When Trump (or Obama) Threatens CEOs, It’s the Little Guy Who Loses
last night, President Donald Trump is none too pleased that GM is shuttering five U.S. manufacturing plants and eliminating 14,000 jobs.As Eric Boehm wrote here
“They better damn well open a new plant there very quickly,” the president barked to The Wall Street Journal yesterday. “I told them, ‘You’re playing around with the wrong person.'” At the White House, Trump depicted to reporters his conversation with GM CEO Mary Barra like so: “This country’s done a lot for General Motors, you better get back in there soon….They say the Chevy Cruze is not selling well. I say, well then get a car that is selling well, and put it back in…. They better put something else in.”
If this Trumpian rhetoric sounds familiar, that’s because it is. In the president-elect’s very first press conference, he vowed hyperbolically that, “there will be a major border tax on these companies that are leaving and getting away with murder.” There was, it turns out, no targeted border tax on companies that do homicide, but instead a broad tax on all individual consumers (and businesses) who do shopping.
There is a lesson here, one that transcends politician or party, though it increasingly needs to be re-learned by all elected officials and those who affirmatively vote them into office: When pols threaten CEOs, it’s the lowly taxpayer who’s about to take it in the shorts.
Anti-corporate bluster makes for good copy, particularly in a #hottake media environment where historical memory is the exception, not the rule. For instance, in that very same January 2017 press conference, Trump made the now-even-more-laughable boast that, “the word is now out, that when you want to move your plant to Mexico or some other place, and you want to fire all of your workers from Michigan and Ohio and all these places that I won—for good reason—it’s not going to happen that way anymore.” Whoops!
And it’s not just Team Red getting purple-faced at GM this week. Here’s Sen. Sherrod Brown (D-Ohio): “This country has been good to GM with the rescue of the auto industry less than a decade ago. They’ve been immensely profitable, [and] President Trump just gave them a huge tax cut. They’re taking those dollars and building in Mexico, and they should be held accountable for this.”
Note the Trump/Brown yin-yang of we did you favors and where’s your gratitude? This is the central policy fail hiding in plain sight. Those political favors cost money, whether in subsidies, loans, targeted tax breaks (which mean the rest of us have to pay more to the state), eminent domain atrocities, or whatever else. And the larger the largesse, the more that the key customer for these incumbent behemoths becomes government, not consumers.
Manufacturers that lose focus on making products that individual buyers desire are manufacturers that (deservedly) go out of business. Just because politicians have for many decades now treated automakers like public utilities doesn’t mean that they are. There is no guaranteed customer base or revenue stream.
Trump’s predecessor was no stranger to taxpayer-soaking disguised as boardroom bullying.
“I intend to hold these banks fully accountable for the assistance they receive,” a stern-sounding Barack Obama said to rapturous applause in a February 2009 address to a joint session of Congress about the financial crisis. “This time, CEOs won’t be able to use taxpayer money to pad their paychecks, or buy fancy drapes, or disappear on a private jet. Those days are over…. I will not spend a single penny for the purpose of rewarding a single Wall Street executive, but I will do whatever it takes to help the small business that can’t pay its workers or the family that has saved and still can’t get a mortgage. That’s what this is about. It’s not about helping banks; it’s about helping people.”
Just one week later, the administration announced another $30 billion in bailout money (on top of the $133 billion to date) for the disgraced insurance giant AIG.
In mid-April of that year, in the face of criticism over bailout fairness that would give rise in part to both the Tea Party and Occupy Wall Street, Obama was reduced to a type of voodoo economics in which helping banks is about helping people: “One of my most frequent questions in the letters that I get from constituents is, ‘Where’s my bailout?’ And I understand the sentiment: It makes sense intuitively, and morally it makes sense. But the truth is that a dollar of capital in a bank can actually result in $8 or $10 of loans to families and businesses. So that’s a multiplier effect that can ultimately lead to a faster pace of economic growth. That’s why we have to fix the banks.”
The Democratic Party has moved significantly to the economic left since 2009.
Hilary Clinton’s pitch about insufficiently patriotic companies in 2016 was positively Trumpesque, minus some of the rhetorical flourishes: “I want companies to know, if they walk out on America, they’re going to pay a price. And if they ship jobs overseas, we’re going to make them give back the tax breaks they receive here at home.”
In an ideal world, government gives companies and industries zero subsidies, loans, targeted exemptions, forcible property transfers, or other products of coercion. Instead, it creates a level playing field and uses the resultant savings in money and time to make the costs of both government and consumption cheaper. The world that we actually live in, alas, looks largely as I predicted when President Trump first announced his marvelous new trade war:
As Ilya Somin has noted over at The Volokh Conspiracy, Trump has dramatically shifted Republican public opinion on trade. And some high-up GOP types have been all too happy to change their spots: Never forget that then-Republican Party Chair Reince Priebus drew applause from the stage of the Republican National Convention for crowing that “Donald Trump wants to bring jobs back from overseas and hold companies who want to send them abroad accountable.” With Democrats already tacking hard toward a Bernie Sanders-like approach on economic policy, tariff-reduction may be following deficit-reduction out the exit door of two-party politics.
UPDATE: The presidential tweets have arrived:
Very disappointed with General Motors and their CEO, Mary Barra, for closing plants in Ohio, Michigan and Maryland. Nothing being closed in Mexico China. The U.S. saved General Motors, and this is the THANKS we get! We are now looking at cutting all @GM subsidies, including….
— Donald J. Trump (@realDonaldTrump) November 27, 2018
….for electric cars. General Motors made a big China bet years ago when they built plants there (and in Mexico) – don’t think that bet is going to pay off. I am here to protect America’s Workers!
— Donald J. Trump (@realDonaldTrump) November 27, 2018