Trump is Going to Destroy Economic Growth If We Don't Find Ways to Block Him -- We Need A Real Consumer Advocacy Organization

As an example, from the WSJ today:

Auto executives typically spend the end of the year prepping for product debuts and thinking up ways to spark sales.

This time around, Detroit’s chiefs devoted considerable time to trying to figure out how to deal with the nation’s new commander in chief. Union bosses are being called in to consult on how to reshuffle factory work, board members are trying to figure out who has friends in President Donald Trump ’s new administration, and task forces have been created to monitor his Twitter account.

At a dinner party during the Detroit auto show earlier this month, Ford Motor Co. Chief Executive Mark Fields said he reread Mr. Trump’s “The Art of the Deal” over the holidays. He first read it in the 1980s, but wants to better understand the new occupant of the Oval Office.

American companies, several of which have been scolded by Mr. Trump, often via Twitter, are suddenly grappling with a new, unpredictable force in their operations. Barbs have included the price the Pentagon pays for Lockheed Martin Corp. jets and whether Carrier Corp. assembles furnaces in Indiana. AT&T Inc. Chief Executive Randall Stephenson recently met with Mr. Trump, who had expressed concerns about the telecom giant’s proposed purchase of Time Warner Inc.

In other words, rather than worrying about pleasing consumers, auto companies are spending all their time figuring out how to please the occupant of the White House.  This sounds more like corporate life in Venezuela than the US.  It is absurd that Trump claims to be about reducing regulation, and then personally intervenes to micro-manage corporate division-of-labor and sourcing decision.

We need new consumer activist organizations.  The classic ones, like Nader's PIRG, are captured by progressives and economic illiterates.  Economic nationalism and tariffs and reduced immigration and border taxes and elimination of free trade treaties are all direct assaults on the American consumer.  Do all the Midwestern folks who voted for Trump ostensibly because they are struggling economically really want 20% higher prices in their Wal-Mart?

Postscript:  By the way, for a moment let's accept this awful situation.  Consider women's groups (as discussed here) and their response to Trump and Ford's response.  Which is more likely to succeed?  If abortion were my #1 issue (as it is for my wife), I would be seriously concerned that women's groups were using all the wrong tactics.  Trump is petulant.  He does not back down based on protests, he moves you up the target list.   This is a terrible, awful character flaw, but it is reality.  If women's groups had calmly sat down with Trump in a back room and worked out a deal (with a man who is a lifelong social liberal) they would probably be further ahead.


  1. August Hurtel:

    I recommend not freaking out until you've got actual laws to freak out about.

  2. aczarnowski:

    This is a very un Coyote post.

    This reads as a classic example of corporations acting rationally in a system where government is the biggest bang for the buck versus consumers. That is, government is too powerful. Something you've written on several times (and I agree with). The implication in the quote above is that Ford and others were not doing this same thing when Obama took office and, therefore, value is being flushed away? I don't believe that is true.

    Your postscript helps a bit; you probably aren't as concerned about Trump as you are about the underlying problem. But this is the first time I remember you advocating for new activist organizations and, against the OMG TRUMP! backdrop of the post, it comes off oddly for this space.

  3. Nehemiah:

    Well one thing I'll say is that Washington DC may never be the same and the nature of state-corporate cronyism will change, I hope for the better. Maybe the small to midsize business will have a chance to compete. Fro me the jury is out on the Trump presidency. If he reduces business income tax and cuts red tape, he won't have to twist CEO arms.

  4. Swami:

    I agree that a missing tactic of libertarians and classical liberals is refusal to create a true consumer organization which recognizes that the sovereign in economics is the consumer. Such a consumer organization can be the voice of free markets.

    And yes, it needs to protect itself against the tendency of all political groups to be captured by the left.

  5. ColoComment:

    Thank you, other commenters. For just a second there I thought I had arrived at the wrong blog.

    For all we know, Warren, in Trump's telephone calls with leaders of American companies, he may have asked them to give him 6 months to get laws and regulations through Congress & agencies that will reduce the tax and regulatory wedge that makes them internationally non-competitive in today's hostile domestic business climate. We don't even need to go toward protectionism and tariffs if we can loosen the burdensome reins on business and allow these companies to fully realize their potential productivity.

    Let's not condemn the man as a failure before he's, y'know, done something. He doesn't even have his cabinet approved yet.

    PS: that women's "march," I daresay, had been planned long in advance to celebrate the presidency of Hillary Clinton. When she lost, it devolved into a vague protest of [what, exactly?] against women*. It accomplished nothing, except to reinforce some feeling of [warning: buzzword] tribalism among the participants. Rights? Women's rights? Huh? What more "rights" do they want? I think they've got them all....

  6. Broccoli:

    Wouldn't reducing the regulatory burden on US businesses and employers go a long way to reducing that 20% price gap you claim comes from making American. I agree that the US presidency shouldn't have the power to meddle in business decisions. On the other hand, part of the reason why it is logical and economic for business to shift manufacturing and services overseas is because our local, state, and federal governments are insane with regulation.

    Coyote, you yourself have complained about the myriad surveys you have to fill out that serve no purpose and are actually contradictory to other parts of the law. For example, you are supposed to tell one agency how many minorities you employ, but you aren't allowed to ask your employees if they belong to a minority group.

    In my own profession, I could count numerous regulations that are counterproductive to the actual legislative goal and add costs to boot. Air discharge permits being hostile to carbon efficiency comes to mind as an example.

    A lot of political debate is about false choices and ignoring the underlying root causes. We should examine why businesses moves overseas, not just penalize businesses.

    Another favorite of mine is the contention by new wave Trump supporters and liberals alike that free markets have failed the employee. When I see the exact opposite, the declining fortunes of the american worker correspond to ever more restricted markets and government intervention. Calvin Coolidge was probably the last time freedom in markets was increasing, ever since then freedom in markets has been decreasing. Yet free markets are blamed for all ills in the marketplace as things get worse.

  7. DirtyJobsGuy:

    Protectionism and the implied Strong-man cronyism of Trump are always, always fatal to economic growth. As much as Trump supporters feel anger at what the left has done to the USA is does not excuse ignoring facts. We of the right/libertarian mode are supposed to be more independent and fact driven than the left. This may come from falling for Trump's self promotion as a great deal maker and business man. Check out his web site for the Trump Organization. There are nine hotels, 15 golf courses, a winery, a real-estate brokerage, a Model Management company and some partial ownership in buildings and naming rights. He was not a big player in any of these areas, and a tiny one in most. His deals were notable mostly for losing money in a huge way. When you bid for a hotel a price so high that you need 100% occupancy at more than the going rate to break even, how good of a deal maker are you?

    When he attempts to punish the Chinese with high tariffs, you can count on retaliation against Boeing, GM and US agriculture. But Donald comes out ahead pretending to be a tough guy? Seriously.

    If he takes a few minutes of silence and consultation on issues, he could accomplish much of what he wants without so much broken crockery. But that would not be his style.

  8. joe:

    I also recommend not freaking out until any actual laws are propsed, Trump, the pompous showboater has some pretty good cabinet appointees that have a reasonably good handle on economics, so even with his blow hard comments, I think we are pretty safe from stupid trade policies.

    Secondly, whats the difference with have tons of lobbiest in DC

  9. kidmugsy:

    "rather than worrying about pleasing consumers, auto companies are spending all their time...": I wonder why Ford was cited, and not GM and Chrysler. Hm.

    "Union bosses are being called in to consult ...": if the company bosses had been any bloody good for decades, there wouldn't be any union bosses in their industry.

    "it needs to protect itself against the tendency of all political groups to be captured by the left": how?

  10. mlhouse:

    One thing Trump has done is make me review my position on "free trade". And two of the changes in my position based on Trump's influence is "what really is free trade?" and the fact that my support for "free markets" outweighs "free trade".

    The first question is obvious. Even the United States does not practice "free trade". There is protectionist schemes abound. THere are government subsidies and other trade maniuplation. And, compared to the rest of the world we are novices at this game and trade ranks much lower in economic importance to us (only about 7% GDP is international trade based). If other nations are directly manipulating their trade via currency manipulations, high subsidies, and/or very high protective tarriffs is the United States supposed to just throw up their hands and say, ok?

