Wrong Way Economics: Trump's Roadmap for Corporate Domination
Trump's economic policies can be summed up as CACAnomics: an acronym for Corporate Agenda (CA), Cronyism (C) and Authoritarianism (A)
President Trump has been engaged in a giant bait and switch scheme: he is using the rhetoric of America First to cover-up policies that put Wall Street and Global Corporations First.
Trump’s rhetoric seeks to validate the malaise felt by small businesspeople and workers rooted in Main Street towns, suburbs and rural areas. He uses the rhetoric of what I call national capitalism to project himself as the savior and protector of U.S. jobs, businesses and sovereignty. Yet, Trump’s ultra-nationalist/patriotic rhetoric is a scam. A close analysis of his policy proposals, appointments and executive orders reveal Trump as an avid supporter of global corporations, Wall Street and the wealthy. Instead of being a maverick taking on the establishment, Trump follows a set of destructive policies that has dominated the U.S. and world economies for a generation and led to the historic transfer of income, wealth and economic opportunity from the 99% to the 1%. Instead of being a tribune of the people, Trump is an agent for further consolidating power and wealth among global corporations – especially Wall Street - and the super wealthy.
"The ultimate challenge for us is to develop a progressive movement that will not only prevent such an outcome but will also create a democratic society built on the principle of justice and prosperity for all instead of profits for a few."
This article provides a detailed “roadmap” to Trump’s economic policies in order to make sense of what appears on the surface to be a series of random and fragmented proposals. (A previous article, Roadmap to Destruction: Trump, Cacanomics and the Rhetoric of National Capitalism, examined the relationship between his rhetoric and his policies). Trump’s economic policies can be summed up as CACAnomics: an acronym for Corporate Agenda (CA), Cronyism (C) and Authoritarianism (A). The Corporate Agenda is firmly rooted in the interests of global corporations especially those associated with Wall Street – cut taxes primarily on large corporations and the wealthy, selectively manage deregulation and regulation, cut government spending on social programs, and privatize government programs and resources. Trump’s Cronyism re-enforces the corporate looting of the public trough. And his Authoritarianism not only represents a threat to democracy but the calcification of a corporate state. These policies will further undermine the economic well-being of those who Trump purports to champion: U.S. workers, small businesses, and our democracy. For the vast majority of Americans, Trump’s policies will truly amount to CACA but for the top 1% - and the large global corporations - they will mean gold.
While I focus on Trump’s policies it is critical to understand that the core issue is not Trump or the Republicans or the Democrats. The central problem is the domination of our political economy by global corporations, Wall Street and the super wealthy. They are the ones who have sponsored and primarily benefit from these corporatist policies while lubricating the economic stagnation experienced by most working families. These destructive policies are not new: both Democrats and Republicans have implemented them since the late 1970s. Trump is just a more brash, extreme representative of the corporate agenda. Getting rid of Trump will not get rid of CACAnomics. Pence, Ryan and many corporate Democrats would implement the same program but in a less crude or comprehensive manner. My goal with this article’s deep dive into CACAnomics is to clarify its component parts so that we can more easily identify, resist and replace not only the policies themselves but also their proponents. This is just one step in the process of creating an alternative economic policy agenda to ensure that prosperity and opportunity are shared by everyone and not hoarded by the few.
The “corporate agenda” (also called neo-liberalism or the “better business climate” model) has defined U.S. policies since the mid-1970s when President Carter initiated the era of deregulation. Each subsequent President (and Congress) adopted this bi-partisan agenda focusing on different aspects and with different degrees of emphasis. President Trump most likely will be able to implement it more comprehensively because of the conservative corporate majorities in the House and Senate. So don’t expect qualitative differences between Trump, Pence, Ryan or Congress. Indeed, if Trump is impeached, a President Pence might be more effective in instituting this agenda. Here are the component parts of the Corporate Agenda.
