Sunday, December 11, 2016

What’s Behind Trump’s Move To The Right?

He owes nothing to the old guard, he see a window for bold reforms, and he knows who his enemies are.

By John Fund
The National Review
December 12, 2016

The biggest surprise Donald Trump has provided as president-elect is just how conservative a cabinet he is putting together. “This is a more conservative cabinet than Reagan assembled in 1980,” says Ed Feulner, a key Trump transition adviser. As president of the Heritage Foundation at the time, Faulkner provided guidance for Reagan’s choices.

The conservative cast of the nominees thus far is somewhat unexpected, given Trump’s well-known reputation as a non-ideological thinker who has often backed big-government solutions. Plus, Trump was a registered Democrat until 2009. Indeed, Trump’s entire family is largely non-ideological. It was only last August, in a meeting with New Jersey governor Chis Christie, that Donald Trump Jr. ticked off a list of his father’s new positions and said, “Well, I guess that means we’re conservatives!”

Clear traces of the old, more liberal Trump remain as he employs the bully pulpit against companies who move jobs overseas. Trump labels such firms the “dumb market.” He has also selected non-ideological Goldman Sachs bankers to run the Treasury Department and direct the National Economic Council.

But, more broadly, Trump has pleased conservatives with his picks. Mitt Romney, Rudy Giuliani, and Chris Christie are all moderates who backed Trump, but they have been excluded from the cabinet (though, at this writing, it’s not certain whether Romney will have a place or not in the administration). Trump’s nominee to lead the Environmental Protection Agency, Scott Pruitt, has frequently sued the agency. Betsy DeVos, his nominee to run the Department of Education, has consistently supported school choice. Labor Secretary–designate Andrew Puzder opposes increases in the minimum wage. Ben Carson, Trump’s choice for secretary of Housing and Urban Development, has railed against some public-housing advocates as “Saul Alinsky poverty pimps.” Tom Price, the Georgia representative slated to head Health and Human Services, has been a fierce critic of Obamacare has supported Medicare reform.

“I’m trying not to be too giddy tonight,” Heritage Foundation president Jim DeMint told a group last week at a Heritage event addressed by Vice President–elect Mike Pence.

“The fact is many of these folks are at odds with the stated mission of the agencies they have been tapped to run,” Jim Manley, a former aide to Senate Minority Leader Harry Reid, told the Washington Post.

Liberals have reacted with horror to Trump’s nominees. Democratic Representative Rosa DeLauro of Connecticut told the Wall Street Journal that Puzder’s appointment was proof that “the fox is in the henhouse.” Using a different animal metaphor, liberal columnist Tom Moran, writing for the New Jersey Advance, said, “Almost across the board, Trump is picking reptiles whose views clash with the majority of Americans.”

So why has Trump moved in such a conservative direction since his election? Interviews with several people around him turn up several answers.

1. During the campaign, Trump learned a lot about the country and how its economic vitality had been sapped and its foreign-policy standing eroded during the Obama years. “He now recognizes that the problems confronting the nation require bold reforms, and delaying the treatment will only sap his political capital,” former education secretary Bill Bennett says.

2. The refusal of previous GOP presidential nominees George H. W. Bush, John McCain, and George W. Bush to back Trump in the general election has liberated Trump from obligations; he owes very little to them or their followers. “An entire existing infrastructure of establishment Republicans are not favored to run cabinet agencies as would normally be the case,” a key Trump adviser told me. “Fresh faces, new ideas, and résumés unburdened by special-interest ties move towards the top of the pile.”

3. The viciousness with which left-wing allies of Hillary Clinton and their media enablers attacked Trump persuaded the New York billionaire that there was no making peace with his adversaries. “He is not a traditional conservative, but he sure as hell knows who his enemies are,” a Trump aide told me. “He won’t be forgetting that either he defangs them, or they will defang him.”

Ari Fleischer, the former press secretary for President George W. Bush, was no Trump fan during the campaign, but he concurs that we are now seeing a more focused and determined figure — and one who plans to move in a conservative direction.

“What I’m seeing is a blunt confidence in what he wants to do,” Fleischer told the Washington Post. Trump also realizes, Fleischer adds, that his base of angry voters won’t settle for less than dramatic change.

For all his known vulnerabilities, Trump has often proven to be a highly effective operator when he focuses on getting what he wants. That’s exactly what worries left-wing groups and Democrats. Having underestimated him for so long, they now fear he won’t easily be forced to slow down or change course as he moves to overturn their agenda.

