Joe Hockey's report card from Washington

Check against delivery

Introduction

On the twentieth of January this year, Donald J. Trump was inaugurated as the forty-fifth President of the United States of America.

On that historic day in Washington, as a self-described firebrand and Republican-turned- Democrat-turned-Republican, Mr Trump — the most unconventional presidential candidate ever — was sworn in to the Oval Office as the most powerful incoming President in living memory.

Donald Trump won the White House for the Republicans and he had majority control of the House, the Senate and Republican Governors in thirty four of the fifty US states.

In winning, Trump had defied the pollsters, the critics, media commentators and the Washington establishment – Republican and Democrat alike.

He had beaten campaigns with more money, more volunteers and more third party supporters. He had surprised some even in his own campaign team who doubted he could win.

Donald Trump was an immensely powerful incoming president because he defied not only expectations, he defied history.

Many in Australia, and around our region, have found America’s new President to be unsettling. It’s worth remembering that President Trump was elected promising to shake things up, so he might take your being unsettled as a compliment.

While his Administration has done things that are unexpected, with a deeper understanding of the United States, its history and its people, we shouldn’t find this moment too surprising.

Part I: America beyond the Beltway: A tale of resilience and division

As a new President Donald Trump inherited a nation in transition.

Despite the country’s vast wealth, many Americans are in precarious economic circumstances.

Consider this…

Nearly 17 million households — roughly one in every seven households in America — have a negative net worth.

Nearly seven in ten American adults have less than $1,000 in savings, and of these, nearly half have no savings at all.

They are living pay cheque to pay cheque, week after week – and that’s if they have a pay cheque at all.

Small towns across America have suffered big job losses because of the technology boom and climate change. In many cases there was no structural adjustment support when the only employer closed its factory.

New technologies and American innovation come at a cost. For example ‘retail salesperson’ remains the most common occupation in forty-two US states.

So their reaction to the emergence of Amazon, Ebay and online shopping isn’t as enthusiastic as one may assume.

Even for Americans familiar with disruption and rapid change, it is understandable that many may seek a return to a slower, gentler and more certain time.

A time when they felt America — and their own future and that of their children — was “great”. And for those paying attention, that is the true divide in the United States today.

There are many Americans that feel secure about their future but there are tens of millions of Americans that do not.

There are many Americans who have the security of savings and there are tens of millions that do not.

There are many Americans who have the security of a university education and there over one hundred million working age Americans that do not.

This America sits alongside another America – the one Australians are more familiar with – the America of world-leading technology, business innovation, media and entertainment.

The cities that host these new and exciting technologies were all won by Hillary Clinton on 8 November 2016. She won the Presidential vote in the 27 largest cities in the United States.

Not just New York, Los Angeles and Chicago, but big cities in states Trump won – like Dallas, Houston and Austin in Texas, and even Miami in Florida.

During the 2016 campaign, there was a national mood for change. Donald Trump beating Hillary Clinton was part of this. But don’t forget the primaries.

Trump beat 16 other Republican candidates, all with more conventional résumés for the Presidency. And the disruption wasn’t limited to the Republicans. A self-declared socialist came close to being the Democratic nominee. Bernie Sanders was himself a phenomenal disruptor.

If there is one clear lesson I’ve learned during my time as Ambassador to the United States, it would be:

In order to truly understand the United States of America and events that are unfolding there – often at warp speed – one must look beyond Washington.

A business meeting in New York or reading and watching news that comes out of Washington or Los Angeles doesn’t give you a true understanding of what’s really happening in America.

Our city-centric view of the United States doesn’t reflect the diversity of the country and the change that is taking place.

Part II: Entering office

Winning as an underdog gives a leader huge implied power. Donald Trump not only won the White House but he also delivered key Republican victories right down the ticket to the election of a local county sheriff.

And the flow on impact is significant, as illustrated by Donald Trump’s earliest successful decision to appoint a conservative judge to preserve the conservative majority on the US Supreme Court.

But the implied authority, even beyond the Oval Office, came about because of the fabric of his victory.

For example more white women in America voted for Donald Trump (53%) than Hillary Clinton. And he won an overwhelming majority vote from the revered military families and communities that are the most highly respected cohort across American society.

Donald Trump, newly elected as President, came to office beholden to absolutely no one outside the sixty two million people that voted for him.

No President before has been elected with so few political debts – not to donors or surrogates, political kingmakers or their party.

This policy and political freedom stands in stark contrast with almost all of Mr Trump’s presidential predecessors.

In elections past, hard fought electoral victories usually had a strong ideological foundation rooted in the culture of their respective political parties and power bases. Everyone that supported a successful candidate expected favourable treatment. And, usually, they got it.

Donald Trump changed all that. The day he was elected he started changing America.

Based on our experience with Trump-the-candidate, the forty-fifth President of the United States was always expected to act very differently to his predecessors, conducting his presidency largely outside the usual conventions.

Charlie Cook — a political analyst in Washington for 45 years — described it by saying:

…the presidential campaign featured so many developments that had never occurred before, that words like “unique” and “unprecedented” seemed inadequate. We’ve become almost numbed to surprise, or maybe we’re surprised that we’re no longer surprised.

Washington politics has changed over the past twelve months and that disruption is now a badge of honour for the President.

He doesn’t resile from it and he certainly doesn’t apologise. It’s what he promised and he is keeping his promises.

His unique background, having never previously served in the military or in elected office, has contributed to the heightened level of disruption. It is reflected in the general makeup of White House staff and in his choice of Cabinet colleagues.

Part III: What he’s done

Just as with past Administrations, tumult and policy change are not unrelated. Modern America was built by Presidents who responded to the demands of the people, at the most difficult times.

Think of Abraham Lincoln — presiding over an America so divided that the country was torn apart by civil war. Teddy Roosevelt responded to the emergence of big business domination with his “Trust Busting” legislation.  Franklin Roosevelt, responding to the Great Depression with the “New Deal”. Lyndon Johnson responded to the challenges of 1960’s with his “Great Society”.

The frequency of these tumultuous periods in United States history serve to highlight that President Trump and the twenty-first century do not have a monopoly on political tension, animosity or division.

In fact, many of the relatively minor events which occur today and are portrayed as “disruption”, pale into insignificance when compared with the events of the past.

Each president tends to “govern” America rather than “lead” America. That’s because political power in the United States is shared, notwithstanding that the President is the “Commander in Chief”.

The Founding Fathers of the United States, through the Constitution, intended to frustrate unfettered presidential power.

They saw presidential power as a risk to their fledgling and battle-scarred democracies. They implemented a constitutional structure which deliberately checked power at every turn – as President Trump has discovered with bruising congressional fights over healthcare, tax reform and raising the debt ceiling.

2017 was a tumultuous year, including inside the White House. The early days of any Administration will always be full of hiring, firing and power-plays as the lead actors learn their roles — the Trump Administration was certainly no exception.

The United States has survived — and indeed prospered — in times of previous tumult so there is no reason to think that this current period will be any different.

Donald Trump’s voters are not disappointed.

A Fox News poll conducted by both Democratic and Republican research companies at the end of August found 91 per cent of all voters were satisfied with the way they had voted in the Presidential election and only 4 per cent now wished they had voted differently.

For Trump voters, the numbers were even higher. 96 per cent backed their decision last year and only 2 per cent wished to change it.

In my view, for various reasons, if the Presidential election were held again today Donald Trump would win.

Let me share with you some research that helps explain why.

First, take the rapid reduction in federal government regulation.

Dubbed the “Deregulation Nation” by Washington-based political analysts Mehlman, Castagnetti, Rosen & Thomas, this slide highlights that in less than a year, the Trump Administration has utilised presidential regulatory power to withdraw or delay more than eight hundred separate regulatory actions undertaken by President Obama.

The slide also reveals that the introduction of new “significant regulations” has decreased 80% under President Trump.

Regulatory action is one of the most significant tools in the Presidential toolbox. It is especially powerful for a President seeking to change the broad direction of policy in the face of a recalcitrant Congress or a slow moving judiciary.

There is a direct link between deregulation and business confidence. The Dow Jones has increased by over thirty per cent since Donald Trump won the election. Many factors are at play but the surge in the US economy is not unrelated.

Second, look at what President Trump is doing to the judiciary.

The federal judiciary in the United States — comprising the United States Supreme Court and the lower federal courts — is a hugely important centre of power.

President Trump is in the process of remaking the federal judiciary. In the last twelve months, Trump has nominated 59 federal judges and had 14 confirmed.

Most celebrated by conservatives was the nomination and subsequent confirmation of the highly respected Justice Neil Gorsuch to the Supreme Court. Given that Court does not have a mandatory retirement age for its nine justices, at just fifty years of age, Justice Gorsuch is expected to help guide the interpretation of the United States Constitution for decades to come.

Such judicial nominations are one of the most effective ways that a President can continue to influence public policy beyond their own term.

There are now strong signs that President Trump — as all Presidents do — is learning how to use the power of the office to reshape policy.

Take President Trump’s recent recognition of Jerusalem as the capital of Israel. Congress mandated that the US Embassy move to Jerusalem from Tel Aviv in 1995. But since that year, no Administration has been willing to make the move.

When President Trump indicated this would change, many were surprised. They shouldn’t be. President Trump won’t easily be told “no” when it conflicts with his instincts, his policies and his place in history.

This goes for his own party too. In early September he shocked Republicans by striking a deal with the Democratic Congressional leadership to raise the federal debt ceiling.

But this was a perfect example of how Washington has always worked, and also how the Founding Fathers intended it to work — with power shared and compromises reached — between different branches of the Federal Government.

President Trump is very ‘hands on’ in his approach to the legislature and his preparedness to engage across party lines. As a result this has confused some of his strongest critics.

While he has had a legislative failure with the repeal of “ObamaCare”, it looks like the President is about to deliver tax reform that has been elusive for decades.

In truth, change usually happens slowly in Washington DC, and if you put aside the partisan commentary, all previous Administrations have faced policy setbacks.

The reality is that the United States has little tolerance for revolutionary leaders. Its Presidents tend to govern in response to the will of the people. Few, if any presidents, have

actually been able to shape the will of the people.

The United States and its place in the world

So it’s pretty remarkable that, despite the tumult, Americans are growing more confident about their country’s destiny at the same time as others are predicting an end to American exceptionalism.

The confidence about the US economy in many ways mirrors the confidence of Americans about their place in the world.

This slide illustrates that for the first time this century Americans are more optimistic about the economy than they are pessimistic. It is a significant turnaround.

So over the last twelve months it has seemed odd to watch some Americans grapple with self-doubt about the role of the United States in the modern world.

From its very creation, the United States of America was envisioned as a nation different to all others that had preceded it.

For thousands of years, individual nations had sought to build powerful and prosperous empires — invading, pillaging and dominating other nations in order to do so.

The United States is the only global superpower that has not. It has led by the power of its example.

The founding fathers sought to create a very different nation under the banner of “Peace, Liberty and Independence”.

This attitude was captured in President Thomas Jefferson’s first inaugural address to the American people in 1801 when he defined America’s then foreign policy as:

Peace, commerce, and honest friendship with all nations, entangling alliances with none.

For most of its history, the United States has sought to use its values and its success — rather than its military — as an inspiration to the rest of the world.

To serve as the “last best hope of man on earth” according to the legendary words of President Lincoln.

Its ingrained humility was evidenced by a persistent reluctance to involve itself in international conflict, including both World Wars.

Clearly that does not mean that the United States will fail to engage in the defence of its values, its citizens and itself.

But what it does mean is that, far from a desire to build an empire or pursue a messianic complex to save the world, the United States and its people are largely concerned with protecting and advancing their own interests at home.

If you needed any convincing of the pervasiveness of this approach in the United States, you need look no further than the foreign policy pursued by both President Obama and President Trump.

Now I think we can all agree that these two men are generally about as dissimilar as two men can be.

However, what unites them is a belief that the President of the United States should be dedicated to the domestic needs of the people they serve.

Why are we surprised that American Presidents want to put their own people first? It is a trap for so many people living outside America to give Americans advice on what is best for their country.

The priorities of the American people are no different to ours.

