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An earlier version of this article appears in the Fall 2017 issue of The American Prospect magazine. It has been updated to reflect recent events. Subscribe here.
On the morning of Friday, September 8, Mick Mulvaney found himself in a farcical situation. As President Donald Trump’s budget director, he stood, along with Treasury Secretary Steven Mnuchin, before the House Republican Conference meeting trying to sell a deal that combined $15 billion in federal aid for Hurricane Harvey with a three-month increase in the debt ceiling—a deal his boss had just struck with Democratic leaders Nancy Pelosi and Chuck Schumer.
Not only had Mulvaney tried (and clearly failed) to convince Trump to hold the debt ceiling hostage to secure spending cuts, but he had vehemently opposed such bipartisan budget deals when he was an agitating member of the House Freedom Caucus, an amalgamation of Tea Party radicals he helped organize after losing a bid to lead the Republican Study Committee. As a South Carolina congressman, Mulvaney spearheaded the far right’s tactics of threatening to shut down the government to secure steep spending cuts during Obama’s presidency. In 2013, he nearly killed a $50.7 billion Hurricane Sandy relief package by putting forward a poison-pill amendment that would offset the cost dollar for dollar with across-the-board spending cuts.
At the conference meeting, he was ridiculed by his former colleagues, who reminded him that Representative Mulvaney would have been the one yelling the loudest about such a deal. “I remember him during Sandy. I don’t forget,” Peter King, a conservative from New York, said. The room let out a chorus of boos when Mulvaney wouldn’t commit to spending reductions when the debt ceiling would need to be increased again three months later. Hisses and groans persisted as Trump’s lieutenants made their pitch.
The meeting sums up Mulvaney’s tenure so far as the director of the Office of Management and Budget. He was, in part, brought on to serve as Trump’s liaison to the House’s troublemaking far-right fringe, so as to ease the path to repealing Obamacare, securing tax cuts, building a border wall, and advancing an infrastructure plan. But even for someone like Mulvaney, with his unimpeachable conservative credentials, the task has proved to be akin to herding cats. As the debt-ceiling debacle (and efforts on the American Health Care Act, the budget, and tax reform) has shown, he’s struggled to wield influence over his former colleagues. While recognizing that Mulvaney is loyally playing a role for Trump, they see no reason to roll over.
Budget Buster: Mulvaney, back in his days as a congressman from South Carolina
His role as a political liaison will be tested even more now that the pressure to achieve some type of major legislation, after nine months of a Republican-controlled White House and Congress, has reached a fever pitch. A hectic September ended with yet another failed attempt to repeal Obamacare and the rollout of the long-awaited GOP tax plan, which, as expected, would deliver a windfall of costly tax cuts to the top while driving the budget deficit through the roof. Keeping Republicans united on the particulars of that plan, and getting a budget resolution passed as a vehicle for the tax cuts, will be a political headache.
So you may wonder why one of the most radical small-government ideologues went to work in an administration that is pitching big-ticket items like a border wall that costs up to $24.5 million per mile and a $1 trillion infrastructure plan while refusing entitlement cuts. But for Mulvaney, it’s a small price to pay for what he says is his dream job—though one he’s admitted would make him “the most hated man in Washington.” The president has no interest in budgetary matters or the inner workings of bureaucracy, and all the other top advisers are otherwise engaged. In that vacuum, Mulvaney has quietly taken the keys to the federal government, opened up the hood, and begun loosening bolts and cutting wires.
THE OMB DIRECTOR is a generally broad role with tentacles reaching across and deep within the administration. Duties include crafting the president’s budget and negotiating with Congress, orchestrating presidential initiatives across the federal agencies, and overseeing the regulatory process and management of the federal bureaucracy.
Mulvaney had his hand in the administration’s efforts to repeal Obamacare and, now, to cut taxes; he’s taken the reins in the crusade to dismantle the regulatory state and shrink the federal workforce, and he single-handedly devised one of the most draconian presidential budgets since Reagan. All of this promises 3 percent economic growth allegedly stimulated by steep corporate tax cuts, aggressive deregulation, and welfare rollbacks. “It’s our version of Reaganomics,” he told Fox News.
With a president who has no experience with budgets or government, the OMB director’s job is even more important. Mulvaney sees his position and influence with the president, though, as a means to provide Trump with the right-wing movement conservative perspective in a White House that is filled with disparate ideologies and competing power players.