Article Link To The National Review:

Trump Won’t Take A ‘Wrecking Ball’ To Obamacare

By Fox News
December 12, 2016

President-elect Donald Trump left the door open Sunday on how exactly he plans to overhaul the regulation-heavy agenda pursued by the Obama administration, suggesting he wouldn’t dismantle all that his predecessor has done – while making clear the government needs to be more business-friendly.

Asked in an exclusive interview with “Fox News Sunday” whether he’d take a “wrecking ball” to President Obama’s legacy, the construction magnate responded:

“No. I don’t want to do that at all. I just want what’s right.”

The answer may have surprised those watching Trump’s recent Cabinet selections, which have included: a prominent ObamaCare critic to lead the Health and Human Services Department; a foe of Obama’s overtime pay expansion to lead the Labor Department; and a state attorney general currently suing the Environmental Protection Agency to lead that very agency.

Trump, at the same time, has sent mixed signals about his plans, meeting in recent days with prominent climate change activists Al Gore and Leonardo DiCaprio.

Asked on “Fox News Sunday” about the implications of those meetings as well as his Cabinet selections, Trump indicated his interest is in making the government more efficient and responsive to business.

At the EPA, he said, “You can’t get things approved. I mean, people are waiting in line for 15 years before they get rejected, okay? That’s why people don’t want to invest in this country.”

Trump said: “So we’re going to clean it up. We’re going to speed it up and, by the way, if somebody is not doing the right thing we’re not going to approve. … We can’t let all of these permits that take forever to get stop our jobs.”

Trump steered clear of committing to specific actions regarding projects that have pitted environmental interests against the energy industry, while suggesting economic considerations are paramount to him.

On the long-disputed Keystone pipeline that was halted by the Obama administration, Trump said “you’re going to have a decision fairly quickly.”

Asked about the Dakota Access Pipeline, which the Army Corps of Engineers wants to re-route following protests, Trump said he did not want to answer right now.

“But I will tell you, when I get to office, if it’s not solved, I’ll have it solved very quickly,” Trump said, before adding: “Something will happen. It’ll be quick. I think it’s very unfair. So, it’ll start, one way or the other.”

Trump, meanwhile, said he is still studying the Paris climate agreement – a pact, backed by the U.S. and dozens of other nations, committing countries to curb the global rise in temperatures – but, “I don’t want that agreement to put us at a competitive disadvantage with other countries.”

When asked where he stood on the environment and climate change, Trump would not be pinned down. “I’m very open-minded. I’m still open-minded. Nobody really knows,” Trump said. “Look, I’m somebody that gets it and nobody really knows. It’s not something that’s so hard and fast. I do know this: other countries are eating our lunch.”

Taken together, Trump’s comments, meetings and appointments speak to an incoming president still weighing his options on how drastically he wants to reverse or halt the Obama regulatory agenda.

In an indication that the incoming administration may be preparing for big changes with regard to energy sector programs and rules, his transition team reportedly has sent around a questionnaire asking the Energy Department for a list of appointees and senior executives – and details on who has spearheaded the agency’s clean energy initiatives.

One unnamed department official described the questionnaire as a hit list, according to an Associated Press report. The memo sparked alarm among some Democrats, as did Trump’s decision last week to name Oklahoma Attorney General Scott Pruitt to lead the EPA.

Pruitt has been involved in lawsuits against the Obama EPA, including over the controversial Clean Power Plan and waterway regulations. He also has suggested the debate over global warming – and the impact of human activity on global temperatures – is unsettled.

Former Democratic presidential candidate and Vermont Sen. Bernie Sanders suggested Sunday that the Pruitt pick suggests the meetings with Gore and others are not informing policy decisions.

“I’m glad they reached out to Gore, but apparently they are not hearing what Gore has to say,” he told CBS News’ “Face the Nation.” Sanders said it’s troubling Trump would appoint a climate change “denier” to lead the EPA.

Trump’s first order of Obama legacy business may be the Affordable Care Act, with congressional Republicans eager to send a repeal bill to his desk next year. Trump has said he plans to nominate Georgia Rep. Tom Price to lead HHS, which would put an outspoken ObamaCare critic at the helm of the agency that implemented the law.

House Majority Leader Kevin McCarthy, R-Calif., told Fox News’ “Sunday Morning Futures” that the Obama administration “pushed investment out” with its raft of rules and predicted a shift toward what he called “common-sense regulation,” including with health care.

