The spending bill the Senate will soon consider would significantly increase government spending. While the bill only covers this fiscal year and next, its practical effects will last longer. If you increase discretionary spending by $150 B per year for each of the next two years, you establish higher expectations and a new benchmark, a new baseline, against which future discretionary spending proposals will be judged. This is true even if the bill is drafted to technically cover only the next two years of spending.
Using press reports for some back-of-the-envelope calculations of my own, it appears that Congress is heading toward increasing discretionary spending by about $1.8 trillion over the next decade (+2/3 of this unfinished budget year), and will have to borrow about $1.7 trillion more from financial markets to finance those net spending increases.
In making this calculation I am being generous in all as-yet unspecified respects. I am ignoring rumored discretionary spending increases outside the spending caps in law, as well as reported possible mandatory (entitlement) spending increases. I am ignoring another $60ish B in added interest expenses that would result from the added government borrowing, and I am giving them full credit for a claimed $100 B in offsets that will, in all likelihood, consist partially of budget gimmicks.
The effects of this bill would be twofold. First, the numbers are really big.
- This bill would add about $1.7 trillion to debt held by the public over the next decade. Debt/GDP is now in the mid-7os percent, and is projected to grow to about 90 percent by the end of the decade. This law would increase that by another 6 percentage points.
- This bill would increase government debt 58% more than did the tax law enacted last December. (This bill: +$1.7ish trillion; tax law: +$1.07 trillion after incorporating faster economic growth.)
- The immediate government spending increases would create pressure on the Fed to raise interest rates faster, making it more expensive for businesses to finance new factories and families to finance buying homes.
Second, the Republican policy reversals are staggering:
- Members of Congress who once claimed to be committed to debt reduction would increase debt by more than $2.7 trillion in just seven weeks.
- Congressional Republicans would increase government spending by 50% more than they cut taxes two months ago.
- The self-labeled fiscal conservatives in Congress, who had once insisted that all government spending increases be offset by spending cuts, would abandon that principle.
- A party that just a few years ago proposed reforming old-age entitlement spending, the principal driver of government spending growth, would have no proposals to do so. If press reports are true, this bill may even increase Medicaid spending.
- The Republican Congressional Majority, which built last year’s balanced budget plan on deep future cuts to nondefense discretionary spending, would be supporting big increases in that spending.
With this bill, Republicans would abandon their goal to balance the budget. The smart way to achieve this goal is to restructure and significantly slow the growth of the big 4 entitlement spending programs: Social Security, Medicare, Medicaid, and the Affordable Care Act.
Instead, last year’s House Republican majority proposed a budget claiming to reach balance principally through cutting non-defense discretionary spending. At the other end of Pennsylvania Avenue, the President’s advisors reconciled a balanced budget and a large tax cut through a $2 trillion accounting mistake/gimmick.
Now that the tax cut has been enacted and Republicans are about to embrace large increases in non-defense discretionary spending, even those feeble budgetary fictions evaporate. President Trump’s advisors and Congressional Republicans have over-constrained themselves. They refuse to reform Social Security, have failed to repeal the Affordable Care Act, are discussing only small changes to Medicare and Medicaid, and are now about to enact large increases in both defense and non-defense discretionary spending. At the same time, they can no longer claim unspecified economic growth benefits from future pro-growth policies, since their pro-growth policies are all behind them. They can’t make the arithmetic work. This may explain reports that they won’t even try to pass a budget this year.
Other than their relative prioritization of defense over non-defense programs, when it comes to government spending and borrowing, it is now quite difficult to distinguish President Trump and Congressional Republicans from Democrats.
In their Axios story “Trump team considers nationalizing 5G network,” Jonathan Swan, David McCabe, Ina Fried, and Kim Hart report that “Trump national security officials are considering an unprecedented federal takeover of a portion of the nation’s mobile network to guard against China, according to sensitive documents obtained by Axios.”
I had three reactions to the leaked Trump NSC materials.
- Surely these are not actual policy documents they are using to make decisions.
- The author is using China as a model to design a U.S. policy.
- If the President says 5G or build a nationwide wireless network in his State of the Union address Tuesday night, his staff are setting him up for an embarrassing policy failure.
The leaked documents are of such low quality that they barely merit a response, but the policy ramifications would be so enormous and harmful I feel obliged to raise my concerns, framed as twenty questions for the author of these documents.
I encourage you to review the slide deck and memo and form your own judgment.
Public vs. Private
- You compare a government-built 5G wireless communications to both the creation of the National Highway System in the 1950s, and the Space Race in the 1960s. The government did those projects in part because no one else could. Why shouldn’t private firms build 5G? They seem willing and able to do so.
- Pointing to both the U.S. Interstate Highway System and the Chinese “Belt and Road” system as models, your primary option proposes a network model for 5G wireless: a single, universal, government-run, centrally-administered network. Why does this model make more sense for American 5G wireless than the multiple overlapping 3G and 4G private wireless networks, or the privately-owned wired U.S. internet infrastructure, or the private hub-and-spoke air carrier network, or the regional networks of State and local roads that connect to the interstate highway system? Why should the government (you) choose an optimal network structure rather than allow it to grow and evolve based on consumer-driven pricing signals?
- You say a government-built and -operated wireless network will “create millions of jobs.” Won’t it just shift jobs from the private sector to the government?
Financing, innovation, and improvement over time
- You say your “new paradigm … would require a single network that is virtually shared by retail providers.” Who will pay for building this network? Since the benefits of any private investments to build or upgrade part of such a network would be shared by retail providers, how does your proposal “rely on private capital?” Why would private firms invest to build or upgrade capacity? Are you proposing to turn telecom firms into regulated utilities and guarantee them a certain return?
- Or do you assume the government would use scarce fiscal resources to build and upgrade the network over time? If so, what makes you think the taxpayer funds would be available, or that they would not be allocated based on political power in Congress?
- Sometimes different private firms adopt different competing technologies (e.g., GSM vs. CDMA, VHS vs. Beta). Competition drives these firms to improve their technologies. In your plan, the government would choose a single technology and mandate its nationwide use. What makes you think the government (you) knows enough to pick the best technology?
- Other than government fiats, why would anyone have an incentive to improve upon that initially chosen technology?
- IT modernization at the IRS is a multi-decade disaster. The U.S. government was unable to build a health insurance enrollment website. FedEx, UPS, and Amazon run circles around the U.S. Postal Service. What makes you think a government-run wireless network will “enable innovation” or result in “more resilient and effective operations” compared to one built and operated by private firms?
Speed of deployment
- You state the U.S. government will build a nationwide wireless network in three years. That fits with the end of the president’s first term, but is there anything more specific than “Inspired Leadership” which leads you to think this particular timeline could be achieved?
- What makes you think equipment manufacturers could “move manufacturing facilities to the U.S. … in time to allow for a three year deployment timeline?”
- More generally, what examples suggest the U.S. government could build a nationwide wireless network faster than could the private sector?
- You point out that local siting rules slow down the deployment of new telecom infrastructure, and recommend the federal government override these local rules. This policy choice is independent of who builds the infrastructure, right? If made, such policy changes would also expedite private sector deployment, yes?
Security & privacy
- Why do you think a single network would be more secure than multiple networks? Would it be more robust to a debilitating attack?
- As someone who received an Office of Personnel Management notice that my federal government employee records were hacked by Chinese proxies, why should I trust the U.S. government’s ability to secure private wireless communications?
- Your proposal would mean that every phone call I make, every email and text I send and receive, every photo I post, search I cast, app I run, and website I browse would be going through government-operated information systems, right? And my geolocation data as well? Do you consider this a feature or a bug?
- You propose the Department of Education “take the lead in developing training programs that ensure an adequate supply of skilled labor.” What existing government-run job training programs lead you to believe this can succeed?
- You say private firms can be forced to “begin harnessing the secure network as soon as it is available” through imposing “corporate governance standards … for large and publically [sic] traded private entities.” Why should the government tell private firms what technology they must use and when?
- You say the government will create “an air layer utilizing airline carriers and other public/private Unmanned Aerial Systems.” Does this mean the government will be flying planes and drones around to provide 5G coverage? Why is this a good idea?
- The proposal seems to be inspired by and modeled after a Chinese government, top-down, centralized control approach. Is it? If so, why does it make sense to model U.S. policy after Chinese policy? If not, how is it different from what China does?
- Who signed off on this? The Axios story says this document was produced and distributed widely by “a senior National Security Council official.” Do White House staff routinely circulate documents of this poor quality to senior decision-makers? Do policy decisions get made in the Trump Administration based on documents like this?
I write in support of Kirstjen Nielsen, President Trump’s nominee for Secretary of Homeland Security, and to recommend the President nominate Kevin Warsh for Chairman of the Federal Reserve. I worked with both of them in the Bush White House, and they are in both cases the best candidates for the job.
First, a few words on Kirstjen. She worked on the Homeland Security Council staff when I worked on the National Economic Council staff. She was a skilled, effective professional who delivered results and could make cumbersome bureaucracies move. Some Cabinet secretaries play mostly public-facing roles, acting as the face and voice of the department while others do the inside management and policy work. While I think she can be an effective communicator, I support Kirstjen primarily because I know she will be a hands-on leader, driving policy (and the bureaucracies) forward to produce results. She has expertise in cyber policy and natural disasters, two important priorities for the department. She has the trust and confidence of the President’s Chief of Staff, and her stint as John Kelly’s White House deputy means she knows the President and the senior White House staff, increasing her effectiveness when she moves over to lead the department. General Kelly has McMaster at NSC, Mattis at Defense, Tillerson at State, Pompeo and Coats on intel, and he will have Nielsen at Homeland. That’s a solid and stable team that gives me confidence. In this dangerous world and with an unpredictable and sometimes volatile Commander-in-Chief, I want to have confidence in his national security team.
Nielsen’s confirmation will further increase that confidence, and I urge the Senate to quickly confirm her as Secretary of Homeland Security.
I likewise have confidence in and recommend the President nominate Kevin Warsh to be Chairman of the Board of Governors of the Federal Reserve Board beginning early next year. Kevin and I worked closely together for 3 1/2 years on the Bush National Economic Council staff, when he handled the financial policy portfolio. He went down the street to become a Federal Reserve Governor in early 2006, and I renewed regular contact with him from late 2007 through January 2009 during the financial crisis. I recommend him in part based on my experience working so closely with him. Kevin’s free-market instincts, his sound judgment, and his effectiveness in designing and implementing policy inspire my confidence. The President’s senior team trusted and relied on Kevin’s judgment, as did I on a daily basis. He is an expert in the practical aspects of economic policymaking, with experience honed during a financial crisis. He is also just a solid, good guy, and a pleasure to work with. Those personal characteristics are sometimes underappreciated among senior policymakers.
My recommendation of Kevin Warsh also derives from my policy views and my view of what we need in a Fed Chair.
I will start with monetary policy.
- I’m a dual-mandate discretionary inflation hawk. I support maintaining the Fed’s dual mandate: stable prices and maximum sustainable employment. Others right-of-center would like to move the Fed to a single, inflation-only, mandate. That’s not my policy preference. Even if it were I can’t see how one would enact legislation changing the mandate, and I don’t think it’s worth the legislative effort to try to change it.
- At the same time, I’m an inflation hawk. All things being equal, I would place more weight on avoiding inflation risk than maximizing short-term employment. Of course, all things are never equal, but that’s my general lean.
- I’m a discretionary guy, not a rules-based guy. I think monetary rules are useful inputs into a collective decision-making process that ultimately works best when relying on the FOMC members’ judgments, and especially the Chair’s judgment. While I’m attracted to the concept of a rules-based policy, I think the macro models and forecasting tools that would interact with such rules are so imprecise as to make it dangerous to rely too heavily on rules. Our sensor system just isn’t good enough to put the car on autopilot. Maybe someday macroeconomics will be closer to a real science and we can rely more on rules, but we’re not there yet.
- I place a high priority on keeping monetary policy independent of pressures from both the Executive and Legislative Branches. A strong, independent monetary authority is one of the great strengths of the U.S. economic system.
While none of the four candidates are a perfect match, my policy views most closely align with Warsh’s. Yellen is more dovish than I; Taylor would lean too heavily on rules for my taste; Powell is a policy enigma to me (in all respects). At the same time, I shouldn’t overstate the case here. The policy distance among the candidates here is not that big, even between the “extremes” of Yellen and Taylor. Yes, it matters a lot to short-term investors, and yes, I have preferences, but the policy differences among the candidates are not significant enough to determine my recommendation.
On regulatory and macroprudential policy, I’m an outlier. I think I’m more aggressive than Warsh, Taylor, or Powell on pre-emptive policy changes to reduce the risk of another TBTF (Too Big To Fail) scenario. We are once again bearing too much long-term crisis risk, and are still too vulnerable to large financial institutions failing again with potentially catastrophic effects. I favor even higher capital and liquidity standards, size caps on financial institutions (!!), and dramatically less complex detailed micromanagement of large institutions’ finances. I want smaller, more liquid, more highly capitalized banks that have more freedom to do what they want and can’t do major harm if/when they fail. I am fairly certain this is farther than any of these three (and Vice Chair Randy Quarles) would go, and it is a fundamentally different approach than the Dodd-Frank implementation path implemented by former Governor Dan Tarullo and continued by Chair Yellen. Given how far I am from all the candidates on these questions, this does not help me make a recommendation for Chair.
While I care a lot about these policy questions, the non-policy differences among the candidates are even more important in this personnel decision, and they drive my recommendation of Kevin Warsh.
My top priority for a Fed Chair is someone who can lead and manage effectively if we have another financial shock. This is where Kevin’s experience from 2007-09 distinguishes him from the rest. In addition to being a Fed Governor at the time, he was effectively Chairman Bernanke’s consigliere, his right-hand man. He helped Bernanke lead and run the Fed during a time of tremendous economic, financial, policy, and political stress. From a White House perspective, we could talk to Ben and/or Kevin almost interchangeably at any point during the crisis. We knew they were tightly coordinated and that Kevin could speak for the Chairman if needed. When “New York Fed weekend” happened, Chairman Bernanke sent Kevin to New York as his proxy. Kevin was also interacting with counterparts at the other major central banks, especially during the critical times in September and October of that year, coordinating central bank actions to slow and mitigate the global effects of the U.S.-centered shocks. Kevin was at the center of the action, exercising tremendous responsibility and authority, during the most significant financial crisis since the Great Depression. He was essential to the Fed’s component of preventing that crisis from being far, far worse and mitigating the damage. None of the other candidates have such experience. This distinction and Kevin’s experience are, by themselves, determinative for me. I know he can succeed in a crisis because he has already done so. I can’t say that for the other candidates, and that worries me a lot.
My second priority is someone with the strength and credibility to represent the U.S. at the G-7 Finance Ministers Meetings. The U.S. seats at those meetings are for the Treasury Secretary and the Fed Chair. Given Secretary Mnuchin’s inexperience in international economic policy, as well as the protectionist leanings and unpredictability of the Secretary’s boss, it is even more important that the Fed Chair be globally credible. Yellen and Warsh have this credibility from their global experience as central bankers. Taylor has international experience from his time as the international Undersecretary at Treasury, but from a fiscal rather than a monetary perspective. Again, I’m just not sure about Powell, who has been so low profile as to be almost invisible. He might be globally credible. I just don’t know, and that concerns me.
Third, given the instability in and ineffectiveness of other parts of the U.S. government right now, for the next few years I place a high priority on stability and incrementalism at the Fed (even given my somewhat radical views on structural reform of financial institutions). Just as John Kelly knows he can rely on the Mattis-McMaster-Tillerson-Pompeo-Coats-Nielsen team to address foreign military and terrorist threats, I want to know we can rely on the Fed Chairman to provide monetary policy stability and confidence. Warsh and Yellen fit this criterion. I just don’t know if Taylor or Powell can do this, and in the current environment, I very much want to know.
To those who have suggested 47-year old Warsh is too young to chair the Fed, I’d point out that Tim Geithner was the same age when he became Treasury Secretary. Kirstjen Nielsen is 45; Paul Ryan is 47; Ben Sasse is 45. Kevin’s seven years working in senior economic policy jobs and his experience in the heat of a financial crisis are far more important than his birth date. He has the judgment and wisdom essential to such a critically important role. And frankly, it’s time for the Baby Boomers to move over for a new generation of policy leaders, the next of whom are Kirstjen Nielsen and Kevin Warsh.
Glenn Kessler of the Washington Post performs a valuable service with his Fact Checker column. He plays the referee, holding policymakers to account for the accuracy of what they say, and working hard to research, understand, and educate his readers on the veracity of a range of important policy questions. His body of work elevates the quality of policy debate.
Even good referees sometimes make a bad call, and I think Mr. Kessler did so yesterday in his column, “Is the GOP plan for Medicaid caps really Bill Clinton’s idea?” I disagree with his conclusion and score of former Senator Rick Santorum’s quote (two Pinocchios). I have expressed my views directly to Mr. Kessler, who graciously included some of my input in an updated version of his column. I’d like to share here a fuller explanation of why I think Santorum was right, Kessler wrong, and the two Pinocchio score is undeserved and unfair. My disagreement with Mr. Kessler stems in part, from a different view about the role of someone labeled a fact-checker who scores policymakers with Pinocchios. It may seem like I’m splitting hairs, but the underlying policy issue is important, and Mr. Kessler has a big role on an influential platform. His columns carry weight and his scores have influence, especially because the Pinocchio label implicitly tags policymakers as liars.
The quote Mr. Kessler analyzes comes from former Republican Senator Rick Santorum:
As everyone knows, the Medicaid per capita cap was proposed by President Clinton. Now it is seen as this draconian measure.
In the mid-1990s, Clinton did propose a per capita cap for Medicaid …
“Under the budget, a per capita cap limits Federal spending growth per person while retaining current eligibility and benefit guidelines,” Clinton’s 1997 budget proposal said.
As far as we can tell, Democrats never embraced the idea after Clinton abandoned it once he had struck a deal with Republicans on the budget. Thus it remains a tactical gambit, not a serious proposal. That’s demonstrated also by the fact that Clinton’s caps were so high that they were virtually meaningless in terms of saving money.In making his rhetorical point, Santorum ignores this history. He earns two Pinocchios.
- Kessler penalizes Santorum based on something Santorum did not say and Kessler thinks is important (“ignores this history.”) That’s not fact-checking, it’s Kessler deciding (after the fact) what else, beyond what Santorum said, is important. That is a subjective standard impossible for anyone to meet.
- In this case, it’s also irrelevant.
- It may not even be true. Kessler may be correct that “Democrats never embraced [a per-capita cap] after Clinton abandoned it once he had struck a deal with Republicans.” Before this, however, they did. This November 1995 New York Times article focuses on a “middle-ground budget” proposal from moderate House Democrats who called themselves The Coalition: “Mr. Clinton, by contrast, would limit the growth in the average Federal payment for each Medicaid recipient, and the Coalition also favors a ‘per capita cap.'”
