President-elect Trump warns there will be “retribution” and “consequences” for businesses that export jobs from the United States. Vice President-elect vowed they will start “cutting taxes on job creators and businesses, rolling back excessive regulations” to “free up the pent-up energy in the American economy.”
On his thank you tour of the swing states that elected him, Trump continues to tout the forgotten man, “America first” and “buy American,” suggesting a more activist approach to government than a typical Republican administration. In filling his Cabinet, the president-elect has chosen a fair number of Pence-like movement conservatives, many of whom seem inclined to downsize their agencies from within.
Should we believe the next Republican administration will offer the carrot of no more 35 percent corporate tax rate or wield the stick of new 35 percent tariffs? The answer might be both.
During the campaign, Trump and Pence were often said to be practicing a “good cop, bad cop” routine. The avuncular Pence was the good cop. Tough-talking Trump was the bad cop.
When Trump would trash House Speaker Paul Ryan, Pence would say something conciliatory. When Trump said he would wait and see about accepting the election results, Pence would insist that of course the ticket would abide by the will of the voters.
Sometimes on foreign affairs the roles would reverse, with Pence sounding tougher with Russia or Syria than Trump. But even there, Pence was closer to Republican orthodoxy than Trump. (We may see that trend reemerge with the reports about Russian influence on the U.S. elections.)
Trump and Pence are already showing signs of replicating this arrangement with American businesses. Consider the Carrier deal: Pence, who is also sitting governor of Indiana, helped win millions of dollars in state-level incentives for the company to keep jobs in the state rather than move them to Mexico. Trump reportedly played the heavy on tariffs and government contracts.
Let’s not overstate it: Trump supports the corporate tax reforms and deregulation most Republicans do. Pence has become at least a partial convert to Trump’s view on trade.
Trump prefaced his comments about “consequences” for businesses that “fire” American employees, move overseas and try to ship their products back to the United States with a promise to “substantially reduce taxes and regulations on businesses.”
Pence said at the announcement of the Carrier deal, “The free market has been sorting it out and America’s been losing.”
Two Cabinet nominees, both Trump-like populist billionaires, are the key to synthesizing these seemingly disparate views. Steve Mnuchin, the president-elect’s choice for treasury secretary, and Wilbur Ross, Trump’s designated commerce secretary, are mixing supply-side economics with economic nationalism.
“We think by cutting corporate taxes we’ll create huge economic growth and we’ll have huge personal income,” Mnuchin told CNBC. But he also said the Treasury Department would go after currency manipulators.
Ross told Fox Business News that tariffs will only be a last resort, as they will try to pursue better trade agreements with foreign countries and produce a better business climate for American companies. But that doesn’t mean no tariffs. “There’ll be especially tariffs for punitive purposes for people who dump,” the 79-year-old Trump ally said.
Stephen Moore, a long-time supply-sider who supported Trump, has described the change thus: “just as Reagan converted the GOP into a conservative party, with his victory this year, Trump has converted the GOP into a populist, America First party.”
“So yes, this means we have awoken to a new party that will be a lot tougher on illegal immigration. A lot more skeptical of lopsided trade deals. A lot warier of foreign entanglements. More prone to spend money on infrastructure,” Moore added, writing in National Review. “I don’t approve of all of these shifts, but they are what the voters voted for.”
Yet lots of conventional Reagan conservatives will serve in the Trump administration. Pence still mostly is one. Ryan, arguably the most important Republican in Congress, certainly fits that description.
For business, there is a new sheriff and deputy in town. And they might play good cop, bad cop.