“Our No. 1 focus is jobs [in the House],” he said. “[ObamaCare] is going to collapse on itself. We have to look at health care in a new form and have a new health care system.”

Article Link To Fox News:

Just Cutting Waste At The Pentagon Won’t Cut It

By Robert J. Samuelson
The Washington Post
December 12, 2016

Any reporter who’s written about the federal budget knows that there’s a surefire solution to every problem. It’s called “fraud, waste and abuse.” You want to end budget deficits? Just eliminate all the “fraud, waste and abuse” in the $4 trillion budget. The same is true for cutting taxes or raising spending. Attacking fraud and waste is virtuous and dispenses with the hard political work of making unpopular choices.

It’s a fantasy, of course. There isn’t enough “fraud, waste and abuse” — or we can’t get at it — to evade the difficult choices. But we cling to the mythology because it makes us seem “responsible” and reduces the budget problem to purging sloth and policing misdeeds.

I was reminded of this last week when The Post published a fascinating front-page story headlined “Pentagon hid study revealing $125 billion in waste.” The article, meticulously reported by Bob Woodward and Craig Whitlock, disclosed that a Defense Department study had found that the Pentagon was “spending almost a quarter of its $580 billion budget on overhead and core business operations such as accounting, human resources, logistics and property management.”

These jobs need doing, but it seems that the generals are being overwhelmed by accountants and property managers. If we could squeeze $125 billion out of the Pentagon’s annual budget, there’d be plenty of money to spend on true military needs. Indeed, the report asserts that the savings could cover the costs for 50 Army brigades. It sounds straightforward.

It isn’t. On inspection, it turns out that the estimated savings of $125 billion are spread over five years, from fiscal 2016 to 2020. This changes the numbers dramatically. Instead of annual savings of 22 percent of the defense budget ($125 billion out of $580 billion), the plausible cuts are closer to 4 percent ($125 billion out of the roughly $3 trillion projected in defense spending from now until 2020).

The confusion over whether the estimated savings apply to one year or five is the weak spot in an otherwise excellent piece of reporting. Whitlock and Woodward do say that the savings occur over five years, but they don’t emphasize the point. Moreover, there are mixed messages. Much of their discussion of costs focuses on the annual budget. A prominent graphic shows the annual defense budget and then claims that the Pentagon report “identified a way to save $125 billion.”

What would a “reasonable reader” conclude from the muddled evidence? By “reasonable,” I mean curious and intelligent readers who are not experts and are somewhat casual in their reading. These people, I think, might get the wrong idea. They’d come away thinking that the potential annual savings are enormous and that reducing waste would ensure an adequate military.

Of course, we should do everything possible to reduce waste, and the incoming Trump administration should take a second look at the report. But some outside budget experts are unimpressed. “It’s a somewhat speculative study,” says Michael O’Hanlon of the Brookings Institution. The targets for savings are more “back-of-the-envelope calculations” than detailed road maps for change.

Some “waste” reflects complexity. A few years ago, the Army tried to replace its Bradley Fighting Vehicle; it abandoned the project as too complicated, after spending $18 billion, recalls Todd Harrison of the Center for Strategic and International Studies. The new study complains that the Pentagon has more than 700,000 civilian and contract workers to support 1.3 million active-duty troops. But these workers, says Harrison, are often the cheapest way to get a job done.

Like O’Hanlon, Harrison doubts that the study’s full savings can be achieved. Many proposals would founder on congressional opposition and management practicality. “Can you do the same work with fewer people?” he asks. “If so, who should be cut? The study doesn’t answer that.”

These questions are obviously more than academic. The Pentagon says it needs more spending than the existing budget ceilings allow. Some experts agree. O’Hanlon argues that defense spending should increase by nearly $50 billion annually over existing levels. How should we respond to the various threats: terrorism, cyber-warfare, Russia, China?

Whatever the answer, we shouldn’t fool ourselves into thinking that the contradiction can be resolved by eliminating vast amounts of waste. If we wish to reduce defense spending, we have to cut the military’s size and capabilities. If we wish to expand the military, we need to pay for it.

The underlying struggle pits the Pentagon against the welfare state. Over the decades, national priorities have shifted dramatically. As late as 1990, defense spending constituted 24 percent of the federal budget and 5 percent of the economy (gross domestic product). In 2015, defense was 16 percent of the budget and 3 percent of GDP — and these figures were declining. This is one war the Pentagon is clearly losing.

