that President-Elect Trump has decided that $4 Billion dollars amortized over 25 years is too high a price for planes that will serve as the mobile office for the next five or six presidents. No expense is too great for upgrading the Trump special even though it may only be used by one president for the next four years.

Tradeoffs are important. The key economic issue is the cost of the best available alternative for meeting a need. Saying that the F-35 Joint Strike Fighter program should be cancelled because it is too expensive doesn’t make sense unless you have a less expensive alternative that will meet the mission requirements laid out for the F-35. That is an enormous problem. The F-35 is designed to replace aging fighters and add a few capabilities that no current fighter has.  It is possible that the F-35 is unnecessary. The aging fighters might be doing just fine and the new features may not be justified.

Senator John McCain, former Navy pilot with combat experience and chairman of the Senate Armed Services Committee, believes that we need the F-35. President-elect Donald Trump, career real estate developer, believes that the jet is too expensive.

An inexpensive, state of the art fighter plane is an oxymoron. Even a proven fighter like the F-16 does not come cheap. A state of the art, all-purpose aircraft like the F-35 will be much more expensive because of its new hardware and software. The cost of designing, developing and testing not only the aircraft itself but all of the new capabilities is unbelievable. The F-35 has to pass 56 thousand tests before it gets a stamp of approval. Testing alone could run into the hundreds of billions of dollars.

The cost drivers for the F-35 were put in place 20 years ago. At that time military experts put together a wish list for their new dream machine. A request for proposal was circulated and Lockheed Martin was selected as the prime contractor in 1997. The requirements were probably overstated because engineers cannot help themselves when they are dreaming about what could be. The price was probably underestimated because the contract goes to the lowest bidder and the people evaluating the bid are incurable optimists.

At this point in time, there are no good alternatives. The F-35 is a clear winner for President Trump’s agenda. The planes are in production. That means the program is providing jobs – good paying jobs, which candidate Trump promised to deliver. At least 10 countries are lined up to buy the fighters. That is a plus for our balance of trade and our economy in general. Adding the F-35 to our arsenal bolsters our armed forces and our security. Trump has made promises on both scores.

The problem may be that the project with all of its benefits has been moving along without any input from Donald Trump. He needs to do something dramatic so that he can claim credit for the results. All that President Trump needs to do is declare that the fighters are overpriced because of mismanagement under the Obama administration. He can then refuse to pay full price for them.

If President Trump and the manufacturer, Lockheed, cannot come to an agreement on an acceptable price for the F-35s, he could kill the program.  Or he could let the DOD continue working the problem. Cost control and cost cutting efforts began under Secretary of Defense Bill Gates back in 2010. Since that time the number of aircraft ordered has dropped significantly. This has kept the overall cost of the program somewhat under control but has increased the price for each F-35 aircraft.

The solution is to order more planes. The price of a plane will drop to an acceptable number while the overall cost of the program will rise. Lockheed has already stated that the cost of each aircraft would drop if more units were being bought. President Trump can make a show of changing the game and rescuing the F-35 program by agreeing to the purchase of more F-35s after the election in 2024 which would put the burden of cutting the program on a future president. President Trump could save billions on the purchase of the F-35 aircraft already on order and Lockheed would be guaranteed to make its money either in sales or contract cancellation costs.

Fighter jets are not at all like hotels. Hotel rooms are interchangeable. There may be some advantages to paying $800 per night to stay in a Trump hotel but you can sleep just as well in a room that costs less than $100 per night. As a matter of fact, if you are willing to look on line, you can probably book a room at aTrump hotel for much less than full price. Most people are not going to pay full price for a room at one of Trump’s hotels. That may be the reason that the President-elect objects to paying full price for our new fighters. But he is not going to be the one who will have to fly into combat in an aircraft that was bought at a fire sale. You would not want to attempt combat operations in a business jet just to save a few bucks.

In any aircraft, safety of life is an important consideration. In a combat aircraft, safety of life depends on speed, maneuverability, weaponry, armament and threat detection. These features are expensive. But a fighter jet without them is worthless.

Donald Trump likes to portray himself as an exceptionally skilled business man even though he is well down the list of wealthiest Americans. He was fortunate enough to get a big boost from his father and his grandmother. They laid the foundations for his success. They provided mentoring and money to get him started.

He did not create the Trump organization. He joined the firm, Elizabeth Trump and Son in 1969. He took over the firm in 1971 and renamed in the Trump Organization. Since then the company has seen some pretty bad times but managed to recover. Trump has gone through six bankruptcies. His casino operations in Atlantic City were a business failure even though Trump himself managed to walk away with millions in the end. His most successful business undertaking so far has been marketing the Trump brand. He makes most of his money by putting his name on the work of others. Most recently he has arranged to be paid for the use of his name as executive producer on the resurrected Celebrity Apprentice.

President-Elect Donald Trump is what you get when enough voters in this country follow Sarah Palin’s call for us to go rogue. He has a lot of good ideas and seems sincere in his determination to fix things that are wrong in America. But he is approaching the problem like a bull in a china shop. President Obama cancelled President Bush’s Mars initiative but he replaced with a more plausible program.

Donald Trump has threatened or promised to cancel contracts, throw out agreements and take forceful action against anyone who opposes him. He courted Taiwan as a direct challenge to China while praising Russian leader Vladimir Putin. President-elect Trump has publicly and vociferously dismissed evidence that Russians have hacked into strategically important computer systems and meddled in the US elections.

He is signaling a new world order. We have is assurance that it is going to be okay or even better. For all we know he is whistling in the dark. He may already be several cloud layers above his level of incompetence. He has made mistakes – big mistakes – in the past. He will certainly make a few more before he moves on to replace God in his heaven.