Cut Taxes Primarily for Large Corporations and Wealthy Families
Corporatists and their political allies have called for significant tax cuts for corporations and the wealthy for decades. President Bush instituted such tax cuts in 2001, as did President Reagan in the early 1980s (though he partially rolled back these cuts by increasing taxes in the mid-1980s). Expect Trump and Congressional Republicans to deliver over his term. Significant tax cuts have already been proposed. According to the Tax Policy Center, Trump’s revised September campaign proposal (which is the basis for his recent one-page proposal) would cut $6.2 trillion in federal tax revenues over ten years. Business interests would obtain about three-fourths of the total tax cut. The top 0.1% of individual income taxpayers would obtain an average tax cut of $1.1 million while the bottom 60% would average just $507. All of this is similar to Speaker Ryan’s Republican tax proposal that would cut revenue by $3.3 trillion. Corporatists argue that the 35% statutory U.S. corporate tax rate is just too high. However, the Government Accountability Office reported that no income taxes were paid by about two-thirds of all corporations and 42% of large corporations (those with more than $10 million in assets) in 2012. Large profitable corporations who actually paid corporate income taxes only paid an effective tax rate of just 14% from 2008-2012 (16% in 2012) – far less than the statutory 35%. They get out of paying taxes by using credits, deductions, deferrals and by stashing $2.4 trillion in profits overseas. Furthermore, corporate tax revenue has accounted for a decreasing share of federal tax revenue falling from 32.3% in 1952 to just 1.9% in 2015. Finally, instead of investing in “real” productive assets that create good paying jobs, corporations have really focused their after-tax profits on stock buy back schemes to artificially prop up the value of corporate stock (and management stock options) and on mergers and acquisitions. These expenditures do not create good jobs for workers.
Cut Government Social Spending
Trump and Congressional corporatists will use the burgeoning deficit caused by their tax proposals as an excuse to attack government social spending – but not spending on defense or corporate tax giveaways. The most egregious example of the primacy of tax cuts for large corporations and the wealthy over budget and even humanitarian needs is the House vote in favor of their replacement for Obamacare. The House-passed bill included almost $600 billion in tax cuts for corporations and the wealthy (taxes that had financed Obamacare’s expansion of coverage) and $800 billion in federal budget cuts to Medicaid. The Congressional Budget Office estimated that the House bill would leave 23 million people without coverage.
But there is much more to the relationship between tax cuts and the budget. According to the Tax Policy Center, Congress would eventually have to cut total spending by 21% just to pay for Trump’s proposed tax cut. The Committee for a Responsible Federal Budget calculated that if Congress did not touch Social Security, Medicare or Defense spending then all other programs would eventually have to be cut by 63% just to pay for his ten-year program of tax cuts. Any increase in defense spending would mean more cuts to social programs.
There are three major themes to corporatist budget cuts – including Trump’s most recent proposals.
- Cut programs which impinge on corporate decision-making and profits – this is a form of deregulation by undercutting enforcement. Prime targets include the EPA’s ability to make polluters pay or, at least, reduce the release of harmful pollutants; the Department of Labor’s ability to enforce wage and hour laws, occupational health and safety, and even training and education programs; and the Department of Health and Human Services programs including those that enforce food and drug safety.
- Cut programs that service low-income and even middle-income communities and families. These budget cuts pit the have-littles against the have-nothings by focusing on the trickle of money going to the poor (and middle income groups) rather than the money gushing towards the corporations and the wealthy. Examples include proposed cuts in Social Security Disability, Medicaid (including payments for senior nursing homes), food stamps, community development grants, low-income home energy assistance, as well as before and after school programs.
- Cut programs which are seen to be in competition to private business interests (such as public education and the Corporation for Public Broadcasting) or are judged to be frivolous (such as the National Endowment for the Humanities and the National Endowment for the Arts).
Of course, there is much, much more including proposed cuts to public resources such as the national parks, forest service, the National Institutes of Health, and on and on. Trump’s draconian budget cuts are a logical, if extreme, version of the overall corporatist program. The difference between Trump and more mainstream corporatist budgets is the extent and breadth of the cuts, not the overall program of budget cuts and gutting of social programs.
Trump and the Republican Congress will enact policies to transform public resources into private property and profits. Edwin Feulner, past president of the corporate funded Heritage Foundation and Trump transition team member, crystallized this perspective when he stated, “any government function that can be found in the yellow pages should be a candidate for privatization.” Here is a partial list of privatization targets identified by Trump, his nominees or members of his transition team: public education from K through 12; prisons; the air traffic control system; Indian lands that have energy resources; bridges and highway construction; Veteran’s hospitals; and to open public lands to privatization whether through sales or leases – including national parks, national monuments, and wilderness areas. And let’s not forget Social Security and Medicare. During the campaign, Trump promised not to touch these programs. But it’s one thing to be tough against powerless refugees, it’s quite another to be tough against Wall Street which stands to make billions of dollars in fees by privatizing these insurance programs. It should be noted that House Speaker Ryan and Vice President Pence were very strong supporters of previous attempts to privatize Social Security and Medicare.
