Trump's Economic Stimulus, One Tweet at a Time
There's a paradox in what Rust Belt voters want economically from the new government. They want the government to facilitate job creation, but they don't want the creation of government jobs. Donald Trump may have figured out a way to thread this needle with the help of his Twitter account.
Trump's challenge is simple -- how do you create a resurgence for workers in the Rust Belt when decades of market forces, automation and trade deals have led to employment stagnation in much of the region? So far, it would appear that he's using his Twitter account as a bully pulpit to change the mentality of corporate America.
One recent indication that this would be his style came from his feud with Carrier over its plans to move some jobs to Mexico. Through tax incentives and leverage against parent company United Technologies because of its government contracts, Trump got Carrier to agree to keep 1,000 jobs in Indiana. It may be bad economics, but it sent the kind of political message he wanted to send.
An announcement from SoftBank adds further evidence for this new model. On Dec. 6, Trump tweeted that Masayoshi Son ("Masa") of SoftBank had agreed to invest $50 billion in the U.S. and create 50,000 jobs. He said that Masa told him it wouldn't have happened if Trump had not won the election. While much of this investment was probably headed for the U.S. anyway, and it's unlikely that SoftBank's investment plans in the U.S. will ramp up as a direct result of Trump's win, it shows that Trump will use carrots, on Twitter at least, with firms that serve his interests.
And Trump has shown he'll use sticks as well. On the same day as the SoftBank tweets, Trump tweeted that Boeing's cost controls on the new Air Force One were "out of control" and said to cancel the order. He tweeted similar comments about Lockheed Martin's F-35 program this week. Lockheed's stock initially fell 4 percent in response before recovering somewhat.
Trump's prolific tweeting may have won him a pre-emptive victory when -- ahead of this week's summit between Trump and tech leaders -- IBM announced plans to hire 25,000 U.S. workers over the next four years. As in SoftBank's case, much of this investment was probably already in the works, but the announcement shows that both Trump and corporate America are interested in playing this public relations game. Trump tweets something flattering or threatening about a specific company, and then the company makes at least a token PR move in response (perhaps not by actually changing business plans, but by announcing them with fanfare).
Where could this eventually lead? It's certainly an unexpected way to address regional job inequalities. Trump needs job growth, or at least the appearance of job growth, in the geographical territory he won, particularly the industrial Midwest, if he is to remain popular with his base. Corporate America wants policy certainty and to stay in Trump's good graces. And at the moment, much of corporate America, particularly the tech sector, is in high-priced coastal metro areas that overwhelmingly voted for Hillary Clinton. The president-elect is not stopping by their offices on his "thank you" tour.
But it's not too late to earn his gratitude. Profit margins are historically elevated, and a good deal of knowledge work, while perhaps needing some level of urban scale to find suitable pools of talent, could be done in places like Scranton, Pennsylvania, or Gary, Indiana, just as easily as it's done in San Francisco or Seattle. Corporate America might decide that accepting somewhat lower profit margins to create less-profitable jobs in key Trump regions might appease the Trump administration, and would give them leverage with Trump on future issues.
How sustainable would this sort of thing be? A cynic would say that at the end of the Trump administration, corporate America would go back to the way things were before and would eliminate any excess jobs (if indeed any were ever created to placate Trump), restoring profit margins to their more elevated level. Except that future candidates from both parties might be expected to pledge they would continue Trump's pressure campaign in order to prevent jobs from disappearing.
It's a new style of economic stimulus, and it may not go away when Trump does. His legacy for the executive branch may be "tweet loudly and carry a big stick."
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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