Insights & Advice


Trump’s tweets continue a presidential tradition

“Chuck Jones, who is President of United Steelworkers 1999, has done a terrible job representing workers. No wonder companies flee country!”

“Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!”

                                                            Tweets attributed to Donald Trump

Over the past week or so, Donald Trump has taken aim at two companies, the entire health sector, and a union boss. The media and the financial community are in an uproar over his statements. Should they be?

Actually, ‘jaw-boning’ industry and labor is a time-honored tradition among America’s leaders. Some presidents have done much worse. The fact that president-elect Donald Trump is using social media is about the only thing new in bashing the private sector.

The stock market, however, is acting like this is a blatant and irrational act by someone in power; not so. Consider Theodore Roosevelt’s actions at the turn of the Twentieth Century. “Teddy,” young, brash and every bit as outspoken as “The Donald” in his own way, tangled with none other than the all-powerful, John D. Rockefeller, whose company was supplying 90% of America’s oil.

It took years, but Roosevelt, the first president to take on Big Oil, managed to break up the Standard Oil Company in 1911.Since then a long line of presidents have challenged various oil companies and their managements with varying success.

This week’s vow by Trump to “control drug prices” in a Time Magazine interview sent pharmaceutical and biotech stock prices down 2% or more. This caused a chorus of complaints from investors. But it isn’t the first time a sector has been singled out by a president for bad price behavior.

Some of us may remember John F. Kennedy’s battle with the steel industry 50-plus years ago. At the time, the young president, a year in office, was attempting to control rising inflation. His administration intervened in a labor dispute between steelworkers and steel companies. The government used its heavy-hand to fashion a “non-inflationary” pact between the two sides that Kennedy hoped would provide a guideline for other American industries.

Problem was that Roger Blough, the CEO of U.S. Steel and the largest company in that sector, double-crossed Kennedy and raised steel prices anyway by $6/ton. Six other companies followed suite. Altogether, these steel magnates raised prices 3.5%. It was a direct affront to young Jack.

“My father always told me all businessmen were sons of bitches, but I never believed it until now,” said Kennedy. Kennedy pushed back hard and within two days, Blough and the rest of the rebel CEOs, caved in.

Trump’s attack on Chuck Jones, head of the steelworkers is simply a page out of Ronald Reagan’s playbook. In 1981, for example, Reagan fired 13,000 striking air traffic controllers and destroyed their union. The former president appointed three of the five-member National Labor Relations Board (NLRB), which oversees union rep elections and collective bargaining. Under the president’s direction, the anti-union backed NLRB basically abandoned the union’s right to promote collective bargaining.

In addition, Reagan attempted to lower the minimum wage for younger workers, ease child and sweatshop labor laws, tax fringe benefits and cut back job training programs for the unemployed. Trump’s feud with Jones seems positively benign given the actions of Reagan, who many consider one of America’s great presidents. The point is that influencing the private sector to do a president’s bidding is simply the cost of doing business in America and has been for a good many years.

Posted in Macroeconomics, The Retired Advisor