    Which leads us to the second question. All of these trade manipulations distorts the free market. If China is subsidizing their steel exports or Europe is subsidizing AirBus, that means that capital, labor, and other resources are flowing into production of those products in those locations that should not. I have often heard the retort "if China wants to dump cheap steel (insert otehr countries and products) we benefit from it". I have used these lines myself. The problem is that as a lower upper income person I really benefit. But this benefit is not uniform or even exists. The low skill workers in the United States who supported Donald Trump see themselves, rightly or not, as victims of the trade practices of these nations.

    While I do not support every Trump position on trade (or immigration) I think he has some valid points. FOr example, I think NAFTA was a net benefit for the United States. But I also think that the idea of renegotiating this trade agreement that is 25 years old is a very valid one. While I think the US gets lots of benefit from trade, I also believe in international agreements the United States needs to stop being the Guppie that gives in. Access to the U.S. market is more valuable to other nations than what we we charge, and we should be cognizant of that in these negotiations.

  11. marque2:

    Coyote part of the libertarian establishment.

  12. Matthew Slyfield:

    "Barbs have included the price the Pentagon pays for Lockheed Martin Corp. jets"

    Nothing remotely unpredictable or for that matter untoward about an new incoming president being concerned about how much the government is paying for things.

    "Chief Executive Randall Stephenson recently met with Mr. Trump, who had
    expressed concerns about the telecom giant’s proposed purchase of Time Warner Inc."

    The federal government has been involved in monitoring and approving/rejecting corporate mergers for nearly a century. You are a fool if you don't think White House policy concerns have affected these decisions from the very beginning.

  13. John O.:

    >"it needs to protect itself against the tendency of all political groups to be captured by the left": how?
    Exactly. There's no way to keep the left from capturing anything they want to influence except by persistent vigilance and its not something people can give when they don't even understand their own Constitution.

  14. John O.:

    This is a unfortunately a panic post over the perception of what Trump will bring. There's tons of emotions since Trump campaign started and his election and then inauguration for pretty much everybody in all political leanings. Its best to stay cool and level headed and not make irrational outbursts as it only leads to confusion.

    I learned my lesson from four years ago when I followed Instapundit through the 2012 election and got an expectation that things were going to get better when Obama lost, but then something happened: Obama won. I was so absorbed in my emotions through the campaign I lost sight of the glaring errors and miscalculations by the pundits on the right and when I saw the election results had a meltdown on my personal livejournal. It was a learning experience I had and lead me to be far more restrained on the outcome of this election.

    The left is primarily still reeling from this but I'd rather have them suffer and double down, but eventually they'll learn their lesson despite my wants to the contrary.

  15. mesaeconoguy:

    In other words, rather than worrying about pleasing consumers, auto companies are spending all their time figuring out how to please the occupant of the White House.

    No different than the previous White House occupant, and likely with lower taxes.

  16. BobSykes:

    Here are the facts. The US Ruling Class, which evidently includes you, have pursued open borders, globalization, and free trade for 40 some years. The result has been a substantial reduction in working class income, stagnation and possibly reduction in middle class income, massive deindustrialization, and massive increases in Ruling Class income. The Ruling Class, your buds, have confiscated every single penny of economic growth over the last 40 years, and they have clawed real income away from workers and the middle class. Any policy that takes wealth away from the Ruling Class and redistributes it to workers and the middle class even if it results in a reduction in US GDP is to be pursued. The only alternative is the guillotine.

  17. BobSykes:

    Add anti-American worker establishment. See above.

  18. herdgadfly:

    Corporatism runs amuck inside America's largest companies - and none so far afield as the Obama-conditioned auto industry. If these people could clone long -armed employees in order to beg better, they would do so. American automotive companies haven't changed anything in the past 8 years except to grovel better. Management still can't control inventories or build to order or find a cheaper way to build better cars. Spending all ad money with J.D. Power to put out umpty-ump-gazillion awards to GM is too obvious even for idiots we call consumers.

