A long way from the White House.

Photographer: Curt Hudson/Bloomberg

The U.S. Doesn't Need a CEO in Chief

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of "“The Up Side of Down: Why Failing Well Is the Key to Success.”
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Critiquing Donald Trump’s policy pronouncements for being implausible feels a bit like belittling bathroom graffiti for its weak use of metaphor and inappropriate deployment of the conditional rather than the subjunctive. Sure, you may be technically correct, but you’ve failed to grapple with the essentials of the form. And neither the author nor his audience is likely to take your criticisms to heart.

But what can we pundits do? The man is now the presumptive presidential nominee of the Republican Party. For the next six months, he will be saying things. Much of what he says will be unbearably silly, if not horrifying. These periodic eruptions must be either dealt with or ignored, and neither option seems very appealing.

In the end, however, it’s hard to ignore the man who is probably going to be the nominee, so let’s address ourselves to Donald Trump’s recently floated suggestion that the U.S. should borrow freely because you can always make creditors take a haircut if the economy crashes. I am not going to elaborate all the ways in which this idea is crazy, because so many others have already thrashed this plan like a rented mule. I’ll dwell instead on the claim he makes and his supporters embrace: the idea that Trump will be a good president because he’s a good businessman.

Leave aside the fact that Trump’s not really all that great of a businessman. Even if he were the CEO of the century, that would be no guarantee of success in the presidency. Running a business takes skill and understanding. But those skills, those understandings, don’t translate particularly well into the arena of U.S. government.

Consider: There is nothing in business that parallels the U.S. government debt. Trump is basically imagining something like a structured negotiation under threat of bankruptcy. This is a false analogy, for any number of reasons: Our debt is bond debt, not bank debt, which is much harder to restructure, and there is no bankruptcy court for nations, which is why sovereign defaults are such wild fun for everyone but the participants.

Bankruptcy restructurings are also facilitated by something called debtor-in-possession financing, which provides the cash flow to keep things from grinding to a catastrophic halt while the court and the creditors work things out. The closest parallel in the world of government finance is the International Monetary Fund, which doesn’t have anything like the resources to deal with a default by a government as large as ours -- especially since any such move would trigger follow-on crises in other economies. Not to mention the fact that roughly 17 percent of the IMF’s budget comes from the US government.

Even the biggest company operates in a world where there are lots of other sources of stability to help mitigate a firm-wide crisis. There are banks that can lend, courts that can referee, other, governments that can step in with help in extremis. The U.S. government, by contrast, operates in a world where the globe catches cold when we sneeze -- as we saw so vividly illustrated in 2008. There are no external stabilizers for us to fall back on, because financial instability here would gut the very institutions we’d want to shore us up. Approaching our government debt using the lessons learned as the CEO of an overleveraged real estate operation wouldn’t be canny business; it would be catastrophic.

The list of such mistaken parallels goes on and on. You can’t analogize national trade accounts to a firm’s profit-and-loss statement; you don’t treat a nuclear-armed nation the way you would a recalcitrant vendor; there is no way to fire or demote difficult congressmen; and every single thing you do will be under constant scrutiny from 300 million angry auditors, not to mention your international competition. The power of the presidency is immense, of course, but it also immensely constrained by factors a businessman has never encountered. Which may be why the history of successful businessmen in national politics is actually somewhat unimpressive.

I am second to none in my admiration for the private sector, and I am certainly not one of those journalists who think that I could run a Fortune 500 company better than the CEOs, if only I weren’t so gosh darned busy grinding out words by the gross. Running a company takes immense skill, and the skills it takes are ones I’m quite sure I don’t have.

But just as I wouldn’t want my very fine auto mechanic to take out my appendix, I mistrust anyone who claims that they’re going to be a great president because they really understand what it takes to succeed in business. What they say about themselves may well be true -- but what they’re saying about the presidency makes it clear that as president, they’d have no idea what they were doing.

  1. Consider Herbert Hoover and FDR. In popular legend, Hoover was a hidebound Republican who didn’t understand that Things Had Changed and Something Needed to Be Done. In fact, as historian David Kennedy told me, “Hoover was more of a technocrat than FDR was.” He was also that ideal of moderate Republicans everywhere: a not particularly political man, extremely successful in both business and in organizing humanitarian relief efforts. That did him no good at all when he faced a big economic crisis during his presidency, for as Kennedy added, “He understood a lot about policy issues, but working the Congress, working public opinion and the levers of the political system, were not his skills. They were Roosevelt’s.” There is simply nothing in business that parallels the scope and complexity of pushing legislation through Congress while 535 lawmakers (and their constituents) breathe over your shoulder.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Megan McArdle at mmcardle3@bloomberg.net

To contact the editor responsible for this story:
Tracy Walsh at twalsh67@bloomberg.net