Trump’s Music Man Populism
My theory is this: Sometime over the holidays, someone got to Donald Trump and told him he would lose the midterm elections badly if he did not offer something to the public to deal with affordability concerns. The traditional policy playbook for such things on the conservative side would either do nothing or make things actively worse. So this search for an affordability agenda has led Trump into the waiting arms of progressive populism, sort of.
The result has been … strange. Over the past couple of weeks, Trump has called for banning corporate investors from purchasing homes. He has directed Fannie Mae and Freddie Mac to buy $200 billion in mortgage-backed securities to lower mortgage interest rates. He has insisted on a one-year cap on credit card interest rates to 10 percent, and endorsed a bipartisan bill to inject competition into credit card markets to reduce excessive swipe fees merchants pay. He claimed that he would force tech companies to “pay their own way” when building out data centers that can spike electricity costs. He’s promised a “framework” to lower health care costs (for about the 25th time). And he signed an executive order that purports to restrict military contractors from paying dividends or engaging in stock buybacks until they deliver services on time and on budget.
You can squint and view this as a typical week in the Bernie Sanders presidency. Only in this case, it’s Music Man populism. In most cases, Trump is making big promises that he cannot possibly deliver, because his own party opposes them. Worse, he’s also hyping policies on one end while undermining them totally with his other actions. None of this is likely to amount to anything of value.
Several of these involve Trump just “calling” for things to happen, like ending corporate home purchases or capping credit card interest rates. I can call on all ice cream companies to send me a pint of strawberry, but it’s probably not going to happen. These require laws, and for that you need Congress. And Trump’s party in Congress is not inclined to help him.
Speaking about the credit card interest rate cap—which Trump cynically limited to only one year, precisely to get him through the midterms—Senate Majority Leader John Thune (R-SD) said, “I think that would probably deprive an awful lot of people of access to credit around the country.” This is a banking industry talking point that industry trade groups put out within hours of Trump’s announcement, echoed by House Speaker Mike Johnson (R-LA) and other GOP leaders. Republicans have been all too happy to break with Trump lately, and if a powerful industry with lots of campaign cash wants them to, that’s a double win.
I should say that the talking point is bogus. A Federal Reserve staff report written last March confirms that current profit margins for credit cards are so high, no matter the creditworthiness of the borrower, that capping interest rates would not be at all fatal to the ability to serve all customers. Current credit card interest rates are historically high, and it’s not like banks were unprofitable a decade ago when they were lending without as much extraction.
But while it’s true that a handful of Republicans would carry and vote for an interest rate cap, it’s highly doubtful that enough would do so to break a Senate filibuster. The same goes for the Credit Card Competition Act, co-authored by Sens. Roger Marshall (R-KS) and Dick Durbin (D-IL) and designed to reduce exorbitant merchant swipe fees, which eventually get passed on to consumers. This bill has been around for several years, and anytime it gets close to a vote, the banking lobby beats it back. That dynamic hasn’t really changed.
Whether Democrats should collude with Trump to pass things that make progress for the American people is an interesting philosophical question. But given the present makeup of Congress, all Trump’s credit card advocacy does, along with his surprise phone call to Sen. Elizabeth Warren (D-MA) to discuss it, is highlight his own party’s inability to side with consumers over banks. Those House and Senate Republicans are going to be the ones on the ballot, not him.
Similarly on housing, Trump has no ability to stop single-family home purchases from any subset of buyers, Wall Street investors or otherwise, at least not without legislation. Practically nobody in Congress outside of Sen. Jeff Merkley (D-OR) has supported anything like that. The one moderately useful housing bill out there, a bipartisan effort focused mostly on boosting supply, was initially part of the year-end defense policy bill until House Republicans forced it out. Again, the people fighting affordability on these matters are in Trump’s own party.
Other Trump plans aren’t so much plans as they are random shouting. Trump apparently jawboned health insurance CEOs last week to cut premiums voluntarily; it went about as well as you would expect. He brought in oil companies last week, too, urging them to pull oil from Venezuela to lower prices; they don’t want to do that because it would make many of their rigs unprofitable. Exxon’s CEO called Venezuela “uninvestable.” Whether these CEOs are being honest or not, clearly roaring at them to lower prices is not a viable price reduction strategy.
BUT IT WOULD BE WRONG TO SOