Should-Read: Larry Summers: Time for Business Leaders to Wake Up: “I wonder what the business leaders who have been waxing enthusiastic about our new pro-business administration are thinking right now…
…Confidence and prosperity depend on a perception of government credibility and confidence. Is that present when an administration lies about readily observable facts like crowd sizes and then defends the lie with the Orwellian concept of alternative facts? Does the business community really want NAFTA to be abrogated, Asian trade architecture turned over to the Chinese or a trade war launched with China?… Do the financial cheerleaders for a business-leader dominated administration approve of the emerging combination of weak dollar rhetoric from both the president and Treasury secretary nominee along with strong dollar policy? If, as secretary designate Steven Mnuchin has just written to Congress and the president has asserted, the administration believes the dollar is too strong, why are all its policies calculated to raise the dollar:
- very expansionary fiscal policy
- complaints about easy money
- measures like the border tax adjustment that discourage imports and encourage exports
- measures to reduce capital outflows as American companies outsource?
This is the least coherent dollar policy since the Carter administration…. [Perhaps] business people are more comfortable with fellow business people than with policy people. Perhaps in forming views they should get modern and look at data. Almost 30 years ago in 1988 Roger Altman and I had a piece in the WSJ showing that in the preceding 35 years the economy and corporate profits had done much better with Democrats in power. At the time I thought the point was a valid counter to Republican rhetoric but not necessarily a strong regularity. But the best test of any statistical finding is looking at data subsequent to its publication. The recent much more thorough study by Alan Blinder and Mark Watson shows that Democrats are much better for business than Republicans.
Little is going right or giving confidence. Increasingly, I think the sugar high may be short lived. For the sake of their shareholders, corporate leaders need to stop cheerleading and start insisting that policies have a modicum of logical coherence and factual support.