Article Link To The Washington Post:

Do Republicans Really Want Tax Cuts?

The coming debate over tax cuts will be a debate about the rich in American society.

By Pratik Chougule
The National Interest
December 12, 2016

The coming debate over tax cuts will be a debate about the rich. “Middle-class tax cut” may be the Washington mantra, but the reality is that any broad-based reduction in personal income taxes, under the current tax code, would redound primarily to the benefit of the wealthy. As the latest IRS data reveals, the top 1 percent of earners pay over 39 percent of personal income tax revenues, while the top 5 percent pay 60 percent; the bottom 50 percent, meanwhile, contribute less than 3 percent of federal income taxes.

This poses a dilemma for the Trump administration and House leadership: Will the new, more populist base of the GOP ultimately support their tax agenda?

The inspiration behind the GOP’s tax plan is Reaganomics. From 70 percent on the eve of Ronald Reagan’s election in 1980, the highest income tax bracket fell to 28 percent after the Tax Reform Act of 1986. The economic dynamism that followed over the next two decades instilled in the Republican policy elite an enduring lesson: Tax cuts are not only politically feasible, they are the key to unlocking growth and innovation.

Particularly vindicated were supply-side economists, who emerged from the academic fringe and sold the Reagan administration on “across-the-board” tax relief. It was a radical move for the time—one that GOP Majority Leader Howard Baker likened to a “riverboat gamble.”

Gamble or not, tax reform paid off. As the country, in January 2000, marked its longest economic expansion in history, supply-side economists Lawrence Kudlow and Stephen Moore could credit marginal rate tax cuts for “unleash[ing] a great wave of entrepreneurial-technological innovation that transformed and restructured the economy.” Supply-siders were encouraged again in 2003 when the Bush administration pushed through upper income tax cuts. As Arthur Laffer and Moore noted in their 2008 book The End of Prosperity, the Bush tax cuts produced within four years 150,000 new jobs per month, $6 trillion of household wealth and a 95 percent increase in the number of millionaires.

So even in a populist moment, supply-side insights carried the day as Republicans formulated their tax plans heading into the 2016 elections. Trump has turned not only to Laffer, Kudlow and Moore, but also to a cabinet of wealthy executives who, like he, embody the capitalist success that the Reagan and Bush tax cuts fostered. The House leadership, likewise, developed its plan with the explicit intent to “replicate and build upon [Reagan’s] achievement.”

Ultimately, Trump and the House GOP reached similar policy conclusions. Both plans call for a flatter tax code in which the top income tax bracket is reduced from 39.6 to 33 percent and high-income taxpayers enjoy the largest cuts.

Reaganomics’ legacy may legitimate the economic case for upper-income tax cuts. But they leave unanswered the political question that the Republican leadership must consider before pursuing another wave of tax relief: Why, despite seeing the virtues of a low-tax society, have Republican voters tolerated a steady increase in taxes since the late 1980s? Barely three years after the Reagan tax cuts came into effect, Reagan’s Republican successor reneged on his “no new taxes” pledge, hiking the upper income bracket to 31 percent. Republican House Minority leader Newt Gingrich railed against this “supreme act of stupidity,” but the American people were more amenable—even in the immediate aftermath of the tax hike, 77 percent of the country agreed that “upper-income people” were paying “too little” in federal taxes. Republicans took control of Congress in 1994 on a pledge to cut taxes, but the upper income tax rate has never since dropped below 35 percent.

The answer lays in the evolution of the political coalition that made Reagan-era tax reform possible in the first place. Supply-side economists provided the intellectual framework for tax reform, but their ascent is intertwined with the broader realignment of the Republican Party.

As late as the presidential elections of 1976, the political map bore little resemblance to today’s red-blue divide. Regionally, Democrat Jimmy Carter won most of the South and Rust Belt, while Republican Gerald Ford swept the West, including California. As in 1972, there was no gender gap between the two parties; men and women voted in equal proportions for the Republican and Democratic candidates. Ideologically, the parties were a hodgepodge; Sunbelt conservatives and liberal Republicans remained in the GOP tent while Carter built on a New Deal coalition that kept African Americans, labor and evangelicals within the Democratic Party.

Reagan’s victory in 1980, however, rebranded the Republican Party. Through his attacks on the welfare state, Reagan united social and free-market conservatives who agreed, if nothing else, that the federal government had overreached into civil society. Across-the-board tax cuts, last championed by the Kennedy administration, became a unifying Republican strategy to “starve the beast”—to rein in an out-of-control federal government by cutting off its funding stream. The Keynesian consensus was shattered and supply-siders found a political opening to slash taxes on the wealthy.

This new, more ideological Republican Party created partisan fissures across gender, regional and urban/rural lines that define presidential politics to the present day. In every presidential election since 1980, men have voted for Republican presidential candidates at a higher rate than women. The South, mountain West and Great Plains have become Republican regional strongholds while the coasts and urban America have turned blue. And between 1988 and 2012, Democrats flipped America’s wealthiest suburbs, while rural counties shifted Republican by an average of two percentage points each election—trends that continued into 2016.

The outsized role that non-coastal white men have played in in the modern Republican Party has had mixed outcomes for anti-tax conservatives. The reason is that the very information age economy that Reagan-era tax cuts fueled has also undercut the status of white males in the upper echelons of American society. This, accordingly, has diminished the appeal of upper-income tax cuts for a core segment of the Republican Party.

Relative to white Republican men, information age prosperity has benefited three (somewhat overlapping) groups that have drifted towards the Democratic Party since Reagan.

The first is upper class women. The growing female role in the highest-earning professions has accompanied the erosion of patriarchal family structure in the upper class. In 1983, women comprised just over a third of high-paying executive, administrative and managerial occupations. Through the 1990s, however, college-educated women followed career tracks parallel to similarly educated men, experiencing wage growth that not only kept pace with, but perhaps even exceeded, that of their male counterparts. By 2001, women made up nearly half of high-paying occupations, and since the 2008 economic crisis, women have received higher returns than men for college completion. Even in upper-class households that have not followed the national slouch toward single parenthood, “breadwinning mothers” are becoming the norm. In 2011, married mothers who made more than their husbands were disproportionately white, college-educated and from families with median total incomes 29 percent above the national mean for families with children. In typical cases, breadwinning mothers are the wives of white-collar men, who, as Newsweek put it, have been “victimized by corporate downsizings” and face “psychic whiplash” from layoffs.

Second—coastal and urban elites. A tax upheaval that was supposed to undermine the economic clout of the eastern establishment has in fact reinforced it. The top 10 percent of American earners—the 10 percent that pay over 70 percent of personal income taxes—live near cities. The contrast between the northeast and the south is particularly stark. Whereas forty-four of the country’s seventy-five highest-income counties are in the Northeast, seventy-nine percent of the poorest U.S. counties are in the South. States most dependent on federal taxes—those that pay the least in taxes but take far more in benefits—have, since the 1980s, moved into the Republican fold.

The third is “model minorities.” Since the late 1980s, growing competition in institutions like higher education—where zero-sum admissions processes serve as gateways into the elite—is eroding individualistic, meritocratic values in the white upper class. At three of the four Southern universities that cracked the U.S. News top twenty, Asians represent over a fifth of the student body—numbers unheard of even in the elite northeast schools of the 1980s. Outlier performance from America’s fastest-growing and highest-earning minority group is triggering a backlash in response to what sociologists call “ethno-racial outgroup threat.” Perceiving Asian achievement as an “impending threat” to their “dominant ethno-racial group position,” University of Miami sociologist Frank Samson found in a 2013 study that commitment to meritocratic principles is waning among whites. These sentiments are conspicuous in the suburbs of the new south like Atlanta, where white flight has persistently followed the arrival of high-tech industries and “too many” tiger moms. Amid a sevenfold increase in the suburban Asian population since the Reagan years, the term “competition” itself, as sociologist Samuel Kye discovered, has become a “racial code for the tensions that develop between whites and Asians when Asians succeed.”

Republican America, in short, has become a place where high-income earners are dwindling, where the base of the party is losing its relative privilege and where identitarian insecurity is replacing an individualistic ethos of achievement. Six decades of research on social comparison theorysuggest that relative socioeconomic losses, more so than the promise of macroeconomic gains, are weighing psychologically on Republican voters. This would explain why the Republican base has quietly condoned higher, more progressive taxation since the Reagan Revolution, and why, even after eight years of Obama’s historically high tax increases, more than 60 percent of Americans still believe that the upper-income earners aren’t paying their fair share.

