The incoming president’s advisers are all over the ideological map.
FROM POLITICO | DECEMBER 24, 2016
Donald Trump ran his company and campaign, as many have observed, like an episode of “Game of Thrones”: Pit various factions against one another and see who comes out on top. It may be an inelegant and crude way to manage, but it has a certain logic if you are interested in power and who can wield it effectively. And that is precisely what appears is happening with Trump’s nascent economic team – a group that will be charged with running an $18 trillion economy and fulfilling the dreams of the 63 million Americans who voted for him in the expectation that he will make their pocketbooks great again.
The result looks to be an economic “Team of Rivals”— a mishmash of aides with vastly different philosophies and backgrounds, with seemingly little in common other than their shared desire to serve in his administration. The idea, popularized by Doris Kearns Goodwin a decade ago in her account of Abraham Lincoln’s cabinet, has a certain logic: A strong, great president needs and cultivates a myriad of views championed by strong individuals who do not shy from asserting their convictions in the face of equally strong disagreement from others. In retrospect, that worked with Lincoln and his ornery set of advisers. It worked because Lincoln neither lack for self-confidence nor needed to be the only voice in the room. It rather remains to be seen whether the same will be true of Trump.
In one corner, you have Gary Cohn, incoming director of the National Economic Council, outgoing president of Goldman Sachs. Cohn, a commodities trader known for his hard-charging style, holds relatively traditional views on free-market mantras such as balancing regulation with encouraging the flow of capital. In a graduation speech at American University in 2009, he spoke of how after college, he told his father he had “fallen in love with financial markets”—so passionate about them that he bluffed his way into a job trading options on Wall Street. Summing up his life lessons, he encouraged the students to lean in: “Everything I’ve done in my career, and everything that most of you have done to this point, is to take risks.”
In another corner, you have Wilbur Ross, the incoming commerce secretary, who looks to wield considerable influence. Ross made his billions buying up distressed assets, not in finance per se, and he has been outspoken about his preference for reviving domestic U.S. companies and taking a stronger stance against Chinese competition. He’s not a fan of NAFTA: For years, Ross has railed against “bad trade deals,” at one point comparing them to “bondage.”
Steven Mnuchin, Treasury secretary pick, is another product of Goldman. Mnuchin has said little about his views on economics, but he did reap considerable profit from buying up IndyMac and its distressed mortgages during the heart of the financial crisis even at the cost of many foreclosures. During an interview on CNBC the day of his appointment, Mnuchin said his top priorities were tax reform and rolling back the Dodd-Frank Act – not exactly what all those voters demanding the return of lost industries in middle America were clamoring for. A donor mostly to Democrats, he doesn’t appear to have a deep commitment to Trump or Trumpism. Asked for a Bloomberg profile why he signed up to be Trump’s finance chair during the campaign, he replied: “Nobody’s going to be like, ‘Well, why did he do this?’ if I end up in the administration.”
Then there is this week’s more controversial appointment of Peter Navarro to the newly created White House National Trade Council. Navarro, whom I’ve debated on occasion, is a long-time China trade hardliner. He views China as a dangerous economic competitor to the United States, one that has routinely bent and broken global trade rules, and one whose economic fundamentals are dicey at best. Seeing China as an economic paper tiger (or dragon as the case may be), he also believes that the Beijing government is weaker than it seems and susceptible to pressure and coercion. Hence he is supportive of retaliatory tariffs and other measures designed to “level the playing field.”
Along with Ross, Navarro published a 31-page paper in September that outlined and defended Trump’s economic policies. The plan has four pillars: “tax cuts, reduced regulation, lower energy costs, and eliminating America’s chronic trade deficit.” But trade is their real passion: They honed in on the entry of China into the World Trade Organization, which they said “opened America’s markets to a flood of illegally subsidized Chinese imports, thereby creating massive and chronic trade deficits” and “rapidly accelerated the offshoring of America’s factories and a concomitant decline in US domestic business investment as a percentage of our economy.” And they ripped into the WTO, which they said meant the United States “has effectively surrendered its sovereignty to a group of countries that do not always (or often) have America’s interests at heart.” But the report is also a pastiche of different economic philosophies—it cites as sources both the conservative Heritage Foundation and the left-leaning Economic Policy Institute, two Washington think tanks whose ideological underpinnings could not be more different.
Add to the mix Rep. Tom Price, Trump’s appointee for secretary of health and human services, who is dedicated to tearing down Obamacare and replacing it with something. HHS isn’t usually seen as a key economic portfolio, but given that health care represents something approaching 20 percent of American economic activity, how healthcare is regulated, distributed and priced has immense implications for jobs, wages and growth. The same might be said of Environmental Protection Agency policies that could make domestic oil drilling easier, or coal mining less unencumbered – though both of those will ultimately rise or fall based on price and competition more than on government regulations or the lack thereof.
Finally, there is the possibility of Larry Kudlow (whose CNBC show I’ve been on numerous times and whom I am friendly with, full disclosure) as chair of the Council of Economic Advisors. Kudlow is the ultimate free-marketer, staunch in his support of Reagan-era tax cutting policies and the belief that the less fettered free-markets are, the better that is for the country. “Either you believe in markets, or you believe in government,” Kudlow has said.
It will be hard, and indeed structurally impossible, to reconcile the views on this team. The equivalent in foreign policy would be appointing a group comprised of isolationists, interventionists, realists and moralists. Something’s got to give. How to square deregulation with abiding by environmental standards, as Cohn favors? How to square tariffs on imports designed to boost domestic production (Navarro and Ross) with the free flow of capital (Kudlow)? How to balance deconstructing Obamacare without price gouging and chaos in the health-care system that will surely hurt the working class that supported Trump? How to balance punitive tariffs with affordable goods? How to start mini-trade wars without the costs falling on, say, Walmart shoppers? How to juxtapose tax cuts that will benefit the 1% with the need to boost wages and employment for millions of disgruntled workers and unemployed who see Trump as a best last chance to turn things around?
The answer is that you can’t. If Trump’s goal is to create tension and conflict and see who emerges bloodied but victorious from the fighting, he’s setting up one hell of a battle.
Less clear, however, is whether coherent, cohesive and constructive policy will follow. You never know till you know, but take Navarro as a start. His views notwithstanding, the new National Trade Council will have zero statutory authority other than that conferred by the president. It will, as any such endeavor would be, face intense pushback from established bureaucratic centers and will require skilled navigation through a thicket of agencies that have their own power centers and will not cede those lightly or easily. Unless backed by constant and consistent presidential authority at each juncture, it will need to persuade others in government that its approach will work, and some of those centers will wait patiently for missteps to pounce on. Trump may be a change agent, but it’s unlikely he can change how bureaucracies fundamentally work.
Faced with competing and irreconcilable voices, it will be up to Trump to play the referee. That can take the form of active deliberation with his advisers, or passively waiting it out until someone emerges on top of the bureaucratic scrum. It’s certainly a recipe for a White House of conflict; whether it’s a recipe for sound and coherent economic policy is entirely another matter.