“We will defend American jobs. We have to look at it almost like a war.”
—Donald Trump, 2015
So just what is Trumponomics all about? Does it have any cohesive theme, or is Trump just making this all up as he goes along?
We wish we had a bitcoin for every time we’ve been asked that question.
Trump’s own answer when we queried him about his economic philosophy was that it all boiled down to this: “I’m not running as a typical Republican. I think there’re obvious problems with the way Republicans relate to working-class Americans—which is why they lose and lose.” Other times he would simply respond, “Our strategy on the economy is to always put America first.”
We are fairly certain that some of this vision for a new economic template for the GOP came from the former Breitbart CEO Steve Bannon. The controversial Bannon wasn’t just the campaign CEO over the last months of the campaign, his involvement with Trump came years earlier. There was even talk of getting Trump to run for president in 2012. It’s not clear to us whether Bannon had the populist ideas first and sold Trump on them, or whether Trump had cradled these ideas for a long time and finally found an advisor in Bannon who agreed with his predispositions.
What is clear is that from the start of their partnership—such as it was—they were largely of like mind on how to sell the American people and conservatives on a new economic populist paradigm.
At the very least, Bannon shared Trump’s world vision from the start, and they both are disruptors. We found Bannon to be more pessimistic and Trump more optimistic about the future. Bannon talked a lot about the “wrecking ball” strategy. Trump talked about building things up. “You’ve got to understand that the GOP was out of touch with voters almost completely for the past couple of decades,” Bannon explained to us during the campaign. “They haven’t been addressing a tide of middle-class concerns about trade, immigration, the culture, and expensive and unwinnable wars. Most voters had just completely tuned out both parties. Trump is a nonpolitician who was promising a paradigm shift.”
That’s the understatement of this still-young century. Trump didn’t run as a Milton Friedman–Reagan free marketeer. He is not a libertarian—far from it. He also didn’t run as a “kinder and gentler” Bush neocon.
Trump upended two decades of stale Republican dogma with a freshly minted populist agenda. What was shocking was how many millions of independent and Republican voters—and even some populist Democrats—found Trump’s approach to economic policy refreshingly attractive or at least worth a try.
The Man and the Message
Before we describe the principles of Trumponomics, it is critical to point out that this “populist” agenda—he used to like calling it “popularism”—couldn’t have been pulled off by just anyone. The message required the right messenger. What made Trumponomics sell was a brilliant salesman. We have already made note that Trump is arguably the greatest marketer of modern times. This is the key to his success in business. But it is even more so the key to his success in politics.
What made Trump such a natural and believable messenger was that he never hid his wealth and success—instead he wore it as a badge of honor and even flaunted it. He donned beautifully tailored suits. He drove around in limos, hung out in swanky resorts, flew around in his own plane, and built tall buildings. He boasted about his success (many times excessively) with a bravado that was somehow endearing to his voters.
We are convinced that he pulled off the populist message so well because he was the un-politician. Hillary was smooth, brilliant, prepped, and almost infallible in her presentations. Obama too.
Trump talked like a real person at a sports bar or a neighborhood party (we won’t say like men in a locker room), not someone programmed with a teleprompter. Hillary was Madison Avenue. Trump was Brooklyn. It was Trump’s authentic street fighter persona—which admittedly many Americans found highly off-putting—that was pivotal in selling the populist message. When people ask us what Donald Trump is really like in person, the one word that we found best described him was “authentic.” What you see is what you get.
One other thing we firmly believe about Donald Trump—a belief that his voters clearly share—is that he genuinely cares about the middle class and helping them better their lives. Many criticisms of Trump are legitimate. But we never believed for one minute that he was in this to further enrich wealthy people like himself. He already was rich.
The Principles of Trump Populism
Now let’s get right down to it. Trumponomics revolves around a handful of core principles.
First, always put America first. Reject globalism. This isn’t to say that America will not continue to be the most generous and charitable nation in the world when it comes to rushing to the aid of a friend. But it does mean that we will put America’s and Americans’ interests above those of other nations.
The left snubs its nose at this idea as outdated “nationalism.” Wrong. The entire basis of our nation is self-government and consent of the governed. World government and multinational governing bodies are dangerous and misguided solutions. Globalism is out. National greatness is in.
