Donald Trump is assembling a team of elites in the service of populism. That could make him the first “populetist” president.
Trump has promised to improve the prospects of the “forgotten men and women” of America. To do it, he’s assembling a team of 1 percenters who have profited handsomely from the very trends that have weakened the middle class. If Trump’s populetism works, it might help shrink the growing chasm between the wealthy and the rest. But if it doesn’t, the populist backlash that flared during the recent presidential campaign could grow even more intense.
Much of Trump’s economic team is now in place, assuming a friendly Republican Senate confirms the nominees, which seems likely. Here’s how Trump’s choices to lead the following departments compare with those of President Obama during his first term:
Trump’s choice: Steve Mnuchin, a former Goldman Sachs (GS) banker, hedge-fund manager and film financier known for earning hundreds of millions of dollars buying and reviving IndyMac, a California bank that failed in 2008.
Obama’s choice: Tim Geithner, a career bureaucrat who served at the World Bank and was president of the New York Federal Reserve when Obama tapped him.
Trump’s choice: Wilbur Ross, a private-equity billionaire who has profited from investments in distressed industries such as steel, coal and textiles.
Obama’s choice: Gary Locke, a lawyer and politician from Washington state, who became the nation’s first Chinese-American governor when elected to his state’s highest office in 1996.
Trump’s choice: Andy Puzder, a lawyer who’s CEO of the CKE Restaurant Holdings, which operates Hardee’s, Carl’s Jr. and other chains.
Obama’s choice: Hilda Solis, a California politician and four-term member of the House of Representatives who became the first Hispanic appointed to a Cabinet position.
Trump’s choice: Rick Perry, a Texas politician who served as governor for 14 years.
Obama’s choice: Steven Chu, a Nobel Prize-winning physicist who taught at the University of California and worked as a researcher at AT&T’s (T) Bell Labs.
NATIONAL ECONOMIC COUNCIL
Trump’s choice: Gary Cohn, president of Goldman Sachs, who has worked at the investment bank since 1990.
Obama’s choice: Larry Summers, who served as chief economist at the World Bank, Treasury Secretary under Bill Clinton and president of Harvard University.
SMALL BUSINESS ADMINISTRATION
Obama’s choice: Karen Mills, a venture capitalist, private-equity investor and heir to the Tootsie Roll fortune.
Trump obviously prefers business executives and wealthy bankers, while Obama leaned toward academics and policy wonks. There’s no rule dictating which type of Cabinet official is more effective, and some critics complained that Obama’s economic team relied too heavily on government maneuvering to stimulate the economy, instead of letting the free market do its thing—one reason, perhaps, the economy has been stuck at a subpar 2% growth rate under Obama.
While Trump’s team of business All-Stars excels at enriching themselves, however, it’s far from obvious how those skills will help improve the lot of ordinary workers. Trump’s economic plan, so far, amounts to standard supply-side theory: slash taxes, prune regulation and watch the economy miraculously surge. In reality, supply-side stimulus has never worked as planned, and with the national debt bigger than ever, it could backfire if Washington’s finances become more strained than they already are.
George W. Bush attempted supply-side reforms when he slashed taxes during his first term—but the desired effect never materialized. Instead of sustained strong growth and shared prosperity, income inequality worsened, with Bush’s presidency ending in a grueling recession and an epic housing bust.
Cutting taxes does put more spending money in people’s pockets, which in theory ought to boost growth, create jobs and raise pay. But a lot depends on who gets the extra money and what else is going on in the economy. And when paychecks get bigger, some people who can suddenly pay their bills more easily decide to work less. On the whole, economists have generally found that major tax cuts on their own don’t correspond with stronger economic growth.
What tax cuts usually do accomplish right away is making the wealthy better off. That has already happened since Trump got elected on Nov. 8, with stock markets surging on the expectation that lower taxes and less regulation will boost corporate profits during the next few years. An investor who owns shares in an S&P 500 index fund has earned a sparkling return of about 6% since Election Day, which is $600 for every $10,000 worth of shares.
Many of the people Trump aims to help don’t own stocks, however, which means they’ll end up waiting for newfound wealth higher on the income chain to benefit them, somehow. If Trump and his team are right, empowering the wealthy (even more) will lead to more spending on business investment, more production and more jobs. But that money could also get spent on equipment, imports or digital services that don’t create many jobs. Trump’s wealthy advisers are undoubtedly smart. But many other smart people have tackled the same problem, with little to show for their efforts.
Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman.