During his campaign, Donald Trump told voters that he would apply the lessons of business to running a government. As president-elect he has begun tapping wealthy tycoons to join his economic team, reflecting his faith in private-sector experience – and the approach of past Republican and Democratic administrations in filling these posts.
Reporting on Mr. Trump’s cabinet picks concur on the likely nomination as commerce secretary of Wilbur Ross, who chairs a private equity firm and is estimated by Forbes to be worth $2.9 billion. Mr. Ross was an adviser and fundraiser for Trump’s campaign and has echoed his hostility to “bad trade agreements.”
The New York Times reports that Trump may appoint as deputy commerce secretary another billionaire Republican donor, Todd Ricketts, owner of the Chicago Cubs. The current commerce secretary, Penny Pritzker, is a billionaire and a prominent funder of Obama’s presidential campaigns.
While commerce is a cabinet-level position, it is mostly in the shadow of the US Treasury, making Trump’s nomination for that powerful cabinet job more consequential. CNN reports that Steven Mnuchin, the president-elect’s campaign finance chairman, is one of two contenders; the other, Jeb Hensarling, is the chairman of the House Financial Services Committee.
As nominee, Mr. Mnuchin could face questions over his ownership of a failed sub-prime mortgage lender that he bought in 2009. The bank, now called OneWest, was taken over in 2008 and sold for $1.55 billion by the government, which covered much of its outstanding losses. Mnuchin and co-investors sold the bank for twice its original price in 2015. CNN reports that before it was sold again, federal regulators charged OneWest with falsifying documents during property foreclosures.
Mnuchin is also a former executive at Goldman Sachs. That puts him in good company: Robert Rubin, a Treasury secretary under President Clinton, and Henry Paulson, who served under George W. Bush, both came from Goldman. Mr. Paulson, a Republican who has been critical of Trump’s economic views and experience, was the firm’s chairman.
Goldman was a populist punching bag for Trump, both in the primaries – Sen. Ted Cruz’s wife, Heidi, works there – and in defeating Hillary Clinton, who gave paid speeches to the bank after serving as secretary of State.
"I know the guys at Goldman Sachs. They have total, total control over him. Just like they have total control over Hillary Clinton," Trump said of Cruz in a February debate.
Whoever becomes Treasury secretary will have broad oversight of Wall Street, along with the power to set policy on currency and banking rules. This includes the supervisory powers created under the Dodd-Frank Act passed after the financial crisis, which Trump has said he wants to dismantle. The Treasury is also a major voice in global bodies such as the International Monetary Fund, which would matter in the event of an international financial crisis.
Last month, Trump issued a 100-day “Contract with the American Voter” [pdf] that pledged swift action on several fronts under his administration. One section, entitled “Seven actions to protect American workers,” commits Trump’s Treasury secretary to labeling China a currency manipulator, a longstanding Republican demand that President Obama has repeatedly resisted.
Under a 1988 law, the Treasury has to declare whether major trading partners are gaining an unfair advantage from currency manipulation. Such a formal declaration allows the president to erect trade barriers and take other retaliatory measures. Trump has threatened to sanction China for depressing the value of its currency, the yuan, to make its goods cheaper in US dollars.
However, far from trying to keep the yuan weak, China has more recently been trying to prop up the currency as its economy weakens and capital leaves the country. That reality could stay the hand of Trump’s Treasury secretary, even if it undercuts his 100-day pledge.
David Loevinger, a former China specialist at the Treasury who now works for asset manager TCW Group, told Bloomberg that the incoming administration may adjust its tactics. When candidates "get to the Oval Office they realize finding ways to get China to open up without strengthening the hardliners and hurting ourselves is a lot harder."
However, Bloomberg also cites another former Treasury official, Lewis Alexander, who served under Obama and now works at Nomura Securities, as saying he expected Trump to deliver on his promise to label China a currency manipulator.
Trump’s other 100-day pledges to protect American workers include scrapping or renegotiating existing and proposed trade deals, identifying foreign trade abuses and punishing offenders, and allowing more domestic oil drilling and pipeline construction.
In a survey of eminent academic economists, virtually all said these actions would be deleterious for the workers they are supposed to help. Asked if they thought Trump’s 100-day plan would improve the economic prospects for middle-class Americans over the next decade, 46 percent disagreed – and 47 percent strongly disagreed – when responses were weighted by confidence levels.
When the same question was posed about the prospects for low-skilled Americans – the white working class voters that are credited with helping Trump defeat Mrs. Clinton – only 2 percent agreed and 48 percent strongly disagreed on a confidence-weighted basis. The survey was carried out by the University of Chicago, which regularly asks economic experts similar policy questions.