Trump’s “post-ideological” campaign resonated with the white working class, but further alienated from the GOP Americans most personally vested in tax relief. The 2016 presidential election was the first since at least 1956 when the Republican candidate lost college-educated whites. The consequence is a new partisan divide: “high-output” Democrats versus “low-output” Republicans. As Brookings scholars Mark Muro and Sifan Liu observe, the 472 counties that voted for Hillary Clinton collectively produce 64 percent of the country’s GDP. Partly, this is because Asian Americans—a majority of whom supported Reagan and George H.W. Bush—unified against Trump.

Trump’s advisors have apparently drawn different conclusions from the election outcome. Vice President–elect Pence claimed at the Heritage Foundation that number of counties Trump won has given him the largest mandate of any Republican since Reagan. Stephen Moore brought a more sober “dose of reality” to congressional Republicans: “Just as Reagan converted the GOP into a conservative party, Trump has converted the GOP into a populist working-class party”—a sea change that could frustrate free-market conservatives.

Either way, selling a post-Reaganite Republican base on tax cuts—and the pro-growth, meritocratic culture they encourage—could be an uphill battle. With looming intra-party fights over infrastructure and Obamacare, Trump and House Republicans might conclude that it’s not worth the effort.

Article Link To The National Interest:

Look For The Fed To Hike Interest Rates This Week And Ignore The Elephant In The Room

Yellen should not be expected to offer comment on how a Trump presidency changes her outlook.

By Greg Robb
December 12, 2016

You can expect the Federal Reserve to raise interest rates this week, but look for it to shy away from the bigger question looming for financial markets: How does the shock outcome of the presidential election change the economic landscape?

The Fed is widely expected to announce an increase in the target range for its federal funds rate to between 0.5% and 0.75% when its two-day meeting wraps up Wednesday, analysts agree. It will be the first increase of 2016, a year once expected to produce at least a couple of rate adjustments. The stock SPX, +0.59% and bond markets TMUBMUSD10Y, +1.19% have a quarter-point move baked in the cake.

At the same time, Fed officials are expected to duck questions about how the incoming Trump administration’s plans for fiscal, trade and regulatory policies will impact the economy and the central bank’s policy outlook.

“I would expect them to keep as low a profile as humanly possible,” said Vincent Reinhart, chief economist for Standish Mellon in Boston. “They don’t want to be seen as influencing policy, either as cheerleader or expressing doubts.”

The Fed has already exhibited a preference for staying out of presidential politics. It included no mention of the election in the minutes of its September or November meetings, Reinhart noted.

Fed Chairwoman Janet Yellen wants to avoid the recent experience of Bank of England Gov. Mark Carney, who came under fire from Brexit supporters for comments he made during, and after, the referendum campaign that ultimately ended with a vote for the U.K. to split with the European Union.

And the Fed doesn’t want to whip up Republicans in the House and Senate who are eager to clip the central bank’s wings, analysts said.

Fed officials are not likely to change their economic forecasts or their projections for interest rates over the next three years, economists said. At the moment, the central bank is penciling in two rate hikes in 2017, followed by three rate hikes each in 2018 and 2019. Markets scan the Fed’s “dot plot” to extract a snapshot of Fed thinking on economic and policy projections.

Any forecasts beyond mid-2017 will be basically ignored by the market, analysts say. By the middle of the year, the Trump administration could have put its initial stamp on the central bank, filling the existing two vacancies on the seven-member Fed board of governors.

At the moment, the market does not expect another rate hike until June.

But there are growing expectations that higher interest rates may be needed, perhaps sooner. Bond yields and the dollar DXY, -0.15% have risen in the wake of the election in part due to expectations of a more active Fed.

Congress is expected to press ahead with tax cuts next year, and rate hikes could be needed to keep this stimulus from becoming inflationary.

“The market reflects optimism about the future for economic growth, but the Fed is going to be overly cautious of latching on to that reality,” said Tom Simons, an economist at Jefferies in New York.

For Yellen, the end of her tenure at the Fed is only 14 months away. Republican insiders think it is highly unlikely Trump would offer Yellen another term at the helm of the central bank.

Analysts think Yellen won’t leave early and will follow her policy instincts until the end.

“She’s got a pretty stiff spine. She’ll stand up to any tweets or commentary,” said Kevin Logan, chief economist at HSBC Global Research.

With two hikes foreseen next year, the Fed is likely to space them out from June to December, Logan said. “The general plan is to gradually move the rate up as appropriate, given the data they are faced with,” he said.

Article Link To MarketWatch: