Economic stagnation brings with it a social curse. We're seeing the curse manifesting in the stories about infighting among President Trump’s key advisors. It presents as a clash between the "Nationalists," of whom Steve Bannon, both lightning wielder and rod, is the lead figure and the "Deal Makers," of whom Jared Kushner is preeminent. President Trump reportedly has told them both to "work this out."
But only Trump has the power to really work this out, by directing his advisors -- all of them -- to start focusing on the right question. How to engineer a 3% - 4% economic growth rate? Getting there is not a mulligan.
But then, Trump thrives on challenge.
TIME Magazine astutely sorts the top advisors to the president into categories: the "Nationalists," the “New York Deal Makers,” the "Realists,” and the “Establishment Republicans." Kellyanne Conway and Hope Hicks are termed the “Trump Whisperers, the Minders of the Brand.” Just about right.
I quibble with TIME’s inclusion of Steve Miller, more of a pragmatist, than, notwithstanding his legacy fixation on immigration, a Nationalist and excluding from the Nationalist camp Conway, convincingly tabbed by Molly Ball at the Atlantic as the chief architect of Trump’s anti-immigration posture.
Moreover, the omission of treasury's "special counselor" Craig Phillips, compellingly profiled in the New York Times by Gretchen Morgenstern, may be a grave omission. There are credible reports that Phillips is making a power grab -- one callous-to-the-point-of-cynical as to Trump’s campaign promises -- over economic policy. Phillips thus is to be counted, notwithstanding his location just next door to the White House, among the “Deal Makers.”
Quibbles aside there is good news and bad news for us regular Americans here.
The good news? It speaks well of Trump to have recruited so many extraordinary, and diversely equipped, figures to advise him.
Now for the bad news. It comes in two parts. Part one:
The Deal Makers, who are in ascendancy, have little by way of political or policy chops. This might sound refreshing.
Not so fast. As Harry Truman, after retirement from the presidency, observed in a 1958 speech to the Reciprocity Club in Washington, DC:
I’m proud that I’m a politician. A politician is a man who understands government, and it takes a politician to run a government. A statesman is a politician who's been dead ten or fifteen years.
One of the glories of a republican form of government is its status as a spectator sport. Everyone’s got an opinion on how the politicos are running things, much as they "Monday Morning quarterback" NFL games. Meanwhile the officials, very much including President Trump, track their ratings, a/k/a polls, obsessively.
Most everyone, especially those who have achieved great success in business, thinks that they know how to run the government better. Yet running a government and implementing policy requires refined, specialized, skill. Those who would never dream of trying their hand at brain surgery -- slightly less intricate than governance, especially of a superpower -- are convinced of their own capability.
Not so fast. Harry Truman was right.
“It takes a politician to run a government.”
Bad news Part Two: None of the five West Wing camps have their eye on the ball of economic growth.
And economic growth is key.
As the Clinton administration bragged on its achievement there:
- Strong Economic Growth
- Most New Jobs Ever Created Under a Single Administration
- Median Family Income Up $6,000 since 1993
- Unemployment at Its Lowest Level in More than 30 Years …
- 7 Million Fewer Americans Living in Poverty
Bragging rights? As Dizzy Dean once said, “It ain’t bragging if you can back it up.” Clinton could back it up.
Economic growth, indeed, is powerful. It is powerful on every front.
Trump shows the signs of instinctively getting the power of growth. That said, he delegates the implementation to his advisors. None of the five West Wing warring camps seem to be focusing seriously on how to back it up.
That doesn’t mean that Trump should fire his advisors. Not at all. His advisors simply need firm direction. It is Trump's job to focus them on Job One: how to get to growth. Will Trump do his job?
The solution may be hidden in an obscure, previously unreported, statement made in the aftermath of President Nixon’s Camp David gathering of August 1971. Follow along.
Nixon announced his “Shock” of wage-and-price controls, a 10% tariff wall, and the “temporary” abandonment of the Bretton Woods international monetary system in which the dollar was internationally convertible into gold and other currencies were legally convertible into the dollar.
In the wake of the Nixon Shock the trend line for economic growth flattened. For the past 17-years we’ve struggled through a severe “growth deficit,” compounding over time and leaving the American economy -- your paycheck and mine -- about a third lower than it otherwise would have grown to by now. The national debt thereby ballooned.
At a social gathering some years ago a deeply respected Washington journalist relayed to me the story of a comment by a young, pre-curve, Arthur Laffer who was at Camp David in a junior capacity. Later, standing on the steps of the Old Executive Office Building as recounted to me, Laffer observed, “It’s not going to be as much fun to be an American anymore.”
