Those who frequent these pages are well aware of how absurd (not to mention dangerous) I think it is that Donald Trump has seemingly decided that Twitter is as good a venue as any for floating policy trial balloons.
For one thing, it creates a situation where investors are increasingly vulnerable to what I’ve described as “Twitter tape bombs” – anyone who has (or had) shares of Boeing, Lockheed Martin, Toyota, Nissan, GM, Honda, and/or Mazda knows this all too well.
To be sure, Trump isn’t the first President to adopt a bully pulpit approach to getting things done. Indeed, the White House itself is the greatest bully pulpit of them all. But Trump’s Twitter addiction generates a kind of bizarre verbal collage that commingles self-worship, personal vendettas, and Trump’s own brand of foreign policy. It’s an exercise in social media-assisted stream of consciousness and if the feed is a window into the new commander-in-chief’s mind, then we can’t say we weren’t warned when something goes terribly wrong.
Just this morning for instance, Trump had a veritable meltdown which we all got to watch (and participate in via the “reply” button) in real-time. His target: actress Meryl Streep, who delivered a scathing speech at the Golden Globes.
This is what our new President was spending his time on at 6:30 a.m. on a Monday morning:
But let’s try, for now, to ignore how completely insane it is that the incoming President of the United States was up before dawn tweeting about the relative merits of Meryl Streep’s acting skills and swearing that he didn’t intentionally make fun of a reporter for being disabled. Let’s pretend that Trump only uses Twitter as a way of cajoling corporate management teams into make decisions that will help “make America great again.” Even then, history suggests jawboning won’t achieve much. Consider the following from WaPo.
From The Washington Post:
Jawboning is back in style, courtesy of Donald Trump. Those with long memories will recall that “jawboning” is a term that became fashionable in the 1960s. It signified an effort by the government, usually the president, to persuade companies — through intimidation, bullying or shaming — to do what the president asked in the “national interest” even if it wasn’t in the firms’ immediate self-interest.
This is what Trump has been doing. First, he pressured Carrier, a maker of heating and air-conditioning units, not to move some work to Mexico, saving 800 to 1,000 jobs (various figures have been published). Next, he pushed Ford not to build a new $1.6 billion assembly plant in Mexico; this purportedly saves 700 American jobs. More recently, he’s made nasty noises about General Motors’ and Toyota’s Mexican operations.
All this may be good politics — but it’s not good economics.
In our mind’s eye, Trump is standing up for American blue-collar workers and redeeming his campaign promises to revive the industrial base. The reality is that his jawboning won’t create many new jobs and could actually lose U.S. jobs if American vehicle producers are saddled with uncompetitive costs. History suggests that Trump’s high-profile arm-twisting will disappoint.
That’s what happened in the 1960s. The goal then was to keep price inflation down without resorting to higher interest rates that would increase unemployment, which in 1966 was 3.8 percent. To accomplish this, Lyndon Johnson’s administration calculated that higher productivity would enable firms to increase wages by about 3 percent without raising prices. And if they did raise prices, they incurred Johnson’s wrath.
His frantic efforts to contain inflation by jawboning make Trump look like a piker. When Bethlehem Steel, a major producer, broke its pledge not to boost prices, Johnson denounced the firm’s executives as unpatriotic and forced them to back down. When aluminum companies raised prices, he released supplies from government stockpiles to undo the increase. It worked. Johnson’s interventions were many and varied.
“Shoe prices went up, so LBJ slapped export controls on hides to increase the supply of leather,” aide Joseph Califano later wrote. “The president told the CEA [Council of Economic Advisers] and me to move on household appliances, paper cartons, newsprint, men’s underwear, women’s hosiery, glass containers, cellulose . . . [and] air conditioners.”
It failed. Inflationary pressures — reflecting cheap credit and Vietnam War spending — overwhelmed the jawboning. Wages and prices were bid up. By 1969, consumer price inflation was 6 percent, up from just above 1 percent in 1960. The ’70s were spent trying to contain inflation, which reached an annual peak of 13 percent in 1979 and 1980.
There are parallels between then and now. The lesson of LBJ’s jawboning is that the government can’t easily offset the economy’s powerful, underlying forces. This remains true. Manufacturing employment will probably never again reach its level before the Great Recession, but the main reason isn’t imports or factories’ flight abroad.
Of course all of that is probably just made up. WaPo is, after all, part of the “dishonest,” “fake” media.