Mulvaney is a stark departure from past OMB directors—generally established technocrats with high profiles in budgetary circles who deal in cold calculations and number crunching. He’s far more ideological and is working to advance a political agenda of his own. Even if he’s no longer an official member, Mulvaney has brought the extremist tendencies of the Freedom Caucus to their highest level of power yet. He has embarked on a combative campaign to undermine the institutions and political consensus that might get in the way of his ambitious agenda to finally shrink down the size of the federal government enough to drown it in a bathtub, as Grover Norquist famously put it.
Recently ousted White House strategist Steve Bannon called him “the unsung hero of this administration, because he’s doing yeoman’s work on just about every front. He’s a rock star.”
After being narrowly confirmed by just one vote in the Senate in February, Mulvaney got to work. He staffed up his team largely with GOP congressional aides and staffers from the Heritage Foundation. Russell Vought, Heritage Action’s vice president, manned the beachhead team and was eventually appointed as deputy director, where he helped Mulvaney compose Trump’s budget for Fiscal Year 2018.
Trump’s involvement in formulating the budget was, unsurprisingly, extremely limited. As Mulvaney explained in press interviews, he pored over Trump’s campaign speeches and statements in order to parse out what his priorities might be. Beyond that, Mulvaney had extraordinary leeway to fill out the budget’s details. “When it comes to program by program, or line item by line item, Mulvaney is a power center unto himself,” says Stan Collender, an expert in federal budgeting.
He lobbied Trump hard to retreat on a core campaign promise and cut Social Security and Medicare, but Trump resisted. However, as Michael Grunwald reported for Politico, Mulvaney apparently pulled one over on Trump, convincing him to support cuts to Social Security Disability Insurance by pitching it as welfare reform.
Mulvaney didn’t unveil the full 2018 budget until late May, months later than a typical incoming administration. But when it dropped, it did so with a bang. It was a radically harsh document—a love letter to the Heritage Foundation—that proposed to balance the budget in ten years while taking a wrecking ball to the federal government. It called for a $3.6 trillion decrease in non-defense discretionary spending, slashing funding for nearly every federal agency and hitting the EPA, Labor, and State particularly hard. Defense, meanwhile, got a big increase in funding. To facilitate belt-tightening for nearly everyone else, Mulvaney included a substantial increase in the OMB’s budget.
He also called for rollbacks to a whole host of critical federal programs, including $70 billion in cuts to disability insurance. Booting people off disability and limiting food assistance programs like SNAP and TANF, he says, will incentivize people who are able to work to get back into the labor market—which would in turn drive economic growth. Three-fifths of the cuts targeted programs that help low- and middle-income Americans. He called to eliminate the Community Development Block Grants, which states and cities use to fund everything from affordable housing development to Meals on Wheels. “Meals on Wheels sounds great,” he said, but “we’re not going to spend [money] on programs that cannot show that they actually deliver promises that we’ve made to people.” Further, Mulvaney contended the federal government shouldn’t be subsidizing free breakfasts for low-income schoolkids because there’s no evidence that it leads to improved outcomes.
“When you start looking at the places that will reduce spending, one of the questions we asked was, can we really continue to ask a coal miner in West Virginia or a single mom in Detroit to pay for these programs? The answer was no,” he said on MSNBC’s Morning Joe. “We can ask them to pay for defense, and we will, but we can’t ask them to continue to pay for the Corporation for Public Broadcasting.”
Team Trump: The president with Mulvaney and Treasury Secretary Steve Mnuchin
His approach was ruthless. “We’re no longer going to measure compassion by the number of programs or the number of people on those programs,” he pronounced at a White House press briefing, “but by the number of people we help get off of those programs. We’re not going to measure compassion by the amount of money that we spend, but by the number of people that we help.”
The gargantuan spending cuts still only accounted for a fraction of his budget-balancing scheme. The driving force is an unabashed faith in the growth-sparking power of trickle-down economics. The details of his budget are a fiscal house of cards.
