Sunday, March 27, 2016

Why Trump's (or anyone else's) business experience is irrelevant

How the press has treated Donald Trump is not only fascinating but important. If we elect Trump President, is it worthwhile to see the role of the press in making this happen? (Before I start, let me say that my use of the word "businessman" is meant to be a shorthand for business person.)

Nicholas Kristoff, the esteemed columnist for The New York Times, is the latest critic of the press' "empowerment" of Donald Trump. In My Shared Shame: The Media Helped Make Trump (Times, March 26, 2016), Mr. Kristoff's first indictment is that "television in particular handed Trump the microphone without adequately fact-checking him or rigorously examining his background, in a craven symbiosis that boosted audiences for both." The second charge is that the press "wrongly treated Trump as a farce."

Let me digress a bit. The press is guilty of a lot of things this year, not least of which is The New York Times' coronation of Hillary Clinton as far back as 2014 and its ignoring Bernie Sanders until the elections started and, since, treating the possibility of his winning the nomination as a, for want of a better word, and to borrow from Mr. Kristoff, a farce. But the subject is Trump.

Let's forget about the "farce" issue and focus on the first item: failure to fact-check.

Employing rigorous fact-checking is far better than merely quoting candidates or their supporters and never checking the accuracy of their assertions. Perhaps there has not been enough, but even the pathetic Miami Herald has an active fact-check operation. The problem is that while fact-checking has its place, and, yes, it is a necessity, it is not sufficient for political journalism to serve its purpose. Fact-checking is to wisdom as Google is to in-depth analysis.

There's been a woeful lack of analysis of anything that requires a modicum of sophistication.The vapidity of the candidates' understanding of government and finance are matched only by that of the media. 

Take the issue of whether Donald Trump's business successes, such as they are, qualify him to be President. Most "analyses" of this extremely important issue have attempted to dissect his up-and-down business career to see whether he has been the unalloyed success he claims to be.

There have been innumerable articles about Trump business bankruptcies, Trump business frauds, Trump business scams. They miss the point. There are lots of "Trump Towers"--and  no "Cruz Towers"--to make it appear that Trump built those glittering buildings, rather than simply licensed his name, at no great financial risk. So, stories about Trump University or Trump Steaks have had no apparent effect on Trump's popularity, at least among those who are his core supporters. Why would they be? If you are inclined to be supportive of a swaggering self-promoter who has successfully thrown the finger at the media and all business and political elites, what difference does it make that Trump's business career is littered with failures, scams and outright embarrassments?

There have also been many articles about the undeniable fact that leading a business is infinitely less complicated than leading a nation. From The Huffington Post to The Wall Street Journal, writers have stated the obvious: that the skills needed to lead the nation are far more sophisticated than those needed to lead a corporation. The esteemed economist, twenty years ago published an article in the Harvard Business Review, A Country is Not a Company, in which he covered essentially the same ground, albeit in far greater depth and sophistication. Maybe a good businessman does not have the experience or the wisdom to be a great President. But who knows?

Here's what the conservative National Review, a serious journal, had so say in its January 21, 2016 issue, Against Trump, about this issue:
Trump’s record as a businessman is hardly a recommendation for the highest office in the land. For all his success, Trump inherited a real-estate fortune from his father. Few of us will ever have the experience, as Trump did, of having Daddy-O bail out our struggling enterprise with an illegal loan in the form of casino chips. Trump’s primary work long ago became less about building anything than about branding himself and tending to his celebrity through a variety of entertainment ventures, from WWE to his reality-TV show, The Apprentice. His business record reflects the often dubious norms of the milieu: using eminent domain to condemn the property of others; buying the good graces of politicians — including many Democrats — with donations.
But these articles, as incisive as they are, miss the point. Start again with the hypothesis: that being a successful businessman is a valid predictor of a successful economy if that businessman became President. Rather than focusing on the issue of leadership, why not focus on the issue of what Presidents, no matter how successful they have been in business, can do to improve the economy?

The 2005 Economic Report of the President, written by George W. Bush's Council of Economic Advisors, admitted:  "The tools available to policymakers to affect the economy over a short horizon (up to a few years) can be divided into fiscal policy and monetary policy."

It then went on to explain what these tools actually mean.

Fiscal policy involves decisions about taxes, transfers (such as unemployment insurance, Social Security, or Medicare payments), and government purchases of goods and services. Changes in all of these affect aggregate demand. In the short run, lower taxes or higher transfer payments can lead to higher disposable incomes and thereby boost consumption spending. Government purchases directly affect spending and support aggregate demand. 
Monetary policy in the United States is conducted by the Federal Reserve Board’s Federal Open Market Committee (FOMC). The FOMC targets a
 short-term interest rate, the Federal Funds rate, the rate at which banks make
 overnight loans to one another. This interest rate in turn influences other
 short-term and long-term nominal and real (inflation-adjusted) interest rates 
in the economy. In turn, these interest rates affect interest-sensitive components
 of aggregate demand, such as investment and consumption of durable
 goods (goods used for long periods, such as refrigerators and cars). 

As far as monetary policy is concerned, a President can use the bully pulpit, and his Treasury Department can seek to influence the Fed behind the scenes, but, basically, the Fed was designed to be independent of political influence. In reality, the only certain power the President has is to name the members of the 7-member Federal Reserve Board, if he can get the Senate to confirm them. And a position opens up, absent reservation or death, only every even-numbered year. 

And, in formulating fiscal policy (such as tax policy or the federal budget), the President or his advisors will be faced with hundreds of thousands of choices, each of which will have not only "policy" but also "political" dimensions.

And, sometimes the choice will be between two bad options. When a business has nowhere to go with a product, it can cease making it. See the Oldsmobile. 

The '55 Olds 88--at the height of GM's power

But what about the decline of the coal industry?  Market forces are making coal too expensive, but the question for a President is what to do about the side effects: what to do about the communities and the employees that will be devastated by closing coal mines, or the railroads that will lose the money they make moving coal around? 

What will Trump's ability to negotiate a higher price for lending his name to a real estate project have to do with figuring out how to solve that problem, particularly if he needs Coal States' electoral votes next election?

It is clear that it is virtually impossible to show a connection between what a businessman does and what a President does with respect to influencing the economy. Therefore, even if Trump flunks the true-or-false test, there is a much simpler reason that his business successes are not a valid predictor of whether he could improve the economy if he ever gets to reside at 1600 Pennsylvania Avenue, NW: what he is supposedly good at will not prepare him for the decisions he'd have to make and influence.

1 comment:

  1. Popularity and reliability should not be put up in a single package. They just do not fall well into place with each other. I agree that the media has helped Trump to achieve his current level of trust from his supporters through various influential gimmicks and campaigns. However, others are smarter than that who can analyze between the facts and the lies.