[Update: The source of this story was Robert W. Merry, "a longtime Washington journalist and publishing executive, who spent 12 years as a political reporter for The Wall Street Journal and 22 years as an executive at Congressional Quarterly Inc., including 12 years as CEO. After CQ was sold to The Economist of London, he served as editor of The National Interest."
Merry reports to me: "The story was recounted to me by Jude Wanniski, and part of its significance is that it was the first time Jude and Art ever met. It was the Monday after Nixon's wage-price decision (also when he closed the gold window) and Jude said later he knew very little about any of it. As they exited the Old EOB, he pummeled Laffer with questions, greatly frustrated at his ignorance of the subject, and finally Laffer counseled Jude to focus on the gold window. So Jude said something like, "Summarize for me. What's its significance?'' Then the answer: "Well, let me put it this way: From now on it isn't going to be as much fun being an American.'']
Fast forward. Laffer proved prophetic. Some forty years later it really isn’t as much fun to be an American any more. Yes, Nixon’s economic high commander George Schultz recognized and promptly dismantled the toxic wage-price controls and tariff. Yet the one element that was ostentatiously termed “temporary” -- the closing of the “gold window” -- perversely proved permanent. That closure correlates tightly with the flat-lining of median family income.
The clashing of White House camps is an inevitable artifact of sluggish growth. All President Trump needs to do to bring about a just and lasting West Wing peace is to focus his team better. The way of producing harmony in the West Wing -- and popularity in the polls -- is for the President to issue a sticky note to each of his economic and political advisors that says, simply “How do we get real economic growth up from 2% to 3% or 4%, and fast?” Trump, alone, has the power to do this.
Yes, Trump can “drain the swamp.” This, however, cannot be done by attempting to drain the stagnant water. That's an exercise in futility because the swamp is even bigger than Donald Trump and attempting to drain it burns up more political capital than it generates. (Just ask King Canute.)
The desired result can be achieved only by opening the policy floodgates to the fresh, sweet, water of equitable prosperity. We actually know pretty well how to get that done. One gets it done by following the JFK and Reagan and Clinton basic formula as nicely outlined in Lawrence Kudlow and Brian Domitrovic’s JFK and the Reagan Revolution: A Secret History of American Prosperity, which I reviewed here.
Getting growth is an empirical, not an ideological, thing.
Worked for JFK. Worked for Reagan. Worked for Clinton.
Would work for Trump.
In my review I quoted from the proto-supply-sider Peter Drucker, who stated:
Effective executives concentrate on the few major areas where superior performance will produce outstanding results. They force themselves to set priorities and stay with their priority decisions. They know that they have no choice but to do first things first—and second things not at all. The alternative is to get nothing done.
Firing or rearranging his aides is not apt to change much. If Donald Trump is an effective executive -- a theory which the evidence supports -- he now will focus his team on “the few major areas where superior performance will produce outstanding results.” He will encourage a healthy competition among them to devise and get enacted the best, proven, growth-inducing policies.
Tasking his aides with growth policy would immediately end the West Wing War and, in success, his approval ratings will skyrocket. Nothing else will do.
Back to Harry Truman. A sign on Truman's desk in the Oval Office said, simply, “The buck stops here.” Trump, ultimately, will be the one celebrated for inducing prosperity or, if he does not, will be the one scorned. Trump alone has the power to focus his civilian aides on growth policy. If he is an effective executive he will do just that.
To be helpful, let me observe a great place for the West Wingers to start digging for the key to how to approach 4% growth. It's hidden in plain sight in a temple-like building at Constitution Ave NW & 20th Street NW.
Somewhere in that building, specifically on Fed Chair Yellen’s desk, is (or should be) a sign that states “The buck starts here.” The hidden factor crucial to supercharged, noninflationary, economic growth is great Fed policy. Begin there.
Reagan supported Chairman Volcker’s wringing inflation from the economy. When that was accomplished, and Reagan's across-the board tax rate cut was fully phased in, America enjoyed a cumulative 3.5+% economic growth rate with a spectacular 7% year. Mr. President? That was huge.
Under Clinton, Chairman Greenspan initially followed policies, called the Great Moderation, for which he recently revealed the secret sauce as “US monetary policy tried to follow signals that a gold standard would have created.” The economy boomed at a sustained average 3.8% rate. Huge!
President Trump? Focus your advisors on how to approach 4% economic growth rates to permanently end the West Wing War and establish your own popularity. To speed their quest task them to first seek out the metaphorical sign on Chair Yellen’s desk: “The buck starts here.” Proceed from there.
Thereby make America great again.
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