Typically, the OMB relies on the Congressional Budget Office’s economic growth projections for its own budget forecasting. The CBO forecasted an average growth rate of 1.9 percent over ten years. Mulvaney completely ignored that and projected that the economy would reach a 3 percent growth rate by 2021, not only creating an unprecedented gap between the CBO and the administration, but also basing his entire budget on assumptions that the vast majority of economic experts consider preposterous. He projected that the increased economic growth from Trump’s tax cuts would cover its $6.3 trillion in lost revenue (with some minor assistance from unspecified revenue-raisers) while also erasing $2.1 trillion in budget deficits over ten years.
In fact, if you take away Mulvaney’s starry-eyed growth projections, as the Center on Budget and Policy Priorities did, you find that the Trump budget actually increases deficits by $2.5 trillion over ten years, not the $5.6 trillion reduction Mulvaney claims.
Even Reagan had fiscally serious advisers. Reagan’s first OMB director, David Stockman, also orchestrated a budget that featured steep spending cuts to politically popular programs. But Stockman was recognized as a thoughtful budget wonk and had good relationships on the Hill. He took pains to lay an extensive groundwork, constantly back-channeling with key members of Congress and department heads so as to prepare them for the impending pain. And even he had to dramatically scale back his ambitions.
Mulvaney’s rabble-rousing past hadn’t earned him many allies, even on the Republican side. With Trump embroiled in never-ending political scandals and uninterested in budget politics, Republicans in Congress felt emboldened to turn a cold shoulder on Mulvaney’s budget. Conservatives criticized it for not going after entitlements; foreign-policy Republicans complained about cuts to the country’s soft power—namely the State Department and international aid funds. Democrats clobbered him for double counting and out-of-this-world fiscal assumptions. “Mulvaney’s extreme conservative reputation lives on and I think he proposed the elimination of things and the cutting back on things that are important to Republicans,” Jim Dyer, a Republican lobbyist on budget and appropriations, told me. “He comes to this process at a time when austerity is not in vogue.” In March, in response to Mulvaney’s so-called skinny budget, providing only broad outlines, Rodney Frelinghuysen, chair of the House Appropriations Committee, said, “ I think Mulvaney, quite honestly … he has no idea of the facts.”
It also doesn’t help that there’s a perception in Washington that Mulvaney was perhaps named budget director not because of his budgetary bona fides or even a close relationship with Trump (Mulvaney backed Rand Paul), but as a political favor for now–South Carolina Governor Henry McMaster, who was the first elected official to publicly endorse Trump when he was lieutenant governor. Mulvaney had been mulling a run for the governorship in 2018.
Months after Mulvaney unveiled his budget, the House Budget Committee voted out a budget resolution of their own that, while extremely conservative in its own right, with cuts to Medicare and Medicaid, ignored Mulvaney’s budget outright. House appropriations bills also brushed off Mulvaney’s line items.
“I’ve never seen anything like it before,” says Scott Lilly, a former Democratic staff director for the House Appropriations Committee. “We’ve never had a presidential budget that made such dramatic changes before and never had a budget that was as thoroughly and completely disregarded as Mulvaney’s has been.”
To make matters more complicated, Trump has indicated that he might veto Congress’s spending bill if they don’t include money to build his border wall. And a series of legislative must-dos are prime hostage targets for the Freedom Caucus.
Republicans will need to pass a new budget resolution for 2018 in order to pass their tax cuts through reconciliation. And the politics of that are, of course, highly fraught, too.
Likewise the politics of the debt ceiling, even assuming Congress buys the three-month extension deal that Trump cut with Schumer and Pelosi. Senate Majority Leader Mitch McConnell has said that despite Trump’s wishes, that deal might not pass.
Recently ousted White House strategist Steve Bannon called Mulvaney "the unsung hero of this administration, because he's doing the yeoman's work on just about every front."
Moreover, the House Freedom Caucus and many other conservatives don’t want to vote for a budget resolution until they have a clear sense of the GOP tax plan details, which the lead architects kept locked away until late September. The House Freedom Caucus has indicated support for the tax plan as it is, but that could all change depending on how the bill changes during negotiations in Congress and how the budget resolution debate plays out between the House and Senate. Many Republicans think they need to just pass a budget resolution to build momentum for tax reform. But as the Budget Committee’s plan shows, House conservatives are demanding massive entitlement cuts, which, again, will create political problems with House moderates, senators, and Trump. Gary Cohn and Steven Mnuchin, meanwhile, want the tax bill to be clean, not bogged down with messy political fights over Medicare and Medicaid.
One alternative could be for Republicans to just pass an empty budget resolution—one that doesn’t balance the budget or include any typical conservative budget bromides—that is simply used as a vehicle to obtain reconciliation instructions. This is what they did with the resolution they passed in January to repeal Obamacare. But that tactic rankled a lot of conservatives in both the House and Senate, with some vowing to never support a similar vehicle again.
To put it simply, there are no good options. This is a time when an inexperienced president might rely on a budget director who has worked through tense budget battles on the Hill before and who has political capital and goodwill to spare. Instead, Trump has Mulvaney, a former backbench member of the House Budget Committee who made his name using these types of situations for political extortion. And as his presentation with Mnuchin to the House Republican Conference showed, he doesn’t have much in the way of political capital right now.
“It shows you the price that can be paid by making such a foolish appointment,” Lilly says. “Government, in fact, does things that are important to people, and if you put any idiot that comes down the street in an important position, it’s likely to have consequences beyond what Trump might expect.”
Attacking Honest Numbers
In the late spring, the CBO released report after report showing that each iteration of the GOP’s plan to repeal and replace Obamacare would boot millions of Americans off their current coverage. Republicans were furious. The Trump administration’s strategy to repeal Obamacare first was backfiring. And with their eyes on securing massive tax cuts next, the CBO was becoming a political obstacle, even with a Republican appointee heading it, by publishing honest numbers debunking Mulvaney’s heroic growth assumptions. In July, the CBO calculated that his budget would reduce the deficit over ten years by $2.3 trillion less than Mulvaney projected.
From day one, Mulvaney’s strategy has been to undermine the nonpartisan integrity of the CBO. In an interview with the Washington Examiner in late May, Mulvaney lashed out, calling the scoring methods of the American Health Care Act “absurd.” He claimed that the office was assuming people would voluntarily give up their Medicaid coverage, which was a fundamental misreading of the analysis. The CBO assumed people would lose Medicaid coverage non-voluntarily through eligibility lapses, pay raises, and other changes in the AHCA that would change the dynamics of the program.
“At some point, you’ve got to ask yourself, has the day of the CBO come and gone?” Mulvaney said in the interview. “How much power do we give to the CBO under the 1974 Budget Act?” He alleged that the CBO official charged with scoring the AHCA, Holly Harvey, was politically biased because she helped score the original Obamacare legislation and was a former health-care analyst in the Clinton administration. “We always talk about it as the nonpartisan Congressional Budget Office. Given the authority that that has, is it really feasible to think of that as a nonpartisan organization?”
In July, Mulvaney ramped up the attack, claiming that the CBO was relying on the methodology of Jonathan Gruber, who helped design Obamacare, to score the repeal and replacement of it. Eight former CBO directors, appointed by both parties, wrote a letter to congressional leadership strongly condemning Mulvaney’s attacks on the office and defending its role as a nonpartisan arbiter of policy.
Mulvaney’s allies in the Freedom Caucus doubled down, introducing an amendment to a minibus appropriations package that would eliminate the 89 employees of the CBO’s Budget Analysis Division, which is charged with scoring legislation. Freedom Caucus Chair Mark Meadows said the scoring process ought to be outsourced to think tanks like Heritage, the American Enterprise Institute, and the Brookings Institution, and then aggregated. Mulvaney himself preferred that his OMB take over all legislative analysis.
The amendment ran into strong resistance—Democrats in the capital area called it “part of a strategic assault on objectivity and expertise in the civil service.” But it also drew swift criticism from top Republicans, including House Ways and Means Committee Chair Kevin Brady and Budget Committee Chair Diane Black, who urged their colleagues to vote against the amendment. The House ultimately voted by a nearly 3-to-1 margin against the amendment.
This survival of the CBO is nothing short of extraordinary. In an era characterized by fake news and accusations of fake news, denial of climate science, preposterous claims of tax cuts and deregulation producing magical GDP growth, even many Republicans still value accurate budget numbers. That can’t be good news for Mulvaney and Trump.
Regulations and Government Reorganization
If the Trump administration does deliver on Bannon’s goal of deconstructing the administrative state, that will also be Mulvaney’s doing.
