Corporatism with Nationalism

The Carrier deal shows a big problem with Trump’s approach to the presidency

As noted by Vox, there are several problems:

It doesn’t save many jobs relative to the total that may be lost due to outsourcing.

Because the president is directly intervening, it has elements of crony capitalism.

It requires large taxpayer-funded incentives to make it work, costing more than would have been saved by allowing the jobs to go Mexico.

The biggest criticism is it creates a perverse incentive for companies to threaten to outsource jobs and then, upon working with Trump, collect large tax-payer funded benefits to only outsource some of them. A company may threaten to move 4,000 jobs when only planning to move 2,000 and then work out a deal to only move the 2,000 in exchange for a large tax benefit. This is a ‘bug’ that probably needs fixing…or maybe that was the intent all along. You never know with these things.

The larger issue, though, is that governing through a series of deals creates serious perverse incentives. If Trump starts giving corporate welfare to companies that promise not to move jobs to Mexico, we’ll see a flood of companies threatening to move to Mexico in hopes of getting a handout. Taxpayers would wind up paying to save a lot of jobs that weren’t actually in danger in the first place.

The Vox article says Trump has no interest in policy, but he does: corporatism with nationalism. The biggest irony here is that Trump is making everyone guess, throwing everyone for a loop, when the media during the campaign just assumed he was a simpleton. Trump is taking advantage of America’s reserve currency status and low bond yields to pretty much inflate everything. Corporatism is not new, but when you add nationalism to it, it tends to create inflation since it’s considered Pareto Inefficient in the short-run, producing a deadweight loss. Technically, in the long-run, it can work if the allocation proves to be more optimal than would have otherwise occurred in a free market. An example is the funding of Tesla, in which the government’s $465 million dollar loan helped create a company presently worth $40 billion, and Tesla has long since paid-off the loan. Nor surprisingly, the sore loser left is a vocal critic of Tesla, attacking one of America’s great entrepreneurial success stories at every opportunity…the left wants government spending not for high-ROI endeavors like Tesla – but rather for low-IQ stuff that creates negative ROI…stuff like like social security (which is mathematically doomed to insolvency), disability (paying people who produce no economic value), dept. of education (more spending for flat test scores), and food stamps (again, paying for parasitism). I call it reverse Darwinism.

Although Warren Buffet criticized Trump during the campaign, he has come around upon seeing his Berkshire Hathaway holdings surge in the weeks following the election.

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