- To make this judgment, Kessler appears to rely on an unproven claim by two advocates (Sperling and Jennings) that President Clinton did not actually want to enact a policy that he proposed. They assert this, offer no evidence other than their own claims, and yet Kessler treats it as “history” and punishes Senator Santorum for ignoring it. Even if President Clinton was insincerely proposing a major structural reform to a pillar of the Great Society as a cynical tactical feint, Senator Santorum could not have known this. I did not know this and saw no evidence of it, and I was enmeshed in the debate. It is irrelevant what the president’s motive was–he proposed it. And Messrs. Sperling and Jennings have both professional and policy incentives to rewrite this element of history now, given the tremendous change in sentiment among their Democratic party peers for their past policy work. Kessler implicitly acknowledges this last point when he writes “Former Clinton administration officials now say …”
- Whether the proposal was honestly or cynically offered is irrelevant. Kessler presumes Senator Santorum knew or should have known what someone else, his policy opponent President Clinton in this case, was privately thinking when he proposed a policy. It is unfair to judge a policymaker for “ignoring” (not speaking to) a particular self-interested claim about the history of a proposal that the policymaker could not possibly have known.
Mr. Kessler is, of course, free to evaluate policymakers’ statements on any basis he chooses. If he thinks context is important to readers, that’s his call to make in his column. At the same time, he has created a niche for his column, which is labeled Fact Checker, and tags policymakers with Pinocchios. Checking honesty and accuracy is one task; adding context you think important is closely related, yet also different and far more subjective. Fact Checker and Historical Context Provider is different from Fact Checker.
Pinocchio’s nose did not grow because he ignored history or omitted context deemed important by someone else. Pinocchio lied. When you tag a policymaker with Pinocchios, you are accusing them of lying. That did not happen here.
This Fact Checker column was titled “Is the GOP plan for Medicaid caps really Bill Clinton’s idea?” How can the answer be anything other than “Yes,” and why shouldn’t Senator Santorum get credit for a quote proved to be accurate?
Both President Obama’s 2016 signing of the Paris Agreement on climate change and President Trump’s withdrawal from that agreement today fit into a category I will label as QTIIPS.
QTIIPS stands for Quantitatively Trivial Impact + Intense Political Symbolism.
QTIIPS policy changes provoke fierce political battles over trivially small policy impacts. Passionate advocates on both sides ignore numbers and policy details while fighting endlessly about symbols.
A policy change is QTIIPS if:
- its direct measurable effects are quite small relative to the underlying policy problem to be solved;
- it is viewed both by supporters and opponents as a first step toward an end state that all agree would be quite a large change;
- supporters and opponents alike attach great significance to the direction of the change, as a precursor to possible future movement toward that quantitatively significant end goal; and
- a fierce political battle erupts over the symbolism of this directional shift. This political battle is often zero-sum, unresolvable, and endless.
Advocates on either side of a QTIIPS policy change have desired end states that represent fundamentally different policy outcomes. But while the policy gap between their desired end states is measured in miles, on a QTIIPS policy, actual changes are measured in inches. The battle rages over which end state is the right one, but when policy shifts back and forth it changes direction often but moves only a tiny bit each time. Political constraints make the theoretical debate about miles-apart differences irrelevant because neither end state will ever occur, but that does not deter the theoretical war from raging during the real-world battles over a tiny actual change in direction.
If you listened to President Trump’s remarks today you would think staying in the Paris Agreement would destroy the U.S. economy. If you listen to many advocates who support the agreement, you would think you need to start building an ark, soon.
I therefore read the text of the agreement to see for myself. Doing so reinforced the view I developed when the agreement was concluded. Relative to the scope of the problem it is trying to solve, the Paris Agreement is quantitatively trivial. It is a set of weak process agreements, with many areas of ambiguous language and “flexibility” for countries to reinterpret their only loosely binding quantitative commitments to reduce greenhouse gas emissions many years from now.
The national leaders who supported Paris, including President Obama, had a political interest in overselling their policy accomplishment. Similarly, President Trump has a political interest in selling today’s move to his base as an enormous policy win, when to me it appears he is nullifying American participation in an agreement that on policy grounds was insignificant to begin with.
QTIIPS policy changes rest on the assumption that the first step is likely to lead to that theoretical quantitatively significant outcome. Most supporters of the Paris Agreement would privately concede that it is only a modest first step, and would then express hope that it could/will/might/should lead to further progress in the future. Opponents of the agreement would share their fears that this first step could/will/might lead to an eventual outcome they fear.
But this shared assumption, of a first step or slippery slope, could easily be wrong. If the Paris Agreement were never to have led to a more significant next step, then a key premise of the fight is wrong. The intense political symbolism and the fierce battles waged over both President Obama’s and President Trump’s relatively small policy moves would then be unsupported by strong policy arguments.
I think that’s the case here. I think Paris was not just the first step, I think it was likely the last step, that those who hoped it would lead to “deepening future commitments” were fooling themselves and others. I think Paris was agreed to only because national leaders realized it was impossible to get a numerically meaningful set of binding national commitments to reduce greenhouse gas emissions by specific large amounts. They therefore grabbed the best agreement they could, however weak, kicking the can down the road in the hope that somehow their successors might have more luck. Because I am so skeptical about the first step claim, and because I care far more about the policy impact than about the symbolism, my reaction is mild both to President Obama’s signing in 2016 and to President Trump’s withdrawal announcement today. I think neither agreeing to Paris nor withdrawing from it would have changed future global temperatures by any meaningful amount. Even before today I was skeptical that it would lead to any significant next steps, so I conclude that these symbolic battles about the Paris Agreement are almost meaningless.
A surprising dynamic often surrounds QTIPS policy changes—the most passionate supporters and opponents have a common interest in arguing that this particular policy change is enormously important, while downplaying the reality that its direct impact is barely measurable. These mortal opponents have a shared goal of hyping the issue and the battle. Issue advocates on both sides can generate political and financial support by convincing you this fight is important, even when it’s not. If you hear advocates arguing fiercely about “what this policy change means more broadly” or “the precedent it sets for future action” or “what it says about us/America/society” rather than about “what it does” and “what effect it has,” there is a good chance it is QTIIPS.
QTIIPS issues are unfortunately great fits for our modern advocacy, political, and communications structures. Everyone can virtue signal to their heart’s content. No one has to read the text of the policy change, look at the numbers, or ask hard questions of a relevant policy expert. Political tribes can inhabit their comfort zones and preach to the converted while heaping scorn and derision on the other tribe. Passion abounds while everyone ignores the policy nerds saying “Um… I think the actual effect here is too small to matter.”
I’ll end with two questions for the reader.
Q: Do you agree with me that agreeing to and withdrawing from the Paris Agreement are QTIIPS?
Q: What other hotly debated policy changes are QTIIPS?
How about the 2014 debate about banning immigration of refugees from Ebola-infected West African countries? Or the debate about incremental changes to gun laws? Or other hot-button social issues that dominate news cycles? Are they QTIIPS? Can you think of others?
Kate Davidson and Richard Rubin have an excellent article in today’s Wall Street Journal examining what President Trump’s economic advisors are now saying about how the President wants to allocate $2 trillion in budget benefits they think will result from faster economic growth. I wrote about this question Tuesday.
Trump Budget Director Mick Mulvaney testified at the House and Senate Budget Committees, while Trump Treasury Secretary Steven Mnuchin testified at the House Ways & Means and Senate Finance Committees. Director Mulvaney said President Trump was proposing that tax reform be debt-neutral without including the budget benefits that would result from faster economic growth, while Secretary Mnuchin said President Trump was proposing that tax reform be debt-neutral with including the budget benefits that would result from faster growth. These two views cannot both be true. I understood the Mnuchin position to be the Administration’s unified view before Tuesday’s budget release. The Mulvaney view is the only one consistent with the new budget documents. Davidson and Rubin are therefore correct when they write that the Mulvaney position would be a major fiscal policy shift for the President.
President Trump now has four options:
- President Trump supports the position Director Mulvaney stated yesterday, consistent with the Trump budget release. Tax reform must be debt neutral, statically scored. The budget benefits of growth help the government reach balance in 2027, as presented in the just-released budget plan. Tax reform becomes dramatically more difficult to enact, since the President’s position now requires finding as much as $2 trillion* more revenue over 10 years from eliminating or scaling back tax preferences. That would mean either flipping to support a border adjustment tax and eliminating the deduction for interest expenses, or dramatically scaling back their proposed tax cuts from what they floated in April.
- President Trump supports the position Secretary Mnuchin stated yesterday, consistent with the April tax reform release. Tax reform must be debt neutral, including the effects of growth. Director Mulvaney cannot count those additional revenues to help him balance the budget. He has to modify his budget proposal to cut a lot more spending ($496 B in 2027 to hit balance in that year) or he has to give up on balancing the budget.
- President Trump splits the $2 trillion between the two goals. Mnuchin and Mulvaney each have to find more tax increases / spending cuts (respectively) to meet their stated goals of debt-neutral tax reform and a balanced budget.
- Do nothing, remaining ambiguous and internally inconsistent. They stick with the mutually inconsistent policies and the $2 trillion double-count, and try to duck / ignore / power through the questions that point out this logical and arithmetic contradiction. The likely outcome is that House and Senate Republicans ignore the President’s inconsistent policies and make their own policy choice on this question. I’d guess they’d lean toward the Mnuchin approach, dynamically scoring tax reform and reaching a balanced budget by cutting spending more than the President proposes.
It is unclear to me why Director Mulvaney and Secretary Mnuchin are saying opposite things here. Does this reflect a policy disagreement between the two men that still needs to be resolved by the President, and we are seeing that disagreement play out in public? Does it reflect a new policy direction (debt-neutral tax reform, statically scored) to which Secretary Mnuchin has not yet adjusted his public rhetoric? Does it reflect a coordinated intentional choice to try to have it both ways so that the President did not have to make another $2 trillion of hard policy choices?
This is important. The principle of honest budgeting is amplified by the size of this hole and its impacts on core elements of the president’s economic agenda. Two trillion dollars is a lot of money, and the decisions yet to be made affect the chances for enacting tax reform and a balanced federal budget.
* Correction to my “$2 trillion hole” number — Team Trump says that faster growth resulting from all the President’s policies, in total, will improve the budget picture by $2 trillion over the next decade, and they incorporate that full amount in their balanced budget plan, including $496 billion in the balance year of FY 2027. Traditional dynamic scoring of a tax reform would incorporate the budget benefits of only that additional economic growth which results from tax reform. If some fraction of the faster growth would result from non-tax policies (including regulatory reform, increased energy supply, infrastructure spending), then (traditionally) one could not “use” that to offset tax reform. This means that while Director Mulvaney could and did incorporate the full $2 trillion in his balanced budget plan, traditional scoring rules might allow Secretary Mnuchin to include something less than the full $2 trillion to offset gross tax cuts, if the President were to head in that direction. None of the Administration’s language reflects this difference, and it is secondary to the core problem the Administration faces, but I want to be as accurate as I can be in my explanation.
President Trump has a $2 trillion hole in his fiscal policy proposals. His numbers don’t add up. This creates a conflict between two of his fiscal policy goals: tax reform and balancing the budget.
Let’s look at three elements of President Trump’s economic policy and how they interact:
- Last month he proposed tax reform with most of the key numbers left blank.
- Today he proposed a budget that claims to reach balance in 2027 (year 10).
- His budget assumes his economic policies would increase economic growth by a lot, to 3 percent per year.
In addition to proposing a budget that purports to balance in year 10, today Trump Budget Director Mick Mulvaney told us one key new fact about tax reform: the Administration now assumes tax reform will be debt neutral. Director Mulvaney used this to explain why the President’s top fiscal priority, his tax reform proposal, which would involve trillions of dollars of changes to tax policies, was omitted from the President’s budget. This omission is, to say the least, odd.
There is significant public debate about whether Team Trump’s aggressive growth assumption is reasonable given the policies he has proposed. For now let’s set aside this critical question and pretend it’s reasonable. Let us assume President Trump’s economic advisors are right, that his policies would result in 3% real growth per year, and that this faster growth would benefit the budget. Let us further assume their estimate of the [budget] Effect of economic feedback is correct. You can see it in today’s budget proposal (Table S-2, near the bottom of page 26, which is page 32 of the PDF). President Trump’s advisors assume this faster economic growth will reduce the budget deficit by $496 billion in 2027, their target year for balancing the budget.
The President’s balanced budget claim depends on this $496 billion effect of economic feedback in year 2027. They assume almost $500 billion of government spending bills in 2027 will be paid from additional cash inflows that result from higher government revenues resulting from faster economic growth, rather than from cash borrowed from financial markets. Faster growth —> higher government revenues —> less need for government borrowing to pay spending bills —> lower deficits and debt & budget balance in year 10.
This $496 billion is a really big number for a single year. For comparison, it is almost twice as large as the $251 billion the president proposes to cut non-defense discretionary spending in that year. It is three times as large as the $165 billion the budget proposes to save in Medicaid in that same year.
On that same line of Table S-2 you can see Team Trump assumes economic growth means the federal government will need to borrow $2 trillion less over the next ten years. That equals 6.6% of GDP in 2027, an enormous amount. When Director Mulvaney says President Trump’s budget would reduce debt/GDP from 77% this year to 60% in 2027, about a third of that reduction is from this single assumption.
So far, so good. Items (2) and (3) work together: the balanced budget promise and the positive budget effect of the 3% growth assumption, which for now we are stipulating is valid. The problem is fitting debt-neutral tax reform into this puzzle as well.
We don’t know how much the tax reform proposal would cut taxes because in April President Trump did not provide sufficient detail to estimate it. The President’s campaign proposal was roughly a $6 trillion gross tax cut. Let’s make a wild guess and assume his new proposal is smaller, a $5 trillion gross tax cut. The concept that follows is what matters, not the actual gross number.
If your tax proposal, which you left out of your budget proposal, is debt neutral, then you need to have the same amount of new revenues to fully offset the revenue lost to the government from your proposed gross tax cut. In our example you’d need to have $5 trillion in new revenues over ten years to combine with $5 trillion of gross tax cuts to result in a debt-neutral package. In theory, this offsetting revenue can result either from proposed tax increases or from the higher revenue that results from economic growth, or from a combination of the two. You’d also need to match your revenue loss and revenue gain in 2027 so that your proposal doesn’t affect balance in that year.
In our example, if you combined $5 trillion of gross tax cuts with $3 trillion of tax increases, your tax reform package would be a net $2 trillion debt increase over ten years. If, however, your tax cuts would also result in faster economic growth, and if you think that economic growth would result in an additional $2 trillion of government revenues, then your tax package in total would be fully offset and debt neutral. This dynamic scoring of tax reform would make it significantly easier to enact debt-neutral tax reform, because you would need to add only $3 trillion of painful tax increase policies to a package that includes $5 trillion of gross tax cuts that people and businesses like and support.
But you cannot have it both ways. If you try, you are double counting. Either the $2 trillion of added cash inflows resulting from faster economic growth can pay for more government spending and reduce the need for government to borrow, or that $2 trillion can replace the cash lost to the government from cutting taxes and reduce the size of painful tax increases you need to propose. Arithmetic forces you to choose one goal or the other.
Last month Secretary Mnuchin counted the (then unspecified) positive budget effects of economic growth to help offset their tax reform package. Today Director Mulvaney counts those $2 trillion of extra revenues to reduce government borrowing and achieve a balanced budget. Logic requires they choose one or the other, but today they chose both and Director Mulvaney said that choice was deliberate. There will be only one $2 trillion stream of cash (if you even believe it’s that large). By claiming they can do two things with each dollar of cash they have left a $2 trillion hole, either in the Trump balanced budget proposal or in the Trump debt-neutral tax reform proposal.
If they’re going to use growth effects to help balance the budget as proposed today, then Secretary Mnuchin either needs to convince President Trump to support $2 trillion of additional tax increases to keep tax reform debt neutral, or they need to support significantly smaller gross tax cuts. Secretary Mnuchin has so far opposed the two biggest tax increases needed for a big debt-neutral tax reform: a border adjustment tax and eliminating the business deduction for interest expenses (which, coincidentally, would together raise about $2 T of revenues over 10 years). If they want to use dynamic scoring to make tax reform easier to enact, then President Trump and Director Mulvaney do not have a balanced budget proposal until they find almost $500 B of additional deficit reduction in 2027.
You can’t have it both ways, and $2 trillion is a big hole to fill.
For the classes I teach at Stanford’s Graduate School of Business I make my students write policy memos to a friend or family member as if that person was a Member of Congress. I have done the same here. These memos are similar in style to those I used to write for President George W. Bush and Senate Majority Leader Trent Lott. Here’s a pdf version.
25 February 2017
MEMORANDUM FOR A MEMBER OF CONGRESS
FROM: KEITH HENNESSEY
SUBJECT: THE PRESIDENT’S DEBT TWEET
You asked whether you should echo or retweet President Trump’s tweet about declining debt.
The media has not reported that the National Debt in my first month went down by $12 billion vs a $200 billion increase in Obama first mo.
— Donald J. Trump (@realDonaldTrump) February 25, 2017
In a word, no.
It appears the president was repeating something Herman Cain said this morning on Fox & Friends Weekend. We know the president watches this show and his tweet appeared shortly after Mr. Cain was on-air.
The numbers are technically correct.
- Debt held by the public declined $19.6 B from January 20, 2017 to February 23, 2017, the most recent day for which data is available.
- In 2009 the same measure increased $222.6 B (more than the “$200 billion” the president cited) over the same timeframe.
But government cash flows are lumpy, leading to big daily fluctuations in government debt.
- Had the president / Mr. Cain ended his timeframe one day earlier this tweet would have been invalid and debt would have increased (by just $1 B) in “the first month.”
- This is why analysts look at debt on an annual basis rather than daily/weekly/monthly.
Neither president affected government borrowing in his first month.
- Government borrowing in January and February is the byproduct of spending and tax policies set by Congress the year before. President Obama signed the fiscal stimulus law on February 17, 2009, but it took months before that began to change government cash flows and borrowing requirements. President Trump has so far not measurably affected fiscal policy in general or government borrowing in specific.
- It’s unfair to assign any responsibility for borrowing in the first month to either president.
The big difference between early 2009 and now is the health of the economy.
- GDP was plummeting when President Obama took office. Tax revenues were down, automatic stabilizer payments (e.g., unemployment insurance and safety net spending) were up, and funds were being spent from the Troubled Asset Relief Program (TARP). In early 2009 government was borrowing a lot because the economy was weak, not because of President Obama’s policies.
- In contrast, the U.S. economy is now growing. The smaller borrowing requirement for this month is mostly a result of this economic difference, and may also in part be simply an artifact of choosing such a short timeframe for comparison.
Because of his unique communications advantages, President Trump may be able to get away with making an argument with such a weak foundation. You cannot, and you should not place yourself in the position of having to address the intellectual weaknesses described above.
More concerning, this tweet shows the president continues to rely on TV rather than his advisors for numbers and policy substance. Until his staff figure out a way to ensure he doesn’t make such easily rebutted claims, you should not echo the president’s economic arguments or claims without first verifying both their accuracy and substantive merit. This is particularly true of his early morning and late night tweets, when he’s probably in the residence and away from his staff. This unfortunate situation will persist as long as President Trump continues to take his numbers and policy arguments from TV pundits rather than from Mr. Cohn, Director Mulvaney, and Secretary Mnuchin.
Last Tuesday President-elect Trump said, “My Administration will be focused on three very important words: jobs, jobs, jobs.” Mr. Trump emphasizes geography: American policies should encourage economic growth “right here in America.” Nothing wrong with that.
