Restraining order on Trump

By Doug Bandow

Donald Trump has generally pleased the American Right with his Cabinet appointments, but he cares little for the rule of law and free markets. Arbitrary presidential intervention in economic affairs, both domestic and foreign, “is the way it’s going to be,” he declared.

Which should worry any American committed to free enterprise and limited government--and any citizen from elsewhere hoping to invest in or trade with the U.S. And requires that Republicans in Congress and elsewhere to keep him within legal bounds.

The Carrier deal fulfills the worst of the president-elect’s inclinations. Forget the overall argument for trade. Americans, especially of modest means, are better off if they are able to purchase cheaper products from abroad. Moreover, job growth is stronger if the economy is more competitive.

Trying to “save” high-cost jobs is expensive. Indeed, protectionism routinely spends far more per position than workers receive.

So it is with Carrier. Those employed are happy to keep their jobs. Other Americans will bear the cost. The issue well illustrates the lessons of Public Choice economics: visible, clamorous interests gain at the expense of the inert general public.

The financial pay-off in the Carrier deal is one problem. Vice President-elect Mike Pence is still Indiana’s governor, so he was able to raid that state’s coffers to the tune of $7 million. (If Donald Trump is as rich as he claims to be, he should have offered to pay!)

Since Carrier is owned by United Technologies, a defense contractor, one could imagine promises, or threats, also being made regarding the firm’s future access to military dollars. Trump claimed not to have mentioned the issue, but he didn’t have to. UT’s CEO indicated that it was this possibility which caused him to shift course.

State subsidies are a common though counter-productive means to pay firms to come or stay. Trump’s high profile ploy has increased expectations of future pay-offs, meaning the price will increase. Anyone who could plausibly shift production abroad in the future need merely hint about the possibility while indicating their willingness to be bought off.

Of greater concern, however are the president-elect’s threats to punish and reward companies as he sees fit. The rule of law is supposed to treat all who are equally situated equally. Yet Carrier is not the only U.S., let alone Indiana, company with plans to outsource production.

Moreover, taken literally, Trump intends to make the economy quite unfree. For instance, he declared: “Companies are not going to leave the U.S. anymore without consequences.” He threatened to impose a 35 percent tariff in retaliation.

That is, he would tax Americans buying those companies’ products and invite a trade war. He announced: companies should “be forewarned prior to making a very expensive mistake!”

This policy is what one would expect from a left-wing redistributionist and government planning enthusiast. At the Carrier plant, supposed conservative stalwart and Vice President-elect Mike Pence declared that “The free market has been sorting it out and America’s been losing.” Trump added “Every time, every time.”

But the problem is not just economic. It is the prospect of one person, whatever his intentions, utilizing essentially unaccountable, untrammeled power.

The president-elect attacked Boeing for the potential $4 billion cost of replacing Air Force One, threatening to cancel the contract. The deal is expensive, but it is unlikely that Trump has a clue as to what the new AF1 “should” cost.

Yet his verbal assault came suspiciously soon after the company’s CEO criticized Trump’s counterproductive protectionist plans. No wonder, reported the Washington Post: “At another time, talk of a steep, punitive tariff would have provoked outrage from U.S. corporations. But faced with an impulsive tweeter-in-chief, corporate America’s response has been muted.”

Ironically, Trump’s decision to penalize business decisions in response to market forces will discourage foreign investment, now about $3 trillion. America long has been seen an economic sanctuary in an unstable world. But if the whims of the president rather than dictates of law come to drive U.S. economic policy, companies will have good reason to look for other homes for their money.

Federal industrial policy long has had its fans, but allowing government to pick winners and losers is bound to be a dismal failure. Worse, though, would be a presidential industrial policy, by which Trump would attack or promote companies based on the phase of the moon, or whatever else happened to motivate him that day.

There’s already too much crony capitalism in America. If the president-elect continues to attack the principles of limited government and individual liberty, congressional Republicans should step in. And ultimately the American people must say stop.

Doug Bandow is a senior fellow at the Cato Institute and a former Special Assistant to President Ronald Reagan.