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For all his talk about improving the economy and helping the middle class, since records were first kept during the presidency of Herbert Hoover, Barack Obama was the first president to fail to achieve an annual increase in the gross domestic product of 3 percent.
During the eight years of Obama’s presidency, the average annual growth in the economy was a pathetic 1.8 percent, meaning millions could not find jobs. Measured by net worth, the economic chasm between black and Hispanic families and their white counterparts widened in the final three years of Obama’s presidency.
It’s not hard to see why. If you watched any of the financial television channels, you saw hundreds of CEOs of companies large and small complain that because of the Obama administration’s crusade to impose more regulations on American business, their costs were increasing, and they were afraid to expand and hire more workers.
At the same time, Obama’s demonization of business and his swipes at entrepreneurship imposed a psychological restraint on American capitalism. During a talk in Roanoke, Virginia, Obama diminished successful people by saying no one gets there on his own. “If you’ve got a business, you didn’t build that. Somebody else made that happen,” Obama said.
Obama cited the obvious fact that everyone needs teachers, roads, and bridges. But to detract from the achievement of any successful person—whether a student graduating from college or a Thomas Alva Edison, Steve Jobs, or Bill Gates—is to attack the very essence of the free enterprise system and what makes America a magnet for immigrants from all over the world.
Behind Obama’s failure on the economic front was a blind spot to understanding that people respond to incentives and disincentives. Funneling taxpayers’ money through the federal government has no multiplier effect and does not give businesses incentives to expand and hire more people.
Looking at Obama’s approach, I am reminded of sitting in the dining room at the National Hotel in Moscow when writing my book Moscow Station during the Cold War. Since they were government employees, the waiters milled around and chatted in groups, ignoring my wife Pam and me. Why should they wait on us? They were paid by the Soviet Union regardless and got no tips. Similarly, their bosses had the same lack of incentive to properly supervise them.
Instead of demonizing business, in his first year as president, Trump touted the accomplishments of American capitalism and decapitated government regulations that were strangling large and small companies. In doing so, he achieved even more than his efforts to enact a new health-care law and reduce taxes to supercharge the American economy and give businesses and the stock market a psychological boost.
The conventional wisdom is that Donald Trump only became a conservative the day he announced his candidacy for the presidency. But like most conventional wisdom about Trump, it was wrong.
Less than a year after President Obama took office, Trump told me at his New Year’s Eve party at Mar-a-Lago that the new president was a “disaster” whose economic policies were going to ruin the country. Trump told me then he wasn’t yet ready to be quoted knocking Obama. As a businessman, he did not want to appear to be taking sides. But six years before he took office, in a book that was largely overlooked during the campaign, Trump laid out exactly what was wrong with Obama’s vision and why conservative policies are needed to turn around the country’s anemic economic growth.
In Trump’s Time to Get Tough: Making America #1 Again, the Wharton School at the University of Pennsylvania graduate presented a detailed economic critique that any fiscal conservative would applaud. The reason “this country is an economic disaster right now,” he wrote, “is because Barack Obama doesn’t understand how wealth is created—and how the federal government can destroy it.”
Liberals “scratch their heads and wonder why businesses don’t want to hire,” Trump wrote. The answer: “Companies know Obama is anti-business, and his government-run health-care takeover has created a major disincentive to hire new workers.”
Raising taxes, as Obama wanted to do, merely forces business owners to “lay off employees they can no longer afford,” Trump noted. “It also drives up prices, encourages businessmen and women to move their businesses (and their jobs) to other countries that have far lower tax rates and regulatory costs, and sends people scrambling for tax shelters,” Trump said.
The same lack of market sense led to Obamacare’s skyrocketing premium increases and deductibles as high as $8,000 a year, making the insurance useless in most cases. Requiring that health insurance cover birth control and dental care for children is like requiring that auto insurance cover gasoline purchases. It drives up premiums to cover expected expenses, exactly the opposite of what insurance is for.