Second, restore American patriotism. Trumponomics is predicated on the core belief in the fundamental greatness and goodness of America. America is a special place, and Trump believes that to his core. To quote Reagan: “Divine providence put us here as a beacon of freedom for the rest of the world.”
Many of the leaders of the intellectual left are contemptuous of the idea of American triumphs. Liberals tend to highlight America’s failures and shortcomings, not our greatness. There is a subversive “blame America first” attitude about the American experiment—starting at the very birth of the United States. Our founding fathers, for example, are now portrayed as immoral slave owners and patriarchs, not heroes of the world’s greatest freedom revolution.
Third, empower Americans to make decisions for themselves. This is a rejection of government paternalism. Relying on the forces of competition and choice will foster better outcomes than rules, regulations, and mandates. People can decide for themselves.
The left has adopted the opposite philosophy: people aren’t qualified to make their own decisions about healthcare plans, or schools, or pension investing. It was always disheartening to us that the Trump Cabinet secretary whom the left hated the most was Secretary of Education Betsy DeVos. Her unforgivable sin was a plan to empower minority parents with more options for educating their kids. The left believes that poor parents would make poor choices and that competition would hurt public schools in inner cities—as if they could possibly be any worse.
Fourth, rebuild America’s inner cities. This means eradicating crime, violence, drug abuse, corruption, and joblessness. Trump exposed to the American people that liberal governance had failed to keep its promises of helping the poor and distressed communities. Trump has unflinchingly revealed the flaws of liberalism for its failures in cities like Baltimore, Newark, Chicago, Detroit, and Cleveland. He famously asked inner-city audiences—mostly minorities: What have the Democrats in the inner cities done for you and your neighborhoods? The answer was nothing.
One of Trump’s big urban initiatives is the designation of 50 enterprise zones—mostly poor areas in inner cities—that will be targeted for lower capital gains taxes, regulatory relief, and the clearing of other barriers to development.
Fifth, secure and protect our borders from drug runners, terrorists, illegal immigrants, and criminals. A nation without borders, Trump said many times, is not a nation. The left’s response was sanctuary cities, and charges of racism and xenophobia. The public was with Trump—and they remain so solidly. As a side note, we always urged Trump to talk about high, protective walls, but with big gates for people to enter legally.
Sixth, promote and support American business. Donald Trump is an unapologetically pro-business president—which is a major reason the stock market soared when he won the election. The modern Democratic Party, by contrast, has become reflexively anti-business, in part because of its preoccupation with income inequality. Liberals love jobs, but they hate job creators. As Trump likes to say: you can’t have one without the other.
Seventh, reject identity politics. The prevailing liberal mindset is that Americans are inherently divided by race, sexual orientation, ethnicity, and class and that there is a zero-sum game being played among all those divisions. No. We are one nation under God, indivisible. Everyone can be better off, and the gain of one person does not necessarily equal the infringement of another. All Americans should be treated as individuals, not members of a class, and should be treated equally under the law regardless of their race, gender, and income status. E pluribus unum means “out of many, one,” not “out of one, many.”
Eighth, reject declinism and celebrate that America’s best days lie ahead. This means rejecting the limits to growth, secular stagnation, and the environmental doomsdayism (climate change) that animate the left today. Trumponomics is predicated on a faith in the future and a confidence that America can solve any problem through innovation, invention, technology, and a healthy dose of just plain American can-doism. To quote John Lennon in “Mind Games”: “Yes is the answer.” The solutions to the social, economic, and environmental threats and challenges that will confront our society in the future—from poverty to addiction to cancer—are solvable in the next generation, if not sooner.
Ninth, America’s most valuable role in the global economy is to lead by example. Our most important gift to the world is to export the virtues of democratic capitalism and free enterprise. When we get it right, the rest of the world follows. Trump often said, “Strong at home, strong abroad,” and that was almost a duplication of a core Ronald Reagan belief.
The spread of freedom and economic liberalism across the globe in the 1980s and 1990s happened in no small part because nations started to emulate the Reaganomics formula for growth. When we cut taxes, the world started cutting taxes. When we deregulated and privatized, the world followed our lead. When we stabilized and strengthened the dollar, other nations got control of inflation as well—many times by linking to the dollar.
Trump is right that the best way to promote prosperity abroad is to fix America’s problems first. Then we can serve as a beacon of freedom and opportunity for nations around the globe. If we lead, the rest of the world will follow.
Finally, Growth, Growth, Growth
The final and we would argue the most important principle of Trumponomics and restoring American prosperity is this:
Growth is everything. Faster economic growth is a necessity if America is to fix its socioeconomic problems.
As a White House bulletin put it in early 2017: “Over the next 10 years, 3% growth instead of 2% will yield a nominal gross domestic product that is $16 trillion larger, federal government revenues $2.9 trillion greater, and wages and salaries of American workers $7 trillion higher.”1 The good news is that at the time of this writing, the economy has already posted quarters with annualized growth as high as 3.2 percent—much higher than the 1.5 percent growth in Obama’s last year in office.
While the left is more obsessed with income inequality, the way the economic pie is divided, Trump’s view is the bigger pie gives everyone a bigger slice. The left’s response to the roaring stock market under Trump in 2017 was that since 1 percent of Americans own over half of the stocks, only the rich will benefit. Our view is that a more prosperous and financially secure nation is better for everyone—including the 100-million-plus Americans who own stock through pension and 401(k) plans.
One underappreciated dividend from this higher permanent pedestal of economic growth is that, if Trump succeeds, it will help largely solve the long-term funding crisis of Social Security and Medicare. With 3 percent economic growth, up from the 1.8 percent predicted by the Social Security and Medicare actuaries, the compounding effect over 50 years means more than $50 trillion of revenues into the Medicare and Social Security trust funds, largely dissolving the funding shortfalls of these programs—and perhaps leaving them in long-term surplus, not deficit.
Trumponomics in Action
Now we have to address the issue: How do these Trumponomics principles translate into real-world policy solutions? We have had many discussions with Donald Trump on this front over the past two years. In some cases, we’ve helped steer his thinking on these policy directives.
Another highly influential voice in defining Trumponomics in action has been Mick Mulvaney, the hyperactive (in a good way) former GOP congressman from South Carolina and Trump Office of Management and Budget (OMB) director. We met regularly with Mulvaney during the transition period and early months of the new administration, as he constructed Trump’s first two federal budget requests from Congress. Mulvaney has been one of Trump’s shining lights in the Cabinet when it comes to promoting sound economic policy ideas.
We have always liked the way Mulvaney outlined what he calls MAGAnomics, which is shorthand for Make America Great Again economics. So we will borrow liberally here from Mulvaney’s formulation, with a few of our own additions and refinements.
1. Cut unnecessary regulations
Rolling back unnecessarily burdensome regulations means lower costs to businesses and consumers. As we describe in Chapter Six, the regulatory beast had become one of the greatest deterrents to investment here in America and a faster pace of job creation. As Mulvaney puts it: “Requiring realistic and fact-based cost-benefit analyses of regulations will help protect both the environment and American jobs.” For example, the Environmental Protection Agency (EPA) found that the benefits of the Clean Air Act regulation exceeded the costs by a factor of 30 to 1.2
The World Bank says the United States ranks number eight in the world in having a sound regulatory environment. Trump wants to get to number one.
2. Improve American competitiveness by slashing tax rates and burdens
Lower tax rates—as JFK, Reagan, and others have proven throughout history—lead to more growth, more investment, and more jobs. Trump always saw this through the lens of American competitiveness. “We have put our businesses in a deep hole. I want us to have the tax advantage, and for America to go from worst to first on tax competitiveness.” He scoffed at the left’s notion that taxes don’t impact behavior. “Taxes had a big impact on every economic decision I’ve made,” he told us early on.
He wasn’t alone. For decades, growth in private-sector jobs and wages has correlated with growth in private business investment. When businesses invest in new plants and equipment, they tend to hire more people, who produce more and get paid more.