As you can see it’s a domestic list of health, security, jobs and so on that dominates the thinking of everyday Americans.

But despite what appears to be a moment of self-doubt on the international stage, I believe Americans are confident about their role in the world.

The United States remains the pre-eminent global superpower in 2017 — both in terms of hard, and increasingly importantly, in terms of soft power.

That will not change in a hurry.

Donald Trump is determined to substantially increase military spending even though today the US spends more on defence than the next eight countries combined.

In fact the US is responsible for more than one third of all global military spending and it spends almost three times more than second placed China.

America is also the most significant economy in the world – and with growth at 3.3% that won’t change for a while. The US dollar is still the world’s reserve currency and over 80% of all financial transactions worldwide are conducted in US dollars. Nearly 90% of all foreign currency market transactions are in US dollars.

And in terms of innovation, eight of the nine largest technology companies in the world, are based in the United States. Together with new start-ups and a deep partnership with universities, nearly 30% of all research and development dollars in the world are spent in the United States.

Finally, people want to go to the United States either to live, work or play.

In 2015, the United States was the second most visited nation in the world. I don’t think that will change.

Across a number of important fronts, the United States remains the most powerful nation in the world today.  But like all nations, the United States must decide where to focus its power and resources.

No nation can do it all.

Australia: The right ally in the right place at the right time

In framing our relationship we need to be mindful of the times.

Recently the Australian Government released a Foreign Policy White Paper that focuses on our interests in the Indo-Pacific region. America has a huge role to play in that regard. The alliance with the United States is the pillar of Australia’s security and the US remains a crucial economic partner.

Australia needs the United States engaged with the world, even as it faces its domestic challenges.

In advocating for continued American engagement we have the obligation to explain why

we believe Paris matters to Pittsburgh.

Why beef trade protection hurts Montana or why foreign investment delivers jobs in Mobile, Alabama or Des Moines, Iowa.

It’s an important tool in the tradecraft of diplomacy to engage in advocacy beyond the corridors of the State Department or the hallowed halls of the Congress. It also acknowledges that the Trump Administration is responding to the wishes of the American people.

So far Donald Trump isn’t changing America, he is responding to some of their demands.

This is why we have worked hard to focus on issues of importance to the Trump Administration, from tax reform to North Korea and from trade deals to infrastructure. This is what the American people are interested in.

Moreover Americans tend to listen to their mates. Especially when those mates are speaking about shared interests.

Two examples of this advocacy during 2017 have been a defence of free trade and the financing and delivery of infrastructure.

While President Trump’s long held views on multilateral trade agreements are well known, we have continued to advocate strongly for the overwhelming benefits of such agreements. Australia’s economic success is proof of that. And I think a majority of the American people recognise those benefits.

The results of a recent poll support this belief. This poll found that nearly 60% of the Americans surveyed agreed that free trade with foreign countries was good for America6.

Australia will not be backing away from our support of free trade — nor the negotiation and signing of new multilateral trade deals — so our advocacy in this area will continue.

On infrastructure, Australia has a great story to tell, and the Trump Administration and representatives of Congress and State and Municipal Governments in the United States have been very eager to listen.

As with other issues of mutual interest, Australia’s experience is worth sharing. Given our close economic ties, it is in our interests that the United States has robust infrastructure to underpin its growing economy.

This naturally requires us to point out — as only mates can do — where the United States can do better based on lessons from our own experience.

Conclusion

Ladies and Gentlemen,

For all countries the relationship with the United States is no longer “business as usual”. We accept that.

Sure, despite the tweets, the commentary and the controversy we all need to work hard to be objective about the new administration.

However, the best relationships between countries and people are always based on mutual respect and shared values.

No matter who leads our nations, Australians and Americans have, for nearly 100 years, fought side by side to defend our mateship and defend our shared values.

That won’t change.

The United States of America is undoubtedly the greatest force for good in the world. As a nation it is complex, sophisticated and diverse, but its values are enduring.

And what binds us together – what has sustained the relationship through a tumultuous past century – is our unwavering determination to defend freedom and protect democracy.

I can assure, you that no matter what happens in Washington, those values are not going to change.