Regulations will be judged by whether they serve private corporate interests rather than the public interest. There will be three major areas slated for deregulation: labor, the environment and Wall Street. Corporatists – including Trump – want labor issues to be determined by corporate power without any worker protections imposed by either the government or labor unions. Thus, the corporatist attacks on the right of workers to form unions and bargain collectively, wage and hour provisions such as the 40-hour workweek, workers compensation insurance, protections for workplace health and safety, defined benefit pensions, and even minimum wages. Environmental regulations are attacked because they attempt to privatize the social costs of pollution and environmental degradation. In other words, corporations don’t want the polluter to pay any of the costs of the pollution they cause but for the workers, communities and the general public to pay such costs. President Trump and his many Wall Street-connected nominees will also attempt to usher in another tsunami of Wall Street deregulation ignoring the lessons learned from the S&L crisis of the 1980s and the Great Recession of 2007. Other areas slated for deregulation include food safety, consumer product safety, and any regulations that limit corporate influence including mergers, acquisitions and political lobbying and contributions.
However, note that this deregulation agenda is quite selective. There are many areas slated for increased regulations including monopoly protections for intellectual property, pharmaceuticals, immigration, voting, privacy, and the right of women to determine their own reproductive choices.
Trade policy will also reflect this selective deregulation/regulation agenda. For example, trade agreements will continue to protect and even extend regulations that protect intellectual property including the monopoly patents of the pharmaceutical industry while dismantling regulations that attempt to limit Wall Street’s ability to freely move capital into and out of countries with no concern for financial stability. Trump correctly challenged previous trade agreements that undermined U.S. manufacturing jobs and increased our trade deficits. But he has staffed many positions with Wall Street alumni. And he may or may not be strong enough to follow President Reagan’s trade policies that assisted U.S. based manufacturing by instituting tariffs on specific foreign goods dumped on the U.S. market and limiting currency manipulation by other countries through the Plaza Accords. There appears to be an internal Trump administration battle between manufacturing nationalists and those who want to protect global supply and value chains. But make no mistake whichever faction wins, Trump’s bilateral trade agreements will re-enforce corporate hegemony, profits and decision-making flexibility by undermining workers rights, the environment, food and consumer product safety and even national sovereignty.
The proponents of the Corporate Agenda correctly contend that all these policies will decrease the cost of doing business and increase profits. The expectation for such profit increases is one reason for the recent surge in the stock market. But the Corporate Agenda also promises that this surge in profits will result in increased investment in production, more good jobs and higher rates of growth - the proverbial tide that raises all boats. However, we don’t have to rely on promises to see what will happen. The recent historic levels of corporate profits have not been primarily invested in the creation of new, well-paying jobs for the mass of U.S. workers. Instead, large corporations have, as mentioned earlier, focused on increasing CEO salaries, stock buy-backs and mergers & acquisitions. The Corporate Agenda has also led to an historic transfer of wealth and income to the top 1%; the stagnation of incomes and wealth for the vast majority of people; the replacement of decent paying jobs with lower paid service work with much fewer benefits or contingent work with no benefits; and the transformation of government from creating and reinforcing economic stability and a safety net to an institution that aids and abets corporate power – especially Wall Street with its inherent economic instability and risks. President Trump is following this same model and the results will be similar. If deficits increase significantly, there will be a short-term stimulation of the economy. But such a brief surge covers over the basic hollowing-out of the middle class, the vast transfer of income and wealth to the 1%, the concentration of even more power to large global corporations, and the destruction/erosion of stabilizing regulation on Wall Street – all of which will exacerbate and magnify the effects of the next economic recession that will result from the burst of some bubble or external events whether natural, economic or political.
Corporate titans and their political allies are being rewarded with government positions, contracts or places at the legislative/regulatory writing table that will serve their narrow private interests. In such an environment, corruption will blossom. Trump’s appointment of corporate cronies to important positions is neatly married to policies that serve their corporate and class self-interest to the detriment of everyone else. Here is just a brief list.