In addition, requiring coverage for individuals with preexisting conditions like cancer allows anyone to sign up for Obamacare coverage after they experience illness. That’s like requiring that auto insurance cover an accident that occurred before coverage started. The Republican alternative would cover preexisting conditions but would spread the additional cost among all taxpayers rather than by charging health insurance subscribers and boosting premiums.
During the transition, Trump’s staff drafted two hundred executive orders, most of them designed to roll back the stranglehold on the economy imposed by Obama. Then, to get them through quickly, the White House abandoned what is known as regular order, which requires executive action to go through a vetting process among cabinet officers and government agencies.
“If you look at the first few weeks, we started out like gangbusters with executive orders, trying to get as much of the Trump agenda done as we could,” Priebus says. “We knew that as time went on things would slow down and start to clog because you have everyone getting involved. That’s exactly what eventually happened.”
Four days after his inauguration, Trump signed executive orders or memos to expedite environmental reviews and approvals for future infrastructure projects, reverse the Obama administration’s halt on the Keystone XL and Dakota Access oil pipelines, and order the government to reduce regulatory burdens affecting domestic manufacturing.
Despite approval by the State Department, Obama had rejected TransCanada’s application to build the Keystone pipeline filed as far back as 2008. Likewise, Obama had held up approval of the Dakota Access pipeline over protests by the Standing Rock Sioux tribe, whose reservation abuts Lake Oahe in North Dakota. The tribe claimed the pipeline, which was to run under the lake, would trample culturally historic sites and threaten their water supply. But eight pipelines already go under the lake without causing any problems, a fact rarely mentioned in press stories about the controversy.
In addition to giving the green light to oil pipelines, Trump took steps to permit drilling in most U.S. continental-shelf waters, including protected areas of the Arctic and the Atlantic. It was part of his push for U.S. “energy dominance” in the global market, diminishing U.S. dependence on oil from the Middle East.
While the Trump White House released a government report affirming that global warming is indeed real and caused in part by human activity, Trump withdrew from the Paris Climate Accord, saying its voluntary standards would have done nothing to change the climate. On the one hand, the United States would have faithfully adhered to the voluntary standards, impairing the economy and resulting in millions of lost jobs, Trump said. On the other hand, under the agreement, “China…can do whatever they want for thirteen years. Not us,” Trump pointed out in a Rose Garden speech on June 1, 2017. “India makes its participation contingent on receiving billions and billions and billions of dollars in foreign aid from developed countries…. But the bottom line is that the Paris Accord is very unfair, at the highest level, to the United States.”
Both Jared and Ivanka pushed Trump to change his mind, enlisting Trump friends who opposed withdrawing from the Paris agreement to lobby him. Trump held multiple meetings on the subject, including with the Principals Committee, which serves as the cabinet-level senior interagency forum for considering policy issues that affect the national security interests of the United States. Aides felt Trump knew where he wanted to be from the beginning. While Trump listened to those who lobbied him, he came back to where his gut was originally.
Obama-era regulations were not only strangling business growth, they were impinging on the rights of college students to obtain justice when accused of sexual harassment. Betsy DeVos, Trump’s education secretary, announced plans to reverse the Obama administration’s so-called guidance that shifted the burden of proof when college students make accusations of sexual attacks to “preponderance of the evidence.” That standard had led to a number of false findings against male students. Rather than the “beyond a reasonable doubt” standard used in criminal cases or the “clear and convincing” standard many universities had previously used for sexual assault investigations, the Obama Education Department had required school administrators to use a standard that amounted to a “fifty percent plus one” threshold when determining responsibility in such cases. The Obama administration’s emphasis on placing grave decisions about sexual misconduct in the hands of education bureaucrats instead of the police invited injustice.
In the ensuing weeks and months after becoming president, Trump required that the government rescind two regulations for every new one imposed, eliminated restrictions on energy production, and froze federal government hiring. In fact, the administration wound up eliminating twenty-two regulations for every new one imposed.
Each year, the General Accountability Office (GAO) reports that cutting duplicative programs could save tens of billions of taxpayer dollars. But cutting programs nibbles around the edges of the spending problem. The real problem is bloated bureaucracy.