He follows a hallowed tradition of politicians emphasizing jobs and talking about the number of people employed as if it were the only measure of economic well-being. This is effective political communications about economics and quite common.
Any time a policymaker does this he or she is oversimplifying. Employment levels, that is, jobs, are an important metric of economic health. Maximizing the number of people working is a laudable goal for policy. But jobs are not the only thing we should care about. Economically we are more than just workers.
- We care not just about how many people are working but also about how much we are earning. We are wage-earners.
- We care not just about wages but also about non-wage benefits like employer-paid health insurance premiums and employer contributions to retirement savings. Wages plus benefits equals total compensation.
- We care about the prices of the goods and services we buy. Those prices can be affected by the extent of domestic and international market competition and also by inflation. We are consumers.
- We can only spend what the government doesn’t take from us, so we care about the taxes we pay. We are taxpayers.
- On the flip side, we may receive cash or other transfer payments from the government. Some of us are recipients of government benefits.
- And since many of us own financial assets we care about economic growth and its effects on financial returns. We are investors.
Politicians talk about economic policy as if having a job is the only thing that matters to you. While being employed is critical to your economic status, you are more than just a worker.
When thinking about economic policy, each of us is a worker and a wage-earner, a consumer, a taxpayer, and often an investor and a recipient of government benefits.
OK, but so what? Does it really matter if politicians oversimplify and talk only about jobs, rather than about jobs and wages and compensation and prices and taxes and benefits and market returns?
It matters if political rhetoric drives policy to prioritize one element over the others. If we ignore a policy’s effects on consumers and taxpayers and measure only its impact on jobs, then we are getting an incomplete view of that policy. If we measure a policy’s success only by counting how many more jobs will result without considering the effects on wages and prices and other measure that matter, then we’re going to choose bad policies.
I am not arguing we should ignore the employment effects of a policy; I am not arguing that jobs don’t matter. Quite the opposite. We should start by looking at the effects on jobs and then keep going, analyzing the effects on wages, non-wage benefits, prices, taxes, transfer payments and financial returns. We need to measure, estimate, and understand all the economic effects of a proposed policy change, not just the one effect that is easiest to communicate.
Example 1: Buy American provisions, aka domestic content restrictions, require the government to buy certain things only from American producers. This helps steelworkers while harming taxpayers and those who use the government’s services (a fixed number of tax dollars buying more expensive steel will buy fewer rail cars and buses). We should evaluate these policies not just on the American jobs they create or protect, but also on the Americans’ taxes they increase and the services they reduce for other Americans.
Example 2: Erecting trade barriers with China and other sources of inexpensive imported goods would help American workers in the protected industries, at least in the short run. It would also raise prices for those products. We should consider the effects on both American manufacturing workers and on American Walmart shoppers. If we ignore the latter, much larger group, we’re not making good decisions.
Example 3: A large deficit-increasing increase in government spending or cut in taxes next year (aka fiscal stimulus) could, by itself, increase employment and wages. It could also lead to higher inflation and harm consumers. Or the Fed could react to the fiscal stimulus by raising interest rates more rapidly. This would slow growth in interest-sensitive components of our economy, at least partially offsetting the effects of fiscal stimulus. Higher interest rates would also affect financial returns, the ability of American farms and firms to export goods, and the prices of things we import. Policymakers need to look at the complete set of impacts of a proposed fiscal stimulus, not just at the gross number of jobs someone thinks it will create.
Jobs are important and Mr. Trump deserves credit for signaling early that he will prioritize faster economic growth. We should not single him out for focusing his rhetoric solely on jobs, as most other politicians do the same. At the same time, each of us is more than just a worker, and the number of jobs is not the only measure of a good policy. When we forget this we risk doing more harm than good.
How much advice does the president need? Should the president rely on just one person for advice on a straightforward policy question, or delegate a decision to a single person?
Challenge #1: Any policy problem difficult enough to make it to the president’s desk is usually multidimensional.
Challenge #2: The work of government is often highly interconnected. What one department does affects another.
Challenge #3: Once you get past the analysis, most presidential decisions involve tradeoffs among competing values and interests. I believe those judgment calls should be made by the person selected by voters.
Let’s construct an imaginary example of what appears to be a straightforward, even simple, policy question, and then use that to understand how policy advice to a president typically works.
Suppose House & Senate Republicans are moving a bill to increase government infrastructure spending by $200 B over the next decade, fully offset by cuts to other government spending. Let’s pretend Senator Ron Wyden, senior Democrat on the Senate Finance Committee, proposes doubling that new spending to $400 B over ten years with the increment to be offset by a roughly ten cent per gallon tax increase on gasoline and diesel fuel. Suppose Senate Minority Leader Chuck Schumer has told White House Chief of Staff Reince Priebus that he wants to talk to President Trump about this proposal. Finally, suppose President Trump decides he wants advice on how to respond to Senator Schumer.
Thus the question is: How should President Trump respond to Congressional Democrats’ proposal to double the proposed government infrastructure spending increase to $400 B, offset by a tax increase of roughly ten cents per gallon on gas and diesel fuel?
Pretty straightforward, right? Let’s unpack the question the way a White House policy council staff would.
- Numbers: Are Senator Wyden’s numbers right? Will a ten cent per gallon fuel tax increase raise $200 B over ten years? A tax increase will increase the gross pump price, which will reduce demand for fuel, partially offsetting the initial price increase. What is the net effect on the pump price from a ten cent per gallon gross increase?
- More infrastructure: How much should the president value an additional $200 B of infrastructure spending? How much more economic growth and how much better of a quality of life will an additional $200 B buy? What does it mean for people and stuff traveling by air, rail, car, truck, bus, and ship?
- Economic effects of tax increase: What are the economic effects of tax and price increases of that size? Will they slow growth and by how much? What are the distributional impacts: regional geographic distribution, urban vs. rural, income distribution? What are the sectoral impacts: trucking, agriculture, Uber/Lyft/taxi, the transport component of the cost of consumer goods?
- Environmental: More expensive fuel —> less driving —> less pollution and fewer greenhouse gas emissions. How big are these effects and how do they compare with other policy tools like fuel economy requirements and limits on power plant and industrial emissions?
- Energy supply and demand; national security: How much will domestic fuel demand decline? How will that affect domestic oil and gasoline suppliers? How will it affect U.S. oil and fuel imports and exports? Will those changes affect our relationships with foreign oil suppliers like Venezuela and the Middle East?
