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VOL. 132 | NO. 14 | Thursday, January 19, 2017

Memphis Economists: Trump Tweets Turn the Page on GOP Playbook

By Andy Meek

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It’s long been a cornerstone of Republican political orthodoxy that government should “get out of the way” of businesses, and that the fewer mandates and regulations, well, the better.

Ahead of Donald Trump’s inauguration, local economists sound off about his much-publicized use of Twitter to badger and call out U.S. companies in pursuit of specific ends, a tactic that seems to flout the traditional GOP playbook.

(Daily News File/Andrew J. Breig)

So how to square that with President-elect Donald Trump’s now much-publicized use of a certain social network to, shall we say, tweet loudly and carry a big stick?

Trump’s reliance on Twitter to call out specific companies and demand that they take particular actions – like keeping jobs in the U.S. or committing to making more products here – has certainly grabbed headlines and rattled markets. It also would seem to run counter to the GOP preference for a lighter regulatory touch, to say the least.

As Trump prepares to take office, several Memphis-area economists and finance professionals shared with The Daily News their assessments of his idiosyncratic approach to relations with the business community.

Among their takeaways: the incoming president isn’t so much ignoring GOP ideas about free trade as he is using isolated – albeit colorful – interactions with a few companies to essentially talk past them, asserting his influence on a larger unseen audience.

David Waddell, president, CEO and chief investment strategist for Waddell & Associates LLC, said Trump seems to be advocating “fair trade,” as opposed to free trade.

He also suggests Trump can’t necessarily flout GOP beliefs about free trade because such a thing doesn’t really exist. That’s because, per Waddell, things like taxes and government policy insert themselves into the free flow of goods.

Said another way: Trump is most certainly not a “purist” when it comes to capitalism, according to Kelman-Lazarov Inc. investment adviser representative Marty Kelman.

“But I don’t think there are many that are,” Kelman says, adding that the government is always trying to add incentives and tax credits to spur behaviors like home purchases and charitable giving.

Thus, these and other economists say, the new president can be said to be doing more of the same – pursuing a carrot-and-stick approach to incentivize a particular behavior.

“He’s establishing a ‘What’s in it for America’ standard of proof,” Waddell says. “If your activity doesn’t pass the standard, prepare to be tweeted.

“If it does meet the standard – you are ‘saving’ jobs in America – lobby for credit. He seems to be treating U.S. corporations like direct reports. Praise them for doing the right things and scold them for doing the wrong things. That’s how you build alignment within a company. And now, perhaps, within a country. Fascinating to watch – and so far, pretty effective.”

What it’s not, says Wunderlich Securities chief market strategist Art Hogan, is “your typical Republican banter - that’s for sure.”

Recent days have seen General Motors announce plans to invest $1 billion in domestic factories and add thousands of jobs.

Those plans had already been in the works, but GM announced them in the wake of criticism from Trump, who has called for automakers to build more cars in the U.S. Other companies like Wal-Mart and Amazon have also recently announced big planned workforce expansions – some announcements of which analysts suspect may have been, if not directly influenced by criticism from Trump, then at least a move to proactively avoid the scrutiny that comes from his Twitter missives.

John Phillips, chief investment officer at Red Door Wealth Management, summed up the tweeting and corporate cajoling from Trump this way – if nothing else, it will amount to a “long-term case study” that economists will review for many years to come.

“Some of the bedrock principles of the Republican Party are free markets, free trade, and limited government intervention in business decisions – with the idea being that the ‘invisible hand’ of a free market, not government intervention, will reveal the strongest companies and ultimately the strongest economies,” Phillips said.

But he, too, agreed that Trump’s behavior can be explained by a belief that no such “invisible hand” really exists.

“(Trump’s) message seems to be that the globalized economy is not necessarily a fair and balanced playing field for American businesses and we need to ‘reset’ this imbalance,” Phillips said. “In this new world, Trump has consistently stated companies cannot export labor and import goods at a cheaper cost and then expect to resell those goods in America without paying some kind of tax or penalty. While this may run counter to traditional free-market principles, his intent is that these policies force business owners to invest more in America, hire more workers and push our economy out of the tepid growth we’ve seen during this recovery.

“Like any policy, regulation or tax, we will have to wait and see to determine whether this has a positive or negative effect on our economy.”

PROPERTY SALES 207 263 9,865
MORTGAGES 197 246 10,862
BUILDING PERMITS 138 686 21,643
BANKRUPTCIES 0 256 6,219