Not long ago, one of us was having lunch with a multibillion-dollar fund manager when the subject turned to Trump’s prospects for a second term.
This person is disturbed by many of Donald Trump’s actions and is concerned about what the November presidential election will mean. But when it comes to problems – the economy – they don’t worry. “We didn’t do that badly last time,” he said. “There are some things I don’t agree with, but I don’t think it will matter.”
We fear this view is becoming more common. We have spoken to many business and financial leaders who, when it comes to economic policy, are open to the premise that Mr. Trump is a normal presidential candidate.
We strongly disagree. We have both been involved in business, government and policy for many years, with more than a century of experience between us. We have partnered with elected officials and business leaders across the ideological spectrum. And we believe a direct assessment of Mr. Trump’s economic policy agenda – based on public statements and on-the-record interviews, such as the one he recently conducted with Time magazine – leads to clear conclusions.
When it comes to economic policy, Mr. Trump is not a far-from-normal candidate. A second Trump term will pose great risks to our economy.
At a time when our country is on an increasingly risky debt trajectory, Mr. Trump’s tax initiatives during his presidency add approximately $3.9 trillion to the national debt, according to Brian Riedl of the Manhattan Institute. Mainstream analysis concludes that the result – increasing demand in an already fully employed economy while having a negligible effect on business investment – ​​adds up to very little benefit in the shorter term and almost none in the long term.
And Mr. Trump’s second-term agenda will further damage our fiscal picture. A Committee for a Responsible Federal Budget report said that extending the 2017 tax cuts alone would add $3.9 trillion to the federal debt and increase the debt-to-GDP ratio by about 10 percent. This may lead to higher interest rates and greater inflation while undermining business confidence and may reduce our resilience in the face of future national security or economic crises.
Mr. Trump will also reduce legal immigration at a time when our economy needs additional workers at all skill levels. The company has moved some operations outside the United States to find the employees it needs. Ordering the military to deport millions, as it has threatened to do, will not only cause widespread social instability but also fail to approach the problem of undocumented workers in a way that meets our economic needs.
In trade, raising tariffs across the board – as Mr. Trump has repeatedly promised to do – will increase prices for American producers and consumers, reduce our global competitiveness and most likely lead other countries to retaliate against our exporters.
Regarding regulation, while many business leaders have different opinions with President Biden, Trump’s second term will pose great risks. Mr Trump has made it clear that his regulatory approach will not be driven by a cost-benefit analysis, where potential social and economic benefits are weighed against potential concerns. Instead, he said he would use regulation to reward loyalists and punish perceived enemies.
In his term, Mr. Trump personally directed the Justice Department to block the merger between AT&T and Time Warner because he was reportedly unhappy with his coverage on CNN, which is owned by Time Warner. In his second term, he promised to take this approach, for example, by promising to reward his political allies in the oil and gas industry with cuts to renewable energy, one of the fastest growing industries in the world and which is in fierce competition . with China.
Trump will also take unprecedented steps to reduce the Federal Reserve’s independence, forcing it to adjust interest rates for short-term political gain rather than long-term economic health. Trump’s top economic adviser, Peter Navarro, predicted that Mr. Trump would fire the chairman of the Federal Reserve within the first 100 days of his second administration. Other allies say the Fed’s decision must be consulted on or approved by the administration. Such actions could cause significant damage to markets and our economy by politicizing the Federal Reserve Board’s interest rate decisions and further damaging the Fed’s credibility.
Mr Trump has said he wants to withdraw from NATO obligations and has threatened to abandon our European allies if attacked. Such a threat would immediately shake confidence in America’s defense commitment and could scare our adversaries into acting in bad ways, increasing global instability that threatens our supply chains and markets and increases the risk of armed conflict. Of course, if Mr. Trump follows through on these threats, the damage will be even worse.
The rule of law is the fundamental foundation of our economy. Mr. Trump’s proposed plan would undermine the rule of law in several ways, including using the FBI and the Justice Department to target opponents, possibly doing the same thing as the IRS, firing United States attorneys if they refuse orders to prosecute political opponents. , use the pardon power to immunize their political allies from the consequences of breaking the law and continue to deny the fairness and freedom of our elections.
Mr. Trump will also fill his cabinet and senior staff with people whose primary qualification is loyalty to him. In such a scenario, the White House and federal agencies will be expected to make decisions not in the interests of policy but to satisfy Mr. Trump’s ego, anger, whims, personal business interests and political vendettas.
Nor will Mr. Trump and his allies stop there. He plans to replace up to 50,000 civil servants – nonpartisan professionals such as security inspectors, researchers and procurement experts – with political loyalists. This could include requiring current federal employees to take a loyalty test.
When it comes to managing the crisis – an important component of any president’s stewardship of the economy – Mr. Trump terms paint a troubling picture. As the pandemic spread across the United States, Trump responded with uncertainty, erratic behavior and a political focus on public welfare. The economic damage from the pandemic is inevitable. But more effective leaders can limit the harm.
Even the Trump administration’s biggest success in fighting Covid, Operation Warp Speed, is now barely mentioned due to political pressure. There will always be a crisis, economic, geopolitical or otherwise, and Mr Trump’s reaction to Covid gives a disturbing look at how he will deal with it.
Some argue that many of the dire predictions made at the start of Mr Trump’s tenure have not come to pass. But he has expressed regret that his term was less radical than he had hoped – and has promised that his second term will not be like his first. From 2017 to 2021, Mr Trump, although extreme in many respects, was limited by key appointees from the traditional conservative establishment and had to appeal to the business community as he sought re-election. If he wins this November, he has made it clear that he will choose appointees who will obey him, and that he will not have a re-election campaign that will give him an incentive to curb his most extreme impulses.
Nearly every element of Mr. Trump’s second-term agenda would create a huge risk of economic damage. In aggregate, there is a high probability that the agenda will lead to chaos and unpredictability, including global instability, thereby reducing investment and business activity. Meanwhile, inflation will be increased by tariffs, immigration restrictions and larger fiscal deficits.
Some may feel that we’ve gotten through one Trump term and therefore can get through another. But a more fitting analogy is that after we survived one round of Russian economic roulette, Donald Trump asked us to take another spin – only this time with many more bullets in the chamber.
It will be a very dangerous game.
Robert E. Rubin is a senior advisor at Centerview Partners and served as US Treasury secretary from 1995 to 1999. Kenneth I. Chenault is chairman and general manager of General Catalyst and former chairman and chief executive officer of American Express.
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