- Other increments: What if we did half what Senator Schumer is offering, +$100 B for a 5 cent increase? What if we doubled Schumer’s proposal to $400 B / 20 cents? What if we did Schumer’s +$200 B paid for half by gas tax and half by further spending cuts, or all by spending cuts?
Legislative, political, and communications dimensions
- Communications: Fuel tax increases are extremely unpopular and communicating support for them is hard. What is the best communications strategy? What exactly will the president and his Administration say?
- The politics are multi-dimensional:
- left-right: The more [economically] conservative you are, the more you tend to oppose any tax increases, including these.
- urban-rural: City dwellers are affected less than rural folk. If you drive your F-150 forty miles to and from work each day, you care a lot about fuel taxes.
- infrastructure spending: Almost every Member of Congress wants to spend more money on infrastructure. Most will suck up a lot of other political pain if it means fixing a bridge in their district or State.
- campaign fear: The campaign attack ads against an incumbent who voted for a gas tax increase write themselves. I wonder if I can get an ad on that little TV built into the gas pump?
- political cover: Bipartisanship and/or presidential support might partially mitigate someone’s re-election risk.
- States and localities: When the Feds raise these taxes it makes it harder for Governors and Mayors to do the same, triggering political pushback from those officials.
- votes: How many Republican votes do we lose in the House and Senate if we support including a gas tax increase? How many Democrats do we pick up? Would we risk a Senate filibuster on the right? What would the votes look like if we counter-offered a different pay-for?
- leadership support: Would Ryan and McConnell go along with it if the president insisted? They control the legislative process and without them we’re sunk.
- other effects on the bill: If we lose Republican votes do we have to make other policy sacrifices because we now rely on Democrats to pass the bill? Will Congressional Democrats then demand further changes to the type or location of spending, or to union-related or environmental provisions?
- legislative linkage: How would splitting Congressional Republicans and antagonizing their leadership weaken our ability to get them (the majority party) to help us with other parts of our legislative agenda? Would an alliance with Schumer on this bill provide other legislative benefits?
Someone needs to be able to educate the president about all these aspects of this decision as well as to answer these questions as needed. Let’s look at the president’s most senior advisors: Cabinet Secretaries and the most senior White House staff. Which of them have information, expertise, and/or formal responsibility for these questions and should be given an opportunity to advise the president on this decision?
Two Cabinet-level officials are particularly important:
- Secretary of the Treasury because it’s taxes; and
- Secretary of Transportation because of the infrastructure spending.
Six additional Cabinet-level officials can make strong cases that they should be part of the discussion:
- EPA Administrator because of the environmental impacts;
- Secretaries of Interior and Energy because of the effects on oil supply (Interior) and demand and import/export (Energy);
- Secretaries of Commerce and Agriculture because of the sectoral impacts;
- Secretary of Labor if a legislative alliance with Democrats necessitates changes in labor policy.
So far we’re between two and six Cabinet level officials who probably should be part of this decision. Now let’s look inside the White House (technically the Executive Office of the President, which includes the White House as well as other offices). We’ll start with the in-house policy experts.
- The President needs to have the Director of the Office of Management and Budget who manages both the spending and tax sides of the ledger. $200 B is a lot of money.
- He’ll need his chief economist (Council of Economic Advisers) to answer the economic questions. In theory maybe SecTreas or SecCommerce could do that, but while those two have economists working for them, you’d like to have an economist principal in the room. That’s the CEA Chair.
- If you include EPA you’ll also include the Chair of the White House Council on Environmental Quality (CEQ).
Then you need the non-policy advisors in the White House:
- the head of White House Legislative Affairs to address all the legislative complexities described above;
- the president’s White House political advisor to advise on how this affects politics, including popularity, partisanship, and interest group support and opposition; and
- the communications director and the press secretary to advise on how this fits (or doesn’t) in the president’s overall message and on how to talk about it publicly.
We’ve added another seven White House advisors so far. Just a few more:
- the Vice President;
- the White House Chief of Staff;
- the Deputy Chief of Staff for Policy; and finally,
- the Director of the National Economic Council, who corrals all these people, coordinates the process, produces the paper and runs the meetings.
Phew! That means the skinny version of this decision, with only two cabinet secretaries, has twelve senior people who merit advising the president on this simple question. The fuller version has up to nineteen advisors, each of whom has a strong argument for participating in the discussion leading up to this presidential decision. In practice nineteen is too many; you’d probably end up with around 15. And the president might take input from a dozen or more senior advisors, then have a follow-on smaller discussion with just a few of them. Even so, a lot of people need to advise the key decision-maker, even if they’re not all in the room when he makes the final call.
Why do you typically include so many people in providing input into a presidential decision?
- These advisors have information and expertise—Each question listed above requires analysis and research. The experts who do this work report to these 12-19 principals throughout the Cabinet and White House. These principals also have personal expertise, experience, and judgment (if you hired right). And they are each in close and frequent contact with relevant constituencies (Congress, truckers, farmers, drivers, labor unions, the press, farmers…) and can therefore add useful context and texture to a policy discussion.
- They have formal jurisdiction—Part of their job is to advise the president on policy issues within their portfolios.
- Cabinet management, morale, and policy implementation—These senior advisors are successful people who were told they’d have an impact on policy. They’re working hard on the president’s behalf every day. Many have not-small egos. If you exclude them from the big decisions you’ll have to spend more time and energy managing them, and you’ll have a tougher time getting their portions of the bureaucracy to faithfully implement the president’s decision.
- Cabinet effectiveness — A Cabinet secretary who is excluded from providing input directly to the president quickly loses the ability to be effective with others: Congress, the press, and interest groups. If you don’t have the President’s ear people figure that out quickly and work around you.
- Reduce insularity — Mixing up and expanding the personnel involved reduces the chance the president and his closest advisors will get trapped in a small groupthink bubble.
Could President Trump delegate a policy decision like this to one person, either a Cabinet Secretary or someone in the White House? Sure, but which one? Either you delegate to one person who likely prioritizes their part of the problem, leading to an unbalanced decision that doesn’t account for all of the President’s interests. Or you simply push the advise problem down a level: if you delegate to the White House Chief of Staff, or the Vice President, or the DCOS or NEC Director, then that person needs to get advice from these other dozen or more senior advisors. You haven’t solved the advice management challenge, you’ve simply relocated it.
All of the above was to advise the president on an apparently easy question. Imagine how complex it gets when you’re dealing with something hard. Can the president rely on one person for policy advice? Of course. A president can make decisions any way he wants. If he wants to make the judgment calls, and if he wants to make a well-informed decision, he needs information and counsel that represents a wide range of experience, expertise, and viewpoints.