Those of us who have dealt with the federal government for decades have an impression that in most agencies, half the workers could be cut without impairing services. That’s because, lacking a profit motive, government workers by and large have a different work ethic from those in private industry.
When they could make a phone call, federal workers call a meeting. When they could find an answer on the Internet, they form a study committee. Instead of appointing one supervisor, they appoint five.
To be sure, there are exceptions. FBI agents, CIA officers, and the military work incredible hours and risk their lives to protect us. But even within those agencies, there are unnecessary levels of supervision and support staff who could perform their work in half the time.
At one office in the Labor Department, employees on flextime were supposed to arrive at six a.m. but generally did not show up until nine a.m., a former Labor Department employee told me. At the Department of Housing and Urban Development, a new appraiser was told he performed his appraisals too fast. Instead of taking a week, he should take four months, a supervisor told him.
Remarkably, when I have asked current and former government workers, they uniformly agree that government employment could be cut in half by attrition without losing any output. Indeed, a study by the Center for Naval Analyses found that when private contractors performed the same work as federal employees in the Defense Department, the cost was 30 percent lower. Other studies by the government have found savings of about a third when private contractors perform government work ranging from maintenance, data processing, and procurement to education and training.
Only when you are self-employed do you fully realize how much more efficient you can be when your output directly correlates with how much money you make. But instead of looking for ways to save, near the end of the fiscal year, government agencies look for ways to spend more money so their budget won’t be reduced by Congress the following year.
Trump’s father, Fred, taught him to be cost conscious. A workaholic, Fred would take Donald to construction sites and to his headquarters, a converted dentist’s office near Coney Island. On his own projects, Fred would pick up unused nails off the floor and return them to his carpenters. He saved money by ordering lab analysis of store-bought products, buying the ingredients, and then having them mixed to make his own.
When the father of a childhood friend of Trump’s bought his son a new thirty-dollar baseball mitt with intricate webbing that Rawlings had begun manufacturing, Donald could not persuade his father to buy him one. Fred bought him a cheaper mitt.
Trump passed along that concern about costs to his kids, who booked economy class plane tickets as Trump executives.
“As children, I remember we were made to mow the lawns, to cut down trees, and do all kinds of chores,” Eric Trump says. “Out of all my friends, I believe I’m the only kid whose dad made us work to cut rebars. We laid bricks in construction sites and did other real work every summer for minimum wage. Our dad said that it’s important in the future that when we tell people to dig a hole, you personally know how long it will take to dig that hole. He taught us the value of the dollar.”
“He taught us to learn the ropes of the business early on and not to rest on our laurels,” Don Trump Jr. remembers. “He told us the company will not shoulder our stay in the company just because, and that we need to continue earning the right to be in the Trump Organization through our own diligence and astuteness.” In addition, Don Jr. says, “He always tells us to never give up, never get discouraged during difficult times, and to get up even when the going gets tough.”
By August 2017, Trump imposed a surgically targeted government hiring freeze. Staff may be increased only where an agency like the Secret Service is slated for expansion under his budget proposal. Other agencies will be expected to downsize.
Trump constantly made it clear to employees that they would be held accountable if they did not do their jobs properly. During the campaign, Trump angrily complained at a rally about the faulty microphone at his podium. He vowed not to pay the contractor who had installed it. That attitude sent a message that Trump would not tolerate laziness and incompetence.
As president, Trump pushed a bill allowing the Department of Veterans Affairs to fire incompetent or lazy employees more easily. The measure was prompted by a scandal at the Phoenix VA medical center, where thirty-five veterans died after waiting months for care. During one week in October 2015, thirty-nine hundred appointments were canceled, and twelve patients “may have experienced harm that could have been prevented without the delay in care,” according to a report by the Office of Special Counsel. On average, the VA facility had eleven hundred patients waiting more than thirty days for a medical appointment.
“What happened was a national disgrace and yet some of the employees involved in these scandals remained on the payrolls,” Trump said when signing the bill. “Outdated laws kept the government from holding those who failed our veterans accountable. Today we are finally changing those laws.”
Obama had promised to reform the VA. At a town hall meeting, the widow of Army veteran Barry Coates spoke up. Her husband had waited about a year for a colonoscopy at a VA hospital and died because by the time he got one, doctors found that he had Stage Four cancer and was terminally ill. She asked Obama what he was doing to fulfill his promise.
In response to her question, Obama said that “we have, in fact, fired a whole bunch of people” who ran VA facilities where there were cover-ups and other problems. In fact, according to the Washington Post’s Fact Checker, only three senior officials who ran facilities had been fired since Obama promised to fix the problems.
Veterans Affairs secretary David J. Shulkin had a unique perspective. A former Army psychiatrist who served as the president and chief executive officer of Beth Israel Medical Center in New York City, Shulkin was Obama’s pick as the department’s undersecretary for health. When Trump entered the White House, he named Shulkin VA secretary.
“I have found that mandate from him, to get this organization fixed and the support and freedom to go out and challenge old assumptions, is exactly what the VA needs right now,” Shulkin said when asked about the difference between Trump and Obama. Now that Trump is president, “I think the organization feels more empowered to fix problems than they have in the past, and my hope is that we will be able to set the path so that the organization is earning back that trust that it needs,” Shulkin told the Washington Examiner.
Trump looks at the VA as a business and “understands that you need to allow the manager of the business to have the freedom to go out and to challenge assumptions and to make decisions,” Shulkin said. Trump “did not come in to make incremental change. He came in to set a fundamental different course in direction when it comes to providing services to veterans,” Shulkin noted. “Acting quicker and more decisively is part of that management style.”
Trump invited to the White House Brian Krzanich, CEO of Intel, who announced plans to invest seven billion dollars to build a new factory that would provide three thousand high-paying new jobs. Krzanich said that while plans had been discussed for some time for the new factory, he decided to go ahead with the project specifically because he believed Trump’s policies would encourage economic growth.
As Trump pressured automakers to invest in the United States, Fiat Chrysler and General Motors announced plans to open new plants in America instead of Mexico or other countries. On Twitter, Trump badgered specific companies about moving jobs overseas. He called in the chief executive of Lockheed Martin to complain about the cost of the F-35 fighter jet. As a result, Lockheed Martin agreed to sell ninety new F-35 fighter jets to the Defense Department for $8.5 billion, a reduction in cost of more than $700 million over the last batch of aircraft delivered. Lockheed Martin credited Trump with helping to “accelerate negotiations” and “drive down the price” of what is already the most expensive weapons program in history.
By using the bully pulpit of the White House, Trump reintroduced the idea that “Made in the USA” was a proud symbol that Americans should embrace. And his speeches encouraged American companies to think twice about relocating plants to other countries.
To promote American industry and raise American wages, Trump withdrew from the Trans-Pacific Partnership but said he would negotiate new trade deals that are fairer to the United States with individual countries. He canceled restrictions on the production of oil, natural gas, and clean coal. Meanwhile, he signed a $110 billion deal to supply Saudi Arabia with top-tier military equipment and services, including missiles, bombs, armored personnel carriers, combat ships, missile defense systems, and munitions.
“That was a tremendous day,” Trump said after signing the Saudi agreement. “Tremendous investments in the United States. Hundreds of billions of dollars of investments into the United States and jobs, jobs, jobs.”
A year after Trump was elected, the economy came roaring back, with a red-hot stock market and historically low unemployment numbers. Just in the last two years of Obama’s presidency, his administration imposed 7,000 new rules and regulations. In his first eight months in office, Trump knocked out 860 of them.
As the Wall Street Journal aptly noted, the “biggest change has been in U.S. economic policy, notably the Trump administration’s deregulatory efforts and the boost they have given business confidence. Barack Obama’s economists dismissed regulation as a minor concern, and even called it a boon to growth, but the costs of compliance were real and added to uncertainty. Businesses held back because they didn’t know how or when government might strike next, which contributed to historically low levels of capital investment in this expansion.”