Within two months of taking office, Trump signed several executive orders aimed at deregulation and limiting the size of the government. The one that drew the biggest headlines was his order that instituted a regulatory freeze and required that federal agencies do away with two regulations for every new one proposed. Trump also ordered each agency to come up with a plan to “reorganize” its structure with an eye on eliminating entire agencies where possible. As OMB director, Mulvaney is leading the implementation of those executive orders and has a great deal of power in how deregulation and shrinking of the federal workforce will happen. “Government is using muscles it hasn’t used in a really long time, exposing and removing redundant and unnecessary regulation,” Mulvaney said in a July statement.
Each agency has been ordered to create a regulatory reform taskforce and come up with a list identifying regulations to do away with. Each agency is also required to develop a plan to reform its organizational structure and downsize its workforce to achieve vague standards of “efficiency, effectiveness, and accountability.” Those plans are supposed to be submitted by early September to Mulvaney, who will review them and then develop a detailed plan to overhaul the executive branch, to be included in the 2019 federal budget. Mulvaney, who has long held hostile views on the federal bureaucracy, has an extraordinary amount of latitude to reshape the agencies. The executive orders grant the OMB director vast new oversight powers to dictate agency rulemaking priorities.
During his time in Congress, Mulvaney consistently targeted the federal workforce. He introduced the Federal Workforce Reduction Through Attrition Act, which would require agencies to hire only one new employee for every three employees who retire or quit. He’s also indicated support for allowing private contractors to bid for work currently done by the federal government. As OMB director, he’s proposed reducing retired federal workers’ pension benefits and cracking down on current employee performance.
The deregulation so far has happened through inaction rather than action. The administration has ground its approval and review of new regulations to a halt while withdrawing a large proportion of Obama-era rules that had not yet been approved. In its first six months, Trump’s Office of Information and Regulatory Affairs (OIRA), which operates within OMB as a reviewer of regulations, has reviewed a paltry 41 new rules, only 16 of which are deemed economically significant, meaning the estimated economic impact is greater than $100 million. That’s a record low, according to the conservative American Action Forum. Obama’s OIRA reviewed 80 economically significant rules in his final year. “That’s a strong indication that [Trump] is letting the oil and gas industry and big business across the country regulate themselves,” says Amit Narang, a regulations expert with Public Citizen.
OIRA has also delayed several Obama rules that were set to go into effect, including an 18-month delay of the Department of Labor’s fiduciary rule, which requires retirement advisers to act in their clients’ best interest. The delay alone could cost retirement savers nearly $11 billion over the next 30 years because of conflicted investment advice, according to one estimate.
However, they’ve been very sloppy and half-baked with their legal rationales for delays, says Lisa Heinzerling, who served as an associate administrator in the EPA’s policy office under Obama. “If they continue doing that, I think they are in real legal trouble.” Indeed, they already are. The U.S. Federal Court of Appeals in Washington, D.C., rebuked EPA Administrator Scott Pruitt for unilaterally delaying a rule that required oil and gas companies to decrease methane emissions, saying the agency failed to cite statutory authority to do so. The court, which deals with most regulatory matters, was sending a clear message to the Trump administration that it had better have clear justifications and legal standing in its deregulatory efforts. Trump’s agencies are facing many other legal challenges to its rule delays, including a coordinated effort by state attorneys general suing the Education Department for its delay of a rule that protects student loan recipients at for-profit colleges. Environmental advocates sued the EPA, prompting the agency to abandon its delay of an ozone pollution requirement.
If the administration does ever get around to actually undoing existing regulations, it will have to go through a whole new rulemaking process. One of the greatest ironies of Trump’s two-out-one-in deregulatory order is that it actually creates three new rules—two pertaining to the outgoing regulations, one for the incoming regulation. It’s a years-long process that requires a period of open comment, meetings with stakeholders, a painstaking cost-benefit analysis, and a final review before it can be finalized. The biggest challenge for deregulation is that it must provide evidence-based justification for why the rule is no longer necessary. For instance, the EPA would have to show that coal-fired power plants are not a significant source of greenhouse gases as part of its rationale for undoing Obama’s Clean Power Plan.
With radical deregulators like Scott Pruitt, Jeff Sessions, and Betsy DeVos at the helm of key federal agencies, there's a real concern among regulatory advocates that they will cook the books when removing regulations. Here, EPA Administrator Scott Pruitt speaks at the 2017 Conservative Political Action Conference.
