We don’t know much yet about what Donald Trump will do as president, but the barest outlines of his agenda are coming into view. It seems clear that Trump will pursue tax cuts, including big ones for top earners and businesses; deregulation across the board in areas such as finance; the repeal of Obamacare; more hard-edged immigration policies; and more spending in two specific areas — infrastructure and the military.

Which raises the possibility of a nightmare scenario for economic progressivism. It goes like this: Increased spending helps boost the economy, which is already accelerating, even as Republicans give the credit for it to tax cuts (especially at the top) and deregulation, validating their narrative that Big Government under Obama is what held the economy back from its full potential until President Trump unshackled it.

In his victory speech on Tuesday night, Trump promised to “rebuild our infrastructure,” adding that “we will put millions of our people to work as we rebuild it.” While Trump’s advisers say his plan for infrastructure spending would employ a tax credit scheme that would supposedly mean it costs the government nothing — which is debatable — it would ultimately pump a lot of spending into the economy.

It’s unclear whether House Republicans will go along with the plan. As Steven Dennis reports, House Speaker Paul Ryan has made only the most perfunctory negative noises about it, and the general goal of more infrastructure spending already has the support of Democrats in Congress, so it seems plausible that Trump might end up getting his way. Trump has also promised to rebuild our “depleted” military, which would seem to mean more spending there, too.

Meanwhile, Congressional Republicans have signaled that they will try to quickly repeal Obamacare, and while it’s not clear whether Trump will try to replace it with anything, he may well support repeal, as he, too, has promised to do. Trump’s tax plan calls for deep cuts across the board, including on businesses and top earners, and his transition team is already signaling he will move to deregulate Wall Street.

It’s always possible, of course, that Trump will make good on his vow to start trade wars or implement protectionism, which economists have warned would prove destructive to the economy. But it’s also possible that his bluster on trade may not end up producing much, and Trump will instead govern much more as a conventional Republican, implementing huge tax cuts and running up the deficit, while deregulating across the board — with perhaps much more infrastructure spending than Republicans might traditionally support thrown into the mix.

The Market Monetarist blog argues that the likelihood of such a scenario might be why the markets are no longer panicking over the prospect of a Trump presidency. People may be concluding that Trump will not actually make good on his promises on trade, the Market Monetarist notes, adding that they may now expect Trump to be a Republican “old-school Keynesian.”

Combine that with financial deregulation and Obamacare repeal, and add in some form of stepped up deportations in line with what he has proposed, and we might be getting a bit of a sense of what Trump might do. Obviously progressives would be happy to see more spending on infrastructure and job creation, but they would recoil at repeal of Obamacare and financial regulations and stepped up deportations.

I asked Mike Konczal, a senior fellow at the progressive-leaning Roosevelt Institute, if he could envision this scenario, and if so, whether that might produce an economic boost from spending that Republicans could then also credit to Obamacare repeal, financial deregulation, and increased immigration enforcement (which, they might argue, helps explain why U.S. workers are feeling better about the economy).

Konczal agreed that this was possible. He said such an agenda could amount to “Reactionary Keynesianism,” which essentially involves boosting the economy to full employment, but in ways that nonetheless increase inequality. That’s because it would involve cutting taxes in ways that primarily benefit the top, and boosting spending only in certain areas (such as on infrastructure and the military) while cutting it back in others (such as on the social safety yet and on other social investments that Republicans traditionally oppose, such as Green Energy). Konczal emailed:

It’s possible that Republicans run large deficits on tax cuts for the rich, military spending, perhaps some infrastructure, while also deregulating finance, energy, and other industries and running a massive deportation project of undocumented workers.
A nightmare scenario would be the spending from the first leading to a strong economic rebound from the Great Recession — what John Galbraith would call Reactionary Keynesianism — and the GOP and voters crediting that rebound to deregulation and immigration.

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