Back in the mid-1990s, the Clinton Administration embraced a so-called “royalty holiday” for oil companies that developed leases in the deeper waters of the Gulf of Mexico. The idea was pretty simple: rather than impose royalties of 12 1/2% to 16 2/3% for developing publicly-owned resources (already paltry by international royalty standards), encourage domestic exploration and production by giving oil companies the leases for little or no royalty.
Having worked on offshore oil policy since the mid-1970s, I was skeptical such inducements were needed; there was enthusiastic drilling in deeper North Sea wells absent such promotional incentives, under much more challenging conditions than anything that would be faced in the Gulf of Mexico.
My boss, Rep. George Miller, sent me off to talk with executives at several of the oil refineries in his California district, and every one of them told me the same thing: if you want to give me a lease for nothing, I’ll take it. But I would never make a decision to invest hundreds of millions of dollars on developing a deep-water lease based on a “promise” Congress could rescind.
The experience taught me a valuable lesson about the thinking of private industry executives, an area of knowledge about which my training as a labor historian had left me somewhat deficient. Business naturally favors low taxes and weak regulations, but equally important is certainty — or whatever can pass as certainty — in public policy. Give them a challenge – tougher environmental regulations, safer workplaces, higher minimum wages – and most businesses will figure out how to make it work. But sow economic chaos and they are reluctant to invest, hire or innovate.
Which brings me to the question of how long the business community in the United States can tolerate Donald Trump as president. True, some were doubtless elated that a son of the private sector had been elevated to the presidency. But Trump wasn’t the kind of businessman they really wanted: he was well known in New York as a reckless blowhard whose main product was his name and personality, and whose bankruptcy-prone track record reflected little of the training he presumably received at Wharton.
In the waning weeks of 2018, Trump’s executive driven form of governing has created needless and dangerous chaos in the nation’s economy. Even though Trump’s “great” economic success is little but a continuation of the steady recovery from the 2008 meltdown, the economy is, by many measures, sound (if you ignore issues like record deficits, income inequality and sluggish wage growth).
The combined impact of Trump’s unilateral decisions on trade policy, military alliances, environmental policies, and weapons limitations, combined with threats against the Fed chairman and massive high-level staff turnover in the White House and executive branch departments, have all combined to produce a hair-raising end to the year on Wall Street. The Dow Jones plummeted on Christmas Eve, then skyrocketed on the 26th, then dropped again: down 4,000 points since October. Overall, the S&P index is likely to record its largest annual percentage decline since 2008, when the nation was in the midst of the worst economic crisis since the Great Depression.
There is real loss behind these wild fluctuations: many hundreds of billions of dollars disappearing from IRAs, pension funds, college and retirement accounts, and other personal and business investments. The only volatile element provoking such losses appears to be the erratic chaos-producing gremlin in the Oval Office whose incomprehensible, self-aggrandizing antics are costing tens of millions of Americans enormous amounts of money, destabilizing markets, damaging trade relations and undermining confidence in the economy – all for no reason.
Which brings me back to the value of predictability. It seems self-evident that there is a core of fanatical Trump supporters whose loyalty is virtually unshakable regardless of the boorish behavior, the habitual mendacity, the mean-spiritedness, or even the questioning of Santa Claus’s existence to a 7-year old believer. But one must wonder how long the supposed beneficiaries of Trumpian and Republican policies – the ultra-wealthy and the corporate and financial elite – can tolerate the economic tsunamis he triggers for no apparent reason except to own the momentary news cycle.
Whether they are liberal or conservative policies, the business community needs to know the rules going forward, and with Trump, it is obvious there can be no such clarity because there is no over-arching philosophy of governance. The challenge for the boardrooms and Wall Street is what to do about the problem. A conservative challenge to Trump is pointless given his base support; a moderate business-friendly Republican (like John Kasich) stands little chance in the 2020 GOP primaries and caucuses. Instead, the business community may have to consider the unlikeliest of options: throw its considerable money and influence behind an acceptable Democratic opponent in the nominating process in hopes that a short-term alliance purges the GOP of Trump’s taint without empowering a liberal who promotes policies antithetical to the corporate world.
That’s a tough choice for conservatives, and some who have profited handsomely from the GOP-Trump deficit-inducing tax cut may prefer to sit it out on their fat wallets and purses. But for many, I suspect, the chaos is getting too chronic, too disruptive, and too expensive.