The United States of Trump

While I am tempted to write another post about the federal intervention in the District of Columbia, I will instead address a topic about which I've wanted to write for quite a while. Cult leader, convicted felon, and failed President Donald Trump desires to be a dictator. Unfortunately, a neutered Congress and a compliant Supreme Court are enabling him to fulfill this goal. Trump loves rule by Sharpie, issuing one executive action after another. While these documents cannot lawfully modify, create, or eliminate laws, for some reason they are treated like the edicts of a dictator, exactly as Trump expects. One example is Trump's treatment of tariffs. Congress gave Trump the authority to enact tariffs during an emergency. With Trump, everything is an emergency and, hence, he has essentially rewritten trade policy, repeatedly changing tariff rates on various whims. In Trump's hands, tariffs are not simply a tool for regulating trade. Rather, tariffs are a method of punishing enemies and rewarding friends. Tariffs are an instrument for control and a means of extortion. Trump has gone even further in multiple cases in his quest for control, demanding government payments or even partial ownership of corporations. In a world in which critics have reacted to Democratic nominee for Mayor of New York City Zohran Mamdani's proposal to create publicly-owned grocery stores in food deserts as if he is the second coming of Karl Marx, Trump is demanding partial government ownership of major corporations such as U.S. Steel and Intel. Trump, in effect, not only wants to be the dictator of the United States, but the CEO of any corporation that he can extort into accepting his demands.

Trump's two most prominent demands for partial government ownership of corporations involve U.S. Steel and Intel. With regard to U.S. Steel, Trump intervened during an attempt by Japan's Nippon Steel to buy the American company. In exchange for approving the acquisition, Trump demanded and received a "golden share" that gives the government a veto over certain corporate transactions. In addition, special care was taken in the agreement to emphasize that the President himself has certain prerogatives in governance of the company.

Trump has taken a similar transactional approach to Intel. Intel has been suffering of late, facing both production and sales problems. The COVID pandemic, which led to considerable production slowdowns throughout the U.S. due to an inability to obtain critical components such as advanced semiconductors, demonstrated the importance of having domestic production of such products. Former President Joe Biden championed the CHIPS and Science Act, which was aimed at returning production of critical components to U.S. shores. Under this Act, Intel was designated to receive more than $10 billion in grants. However, Trump balked at providing the funding. He was highly critical of Intel and called on its CEO, Lip-Bu Tan, to resign. But after Tan met with Trump at the White House, Trump changed his tune. Apparently, what changed Trump's mind was the willingness of Tan to provide the government with a 10% stake in Intel. While such an arrangement has not yet been concluded, it remains under discussion.

In the case of Nvidia and Advanced Micro Devices, Trump has taken a different tact. At first, the Trump administration blocked the sale of certain chips to China on the basis of national security. Then, Trump met with the CEO of Nvidia and demanded that the company pay the government 20% of its revenues from such sales. Eventually, they settled on 15%. The problem with this is that the payment is effectively an export tax. However, the U.S. Constitution, in Article I, Section 9, Clause 5, says "No Tax or Duty shall be laid on Articles exported from any State." Therefore, these payments are explicitly unconstitutional. However, in Trump's America, the law does not matter. Nvidia or AMD could sue, of course, but then Trump would simply cut off their exports and create other difficulties for them. It is likely that it is simply cheaper to pay. The problem, as many others have come to learn, is that giving in to Trump's extortion does not free you from his interference. Rather, it just guarantees that Trump's interference will continue. Nvidia and AMD can now expect that every government approval will come with an associated cost.

The Wall Street Journal's editorial board has described what Trump is doing as "corporate statism." The left-leaning American Prospect has called it "State Capitalism." In fact, the practice very much mirrors that of the Chinese Communist Party. Imagine the outcry if Mamdani were to start demanding 10% shares, golden shares, or 15% taxes on New York City's banks and other corporations? Maybe even a 10% stake in Trump Tower itself? Trump would probably send in the National Guard, and most Americans would support him. But when Trump does it, it elicits nothing but a yawn.

As Harold Meyerson writes in The Prospect:

The Biden initiatives were classic industrial policy—but they didn’t encompass government control or even involvement in individual companies’ conduct. If they had, they would have crossed the line into state capitalism, which is the system that prevails in our rival for global domination—the People’s Republic of China. China has a market economy that the state directs through its de jure or de facto control of the majority of major enterprises. Its version of state capitalism is Leninist capitalism, in which it’s the leaders of the Communist Party who control the state’s ownership of large businesses.

Our version of state capitalism is Trumpian capitalism, which, like Chinese state capitalism, involves the government’s increasing control and direction of businesses.

As Myerson goes on to say:

It’s happened under Trump because, like Louis XIV, Trump adheres to the doctrine “L’état c’est moi”—I am the state. Under his rule, the state has become primarily the vehicle through which he can maximize his personal control of whatever he wishes to control.

The Financial Times reacted to the chip sales arrangement by saying, "The legally dubious arrangement underscores that, under Trump, corporate America has entered an era in which business decisions will be dictated less by the invisible hand of the market and more by the heavy hand of the White House."

What the Financial Times gets wrong is that it is not simply the "heavy hand of the White House", but rather specifically the heavy hand of Trump himself. At least the Chinese Communist Party is attempting to make China great. Trump, despite his MAGA slogan, is primarily concerned with advancing his own self-interest. Trump will easily sacrifice America's interest if there is gain for himself. Trump has a hunger for power and loves to exert it. Whether it is deploying the National Guard to Washington, D.C. or exploiting companies for concessions, he simply cannot resist the temptation. Many, such as some of the largest law firms in the country, some of the most prestigious universities, companies such as Nippon and Nvidia, and the governors of several states who are cooperating with Trump by sending National Guard troops to D.C., have decided to play Trump's game. History has shown that this almost inevitably is a mistake. Their compromise and collaboration may appear beneficial in the short term, but in the long term, it is bad for them and it is bad for us.

Update: According to CNBC, the deal giving the United States Government a 10% stake in Intel has been concluded. Commerce Secretary Howard Lutnick tweeted, "BIG NEWS: The United States of America now owns 10% of Intel, one of our great American technology companies." Trump immediately lied about the deal in a Truth Social post, saying that "The United States paid nothing for these Shares". In fact, as CNBC explains, "the government made an $8.9 billion investment in Intel common stock, purchasing 433.3 million shares at a price of $20.47 per share".