3. Replace welfare with work
Growth will require more able-bodied Americans getting off welfare and into jobs. Although the labor pool is aging, we are also seeing people who could be working but are staying home.3 Welfare payments can often exceed in generosity the take-home pay from most starter jobs—and that isn’t fair to those who do work for low wages, for taxpayers, or for the long-term economic mobility of those who could be working. In some states like Hawaii, a full welfare package could give a family the post-tax equivalent of a $50,000-a-year salaried job, according to a 2014 Cato Institute study.4 Welfare—which includes cash assistance, public housing, food stamps, disability payments, unemployment benefits, and Medicaid—needs to be a hand up, not a handout.
4. Use America’s abundant natural resources
America has well more than $50 trillion of natural resources that are accessible with existing drilling and mining technologies. This is a vast storehouse of wealth that far surpasses what any other nation is endowed with. We are not running out of these resources, and the technology to discover them and put them to use for American industry and consumers—such as fracking and horizontal drilling—continues to improve rapidly over time, which means these resources are for all intents and purposes inexhaustible. We can access hundreds of years’ worth of these resources—minerals, rare earth metals, oil, gas, coal, timber—with existing technology.
Using our natural resources enriches the United States in every way. It increases our national output by tens of trillions of dollars over time; it raises trillions of dollars of income tax revenues and lease and royalty payments—for the federal government and the states; it enhances our national security by making us less dependent on the Middle East, Russia, China, and other bad actors across the globe; and it can create millions of high-paying jobs for American workers. The left’s philosophy is “keep it in the ground,” while ours is drill, mine, and recover resources to help make the United States the world’s preeminent natural resource powerhouse.
The Trump White House says that “cheaper, cleaner, more abundant energy will increase investment and employment across dozens of industries, from chemicals to automobiles. By ensuring reliable supplies and stable prices, the president’s energy plan will reduce uncertainty, especially in the manufacturing sector, thereby reducing the risks associated with building new plants in America.” Trump is exactly right.
5. Modernize America’s infrastructure
Trump has called for $1–2 trillion in added infrastructure spending. But he isn’t talking about traditional and expensive make-work, “shovel-ready projects” that aren’t valuable to Americans over time. He wants to leverage private and state dollars to rebuild our traditional public infrastructure—including roads, bridges, schools, airports, and ports.
We often advised Trump that America’s most important infrastructure needs are private—factories, warehouses, research centers, office complexes, laboratories, and so on. Those are largely incentivized by the Trump tax cut and the immediate capital expensing of improvements to these facilities that are privately owned and operated. We also need a new generation of twenty-first-century infrastructure that is public in benefit, but can and should be privately operated. We are talking about pipelines, liquefied natural gas (LNG) terminals, energy refineries, airports, the electric grid system, broadband development, satellites, space rockets, and so on. By simply deregulating these areas, Trump envisions a future with American investment exploding, with few taxpayer dollars necessary. Look at what Space X is doing with private rocket launches as a prototype for what the private sector can do in infrastructure in dozens of other areas.
6. Encourage twenty-first-century healthcare and education based on choice and competition
No modern policy failure highlights the failure of one-size-fits-all government policy more than the bankrupting Obamacare program. Obamacare denies patients the ability to tap into two forces that work to improve products and lower costs in other industries: choice and competition.
Compare this situation with the response to the crisis in 2017 at Facebook, which has promised to change its behavior regarding privacy and content controls, once its customers learned of its misbehavior. Facebook must change its practices, or it risks losing tens of millions of customers who can scramble to find other social network platforms. Consumer power works.
But in healthcare and education, the model is driven by monopolistic structures that are costly, bureaucratic, customer-unfriendly, and molasses-slow to innovate. These two industries have experienced by far the largest increases in prices over the last two decades. In education, more spending has led to flat results. That would never be tolerated in a model that forced schools to compete. Trump wants a competition model in healthcare and education that will revolutionize how we get our healthcare and how we choose our schools. At the time of this writing he has suggested allowing Americans to shop around for very low-priced health insurance packages that will save their families up to 50 percent on insurance costs. Needless to say, the bureaucracy and incumbent powers are putting up mighty resistance.