- Trump and his family. The chief ethics officers under Presidents Bush and Obama have raised major conflict of interest concerns relating to the President’s family and his vast empire of real estate holdings and franchise agreements. However, the biggest conflict of interest has been Trump’s tax proposals that would save his family billions of dollars by repealing the estate tax, the alternative minimum tax and the reduction of the tax on so-called pass through corporations from 39.6% to 15%.
- Wall Street. Secretary of the Treasury Steven Mnuchin, Chief Strategist Steven Bannon and Chief Economic Adviser Gary Cohn all were former Goldman Sachs employees while Jay Clayton, the new head of the Securities and Exchange Commission, was a lawyer who represented many Wall Street clients. In terms of policy, the corporatists in the administration and Congress have already announced their intention to transfer more money and power to Wall Street by rolling back a number of the most important financial stability and consumer protection provisions of the Dodd Frank act. And President Trump has issued executive orders to begin this process.
- The Oil and Gas Industry. Secretary of State Roy Tillerson was the head of Exxon Mobil while the new EPA Administrator Scott Pruitt, Secretary of Energy Ryan Zinke and Secretary of the Interior Rick Perry have been very closely tied to the oil and gas industry throughout their careers. Trump has already signed a series of executive orders that will open millions of additional acres of on-shore and off-shore areas to oil and gas development; approved pipelines that will facilitate the production and export of dirty tar sand oil; decided to leave the Paris Climate Agreement; and is undermining the previous administration’s attempts to cut carbon emissions by nearly 30% by 2030. All of these actions will expand fossil fuel industry profits at the expense of exacerbating the climate change crisis.
- The Pharmaceutical industry. Tom Price, the new Secretary of Health and Human Services and Scott Gottlieb, the new head of the Food and Drug Administration, have long-standing ties to many large pharmaceutical and biotech companies. In terms of policy, Trump already reneged on his campaign promise to have the federal government negotiate the prices charged by drug companies to Medicare and Medicaid. This about-face occurred after a closed-door meeting with the CEOs of Johnson & Johnson, Merck and a few other big pharmaceutical companies.
As usual, Trump’s rhetoric of draining the swamp is contradicted by his systematic policy of corporate cronyism. The link between cronyism, self-dealing and policy will lead to major corruption scandals whether or not the Republican led Congress investigates them.
However, corporate cronyism should not be understood just in terms of specific individuals, industries or conflicts of interest. At a much more fundamental level, corporate cronyism should be understood in terms of class and power; specifically, the selection of corporate representatives to strategic political positions in order to formulate and institute policies to transfer trillions of dollars to the wealthiest families and global corporations and to solidify and concentrate their power. In this sense, corporate cronyism has been a bi-partisan affair. After all, the administrations of Presidents Obama and Clinton were filled with Wall Street veterans. However, the latest exhibition of crony capitalism is truly Trumpian in terms of its scale and brashness.
The U.S. government has become essentially a one-party state. Forget about checks and balances. The dictates of this one-party state will be written into law by the one-party Congress, enforced by the one-party executive, and upheld by the one party judiciary. At an economic level, these policies will be “corporatist.” But there is much more. Trump is especially skilled at the divide-and-conquer tactics utilized by demagogues from Rome to the present. “Your” problems are caused by the “other” – just fill in the blank to determine who will be the target of the moment: Muslims, unions, immigrants, blacks, Hispanics, LGBT… And Trump et. al. will blame these groups for any future crisis caused by the economic policies of the Corporate Agenda or foreign disasters. Furthermore, the entire weight of the surveillance state could be brought to bear against any effective opposition which will be labeled as “unpatriotic” and aiding/abetting terrorists. In support of the one-party state, basic civil liberties will be undermined including human rights, voting rights, workers rights, civil rights, and privacy protections.
CACAnomics thus devolves into an unholy trinity of corporate power, cronyism and authoritarianism. The ultimate effect of CACAnomics will be to weaken government and organized labor as the primary institutions that can potentially create limits and/or alternatives to corporate hegemony. President Lincoln warned of such a situation in a November 1864 letter, "I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country…corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed."
The ultimate challenge for us is to develop a progressive movement that will not only prevent such an outcome but will also create a democratic society built on the principle of justice and prosperity for all instead of profits for a few. This will be the subject of future articles.