One way to do that is to show that the costs of a regulation are greater than the benefits. Mulvaney accused Obama’s OIRA of “fudging the analysis when it came to the cost side of the equation,” essentially greasing the tracks of its cost-benefit analysis for top White House priorities. That’s a laughable notion to many progressives who criticized Obama’s OIRA as giving too much consideration to industry costs, and not nearly enough to its benefits.
Not to mention, Mulvaney was just plain wrong. A review of OMB reports on cost-benefit analysis show that the office considered only the costs in its analysis (for 54 rules) far more than it only considered benefits (16 rules). In making the attacks, though, he is not only criticizing his own career staff, but appears to be laying the groundwork to rewrite regulations’ cost-benefit analyses in a way that juices up the economic costs and gives legal cover for repeal. Under deregulation, the costs and benefits of a rule flip. The benefits that would be lost become the costs; the costs that would be removed become the benefits. So it’s in Mulvaney’s interest to say regulations’ costs are as high as possible.
With radical deregulators like Scott Pruitt, Jeff Sessions, and Betsy DeVos at the helm of key federal agencies, there’s a real concern among regulatory advocates that they will cook the books when removing regulations, going through the motions of the formal rulemaking process while contorting the data and analysis to get a desired result. All agencies do that to some extent, but there’s a concern that the Trump administration will take it to a dangerous new level.
The appointment of Neomi Rao as the OIRA administrator hasn’t given advocates much hope. Rao, a former clerk for Supreme Court Justice Clarence Thomas, is a law professor at George Mason University, where she founded the school’s Center for the Study of the Administrative State, which has received funding from the Charles Koch Foundation. Her scholarly work suggests an aversion to administrative agencies as policymaking vehicles, argues that independent agencies like the Consumer Financial Protection Bureau are unconstitutional, and questions whether human dignity should be considered when analyzing the costs and benefits of government regulations.
For instance, when Obama’s Department of Justice was developing its national prison rape prevention standards, which were eventually issued in 2012, it was required to develop a thorough cost-benefit analysis that attempted to measure a monetary value of preventing various types of sexual assault that can happen in prisons. Preventing rape in a juvenile facility, for example, was worth $674,316; rape in an adult facility, $480,595. Of course, these numbers fail to grasp the unquantifiable human cost of sexual assault. So the Obama administration directed its regulatory agencies to identify regulatory benefits such as dignity, equity, and fairness—all of which fall outside the traditional cost-benefit scope of quantification and monetization—and to include a qualitative assessment of those benefits in its cost-benefit analysis.
Rao’s aversion to factoring in those types of benefits has advocates concerned that she is already abandoning qualitative measurements. In late August, she sent a memo to the Equal Employment Opportunity Commission announcing that the OMB was halting an Obama-era rule that required large companies to disclose how much they pay employees by race and gender as an effort to close wage gaps. “OMB is concerned that some aspects of the revised collection of information lack practical utility, are unnecessarily burdensome, and do not adequately address privacy and confidentiality issues,” Rao wrote.
The regulatory freeze on implementing significant regulations ends at the end of September, at which point the order gives Mulvaney the power to then set each agency’s budget for the amount of regulatory costs it can impose. In theory, Mulvaney could set a completely arbitrary cost budget—say, $1 million—for agencies, which would ostensibly block the promulgation of any new rules. But the legality of Trump’s deregulation order is under question. Public Citizen has filed a lawsuit charging that the executive order is illegal because it forces federal agencies to violate statutory law and that the OMB director does not have the authority to unilaterally set regulatory cost budgets.
“The real question is whether an administration that is impervious to fact will be able to muster the fact-based analysis required to repeal rules,” Heinzerling says. That will be decided in the courts when eventual deregulations are challenged.
IN PRINCIPLE, MULVANEY is one of the most potent members of Trump’s cabinet. The scope of power for the OMB director is nearly limitless, especially in an administration dead set on breaking the government from within. He’s already given the Freedom Caucus ideology its most powerful platform yet. But on budget politics, the GOP remains a fragmented mess. It remains to be seen whether Mulvaney can convince Trump to go after entitlements while also orchestrating a full-throated deregulatory crusade and scaling down of the federal government, tasks that will likely take several years. Mulvaney, despite the extensive power of his office, personifies the multiple contradictions that are the Trump administration.