    Now they are claiming yuuuuge US investments and no more factories moving off shore - but GM has already done that . But they aren't saving jobs, they are buying more robots. Ford says they are spending $4.5 billion to start-up and electric vehicle plant in the boonies of Michigan. Meanwhile Chevy Volts just passed the 100,000 production number of these electric cars that run on gasoline - which first rolled off the line in April. 2010.

    The industry's worst vehicle, supposedly, the Ford Edsel sold 113,000 in just over two years before shutting down dealerships and the factory. Fords total loss in 1960 dollars was about $250 million. - but $4.5 billion for electrics - no way, they want robots.

  19. herdgadfly:

    Apparently, Mark Fields didn't stay up with the news that there were more untruths in Art of the Deal than real lessons in doing deals. His ghost writer says Trump didn't write a single sentence in the book.

  20. Mercury:

    " Do all the Midwestern folks who voted for Trump ostensibly because they are struggling economically really want 20% higher prices in their Wal-Mart?"

    Get with the program peasants or we'll take your cheap plastic trinkets away!

    Sure, I can imagine Midwestern folks willing to pay +20% at Wall-Mart if the whole Trump “package” also includes revitalized economic prospects for them and their maybe some more healthy businesses in the area besides Wall-Mart

  21. J_W_W:

    You know, I have to question how libertarian you truly are as you continue to pine away for the lost Hillary administration...

  22. Ray:

    You win the thread.

  23. johnmoore:

    Get a grip, Warren. Nothing significant has happened yet. You remind me of the Washington Press corps - totally freaking out because they take Trump literally rather than adjusting to his style.

    The guy is different. We needed someone different. He is going to shake things up. Naturally, companies, especially those deeply tied to government like the US car makers, are going to fret.


  24. johnmoore:

    He started a gay marriage organization in Arizona, arguing that government should license a different form of relationship - and, to license it exactly as another, different form that has long been licensed.

    Warren is a summer libertarian at times.

  25. johnmoore:

    This is indeed true. I just read a book by an economist who carefully disentangled the economic impacts of immigration. The net: low wage immigration hurts low wage natives while somewhat enriching high wage Americans.

  26. johnmoore:

    There is another important issue. Even if one accepts the consensus economic position that free trade raises global GDP, it often does so mostly by hurting one side to advantage the other. So software developers in India have their wage raised, while software developers in the US (friends of mine) go on unemployment.

    When you look at it that way, it makes sense, especially as long as we have "safety nets," to re-evaluate the idea that free trade is always a good idea. To me, it is only a guaranteed good thing if:

    >you stand to gain more than you lose, because someone else will lose, even if it isn't exactly zero sum, AND

    >the dislocations it causes don't shift political opinion in bad directions.

    It is important to realize that economic losses are a much stronger motivator than economic gains - it is basic human psychology.

  27. johnmoore:

    No, protectionism is not always fatal to economic growth, or China would be in terrible shape. Protectionism reduces global growth, but often to the advantage of many.

  28. Ray:

    This brings up a question that I've been pondering for some time. Do Libertarians have any room for "gray" in their belief system, or more specifically, in the leaders they choose?

    For all his flaws, we now have a president who intends to drastically slow the growth of the federal government, significantly reduce the regulatory burden on businesses, put a bridle on the EPA while simultaneously putting the brakes on the runaway religion that is the Climate Alarmist crowd, push for school choice, shift the country to a more isolationist foreign policy and secure an originalist supreme court for the next generation.

    Yet, this and a number of my other favorite libertarian leaning bloggers keep ranting and raving about the potential that Trump might tear up NAFTA and TPP -- as if those extremely complex agreements are some paragon of free market purity completely absent of corporate cronyism and foreign trading partners whose economies are far less free than our own.

    What gives, Libertarians? Maybe it's that you all just want to complain about whoever is in power no matter what? I agree with many of your positions, but would a little pragmatism hurt?

  29. johnmoore:

    O'Sullivan law guarantees that it will be captured by the left.

    We have that organization: it is the free market plus a democratic system. It ain't perfect, but we aren't likely to get much more.

  30. herdgadfly:

    When I read True Consumer Organization, my mind went to Ralph Nader and Bill Bradley - Yuk!