7. Promote free and fair trade deals
Trump believes that the United States is frequently abused when it comes to international trade deals. He has called NAFTA the “worst trade deal in the history of the world” and pulled the United States out of the multilateral Asian trade pact known as TPP. He wants renegotiated trade relationships—especially with China—in order to stop cheating, stealing, and other misbehavior by trading partners. The Trump administration estimates $600 billion of intellectual property is stolen each year by our trading partners through nonpayment for use of our computer software, drugs, vaccines, technological innovations, patents, trademarks, entertainment, music, and so on. His Council of Economic Advisers reported in 2017 that most other nations have trade barriers “and non-tariff tariffs” that block American companies’ access to foreign markets. The latest Global Trade Alert report said that there were 2,420 protectionist measures in effect that harm U.S. commercial interests at the end of last year.5
Trump is banking on the threat of tariffs and other penalties against our trading partners to reduce IP theft and force nations like Japan and China to open up their markets. It is a dangerous game, and it is a highly unconventional approach to trade policy. Some indications that nations like China and South Korea are willing to further open up their markets to American firms suggest that Trump’s trade confrontations could end up enhancing the volume of American international trade rather than impeding it.
8. Reduce government spending
Trump promised on the campaign trail that he would cut government spending and balance the budget. It’s a good goal. Milton Friedman taught us that the real “tax” on American businesses and families is the amount the government spends, not the amount it taxes. This is because at some point, all government spending has to be paid for one way or another.
Trump’s first two budgets requested a massive downsizing of government with the cancellation of dozens of spending programs that are no longer necessary or cost-effective, if they ever were. Trump also endorsed the “Penny Plan”: cut one cent of spending for every dollar an agency receives for each of five years. After a decade, this simple formula would balance the budget. But the reality so far is that Trump has signed two budgets that have inflated debt spending as a means to rebuild the U.S. military budget. “When government spends a lot,” Mulvaney says, “it takes money away from private investment. And private investment is always a more efficient allocator of capital than government.” Unfortunately, so far Trump’s goals of spending restraint have been ignored by Congress.
9. Implement a pro-America immigration policy
Overshadowed by Trump’s call for “the wall” and some cuts in our family-based immigration system has been his call for a “merit-based immigration system.” This visa system would select immigrants based on their skills, talents, investment capital, English-language ability, and education level. These characteristics all presage success in America. We used to tell Trump that these immigrants are very desirable because they are the world’s “brainiacs.”
Given that almost all international migrants want to choose the United States as their destination, this new merit system could create dozens of new Silicon Valley tech centers across the country, giving the United States a giant advantage over China, Germany, Canada, and other nations that want to challenge American economic and industrial superiority. These immigrants are more likely than American-born citizens to create new businesses, new patents, and new American-made consumer products. The United States would still allow immediate family members—spouses and children—to gain visas, but most others would be chosen based on how they will benefit the United States.
One potential problem is that Trump wants to (unwisely in our opinion) reduce the total number of visas awarded each year at a time when more young foreign-born workers are necessary to cover the costs of our aging population in the United States.
Can It Work?
So far, Trumponomics has encountered ferocious resistance by the left. This is apparent nearly every day. Let’s face it: the philosophy of Trumponomics assaults the basic framework of command-and-control policies, globalism, the righteousness of the political class, and the victimization thesis of modern-day liberalism.
For example, a core tenet of modern-day liberalism is the victimization narrative. In short, this narrative says that women, blacks, Hispanics, immigrants, inner-city residents, and the disabled can’t get ahead in America because of discrimination, a lack of opportunity, or other insurmountable barriers to success. While there is certainly some truth to this, it has become in too many cases a self-fulfilling excuse factory for people to fail or, worse, not to try at all.
We have found ourselves in general agreement with most principles of Trumpism. On immigration and trade, we are more in favor of expansion rather than restriction. As advisors to Trump, we have always felt it is vitally important to tell him (mostly in private) when we thought he was right and wrong. In some cases, we have publicly criticized Trump’s policies. He wasn’t happy when we argued on TV and in print against his steel tariffs in early 2018. We also tried to persuade him to veto the 2018 omnibus spending bill—which we regarded as obese and economically unwise. He has told us subsequently that he wishes he’d taken our advice on that spending bill.
But on the big-picture priorities, it was our belief, and remains so today, that Trump had the right political and economic take on what was wrong with America and how to fix it. Trumponomics was the right game plan and Trump was the right man to sell it.
In the chapters ahead, we describe how Trump implemented these daring policies and how it has worked out—so far.