  31. herdgadfly:

    We did the Hope thingy with Obama - remember?

  32. David in Michigan:

    Well stated Bob. Some people will just never understand and there-in lies the resistance.

  33. David in Michigan:

    Apparently one man's "protectionism" is another man's "fair trade". And then there's the "retaliation" by China against Boeing, GM, and U.S. Agriculture..... While it's just my opinion and nothing more, I believe that China has more at stake than the U.S. in the trade deal. Deal the cards and place your bets. Let's see who's bluffing and who has the winning hand.

  34. tex:

    Suppose, for example, Trump calls these guys in and sez: “I'm reducing Corp income taxes. What other taxes & fees impede US investment & mfr? To the extent possible I want our cars built here. What do you need to do that? End CAFE? Call the UAW into a joint meeting to streamline work rules? You know what I want. Tell me how to get it.”

    Throughout this campaign innumerable times & in innumerable ways we've been receiving messages along the same line of: “Trump is going to destroy [yada, yada, yada] if we don't find ways to block him,” turning out Wrong, Wrong, Wrong!

    Let's wait a bit before joining mobs throwing stones.

    The man may not be as smart as his ardent supporters think, but he certainly is not as dumb as his detractors suggest.

  35. tex:

    I believe China has a whole lot more at stake. Their economy is in trouble, a whole lot of trouble & depends very heavily on exports, heavily to the US. Most have heard about their ghost cities – whole cities where no one lives, built to keep the economy going. The landscape is littered with what are called “nail houses” (because there are so many nails strewn about dropped during hasty building) that are vacant & many totally unlivable & precarious of falling down.

    Data from a few years ago sez: China's State Owned Enterprises (SOE) were enormously inefficient & cannot complete on world markets. They produce ~23% of China's production but consume ~50% of their labor & even more of state capital. For years they were totally subsidized & after entry into WTO, China declared subsidies would be ended & they had to become profit oriented. So they did – on paper only. They report profits when they lose every year. Rather than subsidies, China's state bank's cover the losses with bank loans – bad loans they can never pay back but grow every year to cover those losses. At the time of this data ~70% of China's state bank loans were non-performing loans. This at the expense of capital for actual, private companies. This economic condition has grown worse since then. Someday it will burst.

    Already, companies are pulling out of China because, according to one international lawyer I know, their quality control is terrible & they are extremely hard to deal with.

    Any major decline in their exports to us can be catastrophic to their ability to hold up the charade.

  36. Thane_Eichenauer:

    If by globalization you mean the US government spends too much on war then I agree.
    "Nobody ‘stealing’ your jobs, you spend too much on wars, Alibaba founder tells US"

  37. Thane_Eichenauer:

    I, a Libertarian, have no objection to reduced government regulation and a reduced scope for the US military. You point out the positive steps but you also fail to note where Trump fails. The South China sea. Continued drone bombing of Yemen. Exempting the military from the 100 day federal hiring freeze. You point out the 12 ounce glass filled with 6 ounces of water. I point out the 12 ounce glass which is clearly half empty.

    I see plenty of gray in the Trump administration. I hope you see at least some as well.

  38. Thane_Eichenauer:

    He clearly would have preferred an administration better than both Hillary and Trump.

  39. jim jones:

    Women love to complain

  40. kidmugsy:

    Is 'consumer advocacy' as important as an anti-monopoly body?

    Whatever happened to the idea that monopolies are a Bad Thing?

  41. J_W_W:

    Yeah sure, I buy that, but would there be this much handwringing over a libertarian hostile Clinton administration?! I doubt it.

    Coyote is signaling "not with Trump" to the progressives. To bad the blog readers are libertarian, not progressives.

  42. Q46:

    The USA has been protectionist for most of its existence.

    The Tariff of 1816 (the Dallas tariff) was the first tariff passed by Congress with the explicit function of protecting US manufacturing from foreign competition.

    "The country has acquiesced in the wisdom of the protective-tariff principle. It is exceedingly undesirable that this system should be destroyed or that there should be violent and radical changes therein. Our past experience shows that great prosperity in this country has always come under a protective tariff." - Theodore Roosevelt.

    Credit Suisse report in 2015 nominates USA as most protectionist in the World.

    According to Global Trade Alert the US had introduced nearly 800 protectionist measures since 2008... that was before Trump.

    The only difference between Trump and his predecessors is he is saying it out loud.

    In any case as part of the WTO, and whilst it remains so, the US is restricted to what tariffs it may apply whatever President Trump says.

    The current hysteria over Trump's trade policy, such as it is, shows just how little 'We The People' know about what has been going on.

  43. slocum:

    Loss of manufacturing jobs is much more about automation than imports. U.S. manufacturing output has continued to increase even as jobs have decreased. Protectionist measures to try to force manufacturing back to the U.S. will only increase the pressure toward automation (workers are expensive, so a sensible business will use as few as possible).

    So if you want to get back to the 'good old days', mere protectionism isn't going to do it -- you're really going to have to go full Luddite and demand bans on robots, driverless cars, and various other high-productivity, low-employee count businesses. Think of how many retail jobs have been displaced by Amazon, how jobs in record and book stores have been lost to digital downloads, how many movie-theater jobs have been killed by Netflix.

  44. slocum:

    I'm pretty certain there would have been plenty of criticism of Hillary by Coyote (just as there was of Obama)

  45. slocum:

    But some things have happened. Trump has selected Peter Navarro and Robert Lighthizer for administration positions -- both of whom have been strong opponents of free trade. I see no reason at all for libertarians who think protectionism is stupid and will make us poorer to wait to complain.

  46. CapitalistRoader:

    Alternative facts: The US had a near monopoly on manufacturing for 15 years after WWII because the other industrial giants in Europe and Japan had factories that were bombed to rubble. As a result US companies had big margins and were happy to bow to union demands. Uneducated factory workers could happily make solid middle class wages and enjoy great health insurance and defined benefit pensions. It was all good.

    But then it started going bad. By the late-1950s half of Europe, thanks to us, rebuilt their manufacturing base with brand new, modern factories and started cutting in to US manufacturers' fat margins. Ditto for Japan but since there was no Marshal Fund for them it took them another decade to do the same thing. GDP growth rates in those countries were stunning.

    By the late 1970s, the US was on a more even competitive level with most of the rest of the world. Wages flattened, benefits declined, and unemployment started creeping up. Then, adding insult to injury, Deng threw off the PRC's communist idiocracy and declared that To Get Rich is Glorious and US manufacturers had another billion people to compete against.

    Back in the 1950s the US was living the dream. 60-some years later we have an over-regulated, over-taxed economy with governments at every level drowning in debt. The answers are obvious. I don't know if Trump will or even can fix these problems. He's off to an admirable start with his cabinet picks. But sure as hell the government would have country continued its slide into a Chicago style one-party corrupt bureaucracy under Hillary. Thank the Great Pumpkin we didn't go there.

  47. wreckinball:

    Stay calm
    Tariffs are a bad idea but requiring fair trade is not

  48. Mars Jackson:

    "Do all the Midwestern folks who voted for Trump ostensibly because they are struggling economically really want 20% higher prices in their Wal-Mart?"

    If it means better paying jobs and fewer taxes, yes. As a consumer, I control how much I spend at Wal-Mart, but as a taxpayer I have no control over how much I pay in taxes. I would much rather have the control than give it to the government.

  49. Mars Jackson:

    I have found most Libertarians to be dogmatic and inflexible in their beliefs, thus few government leaders meet their strict belief system. It is what keeps me and many, many others from becoming Libertarians. Their philosophy, while making solid arguments, does not always equate with real world issues. In this case, there is a failure to realize that past governments sold our manufacturing to other countries who behave as bad actors through out trade agreements. This has put us in a position where we have to build American manufacturing from the ground up in order to spur economic growth. Mr. Trump's desire to work with manufacturers is nothing but good news for all Americans, as he is getting to the core of most American domestic problems: the economy.

  50. Nehemiah:

    I didn't do the Hope thingy with Obama. But perhaps I should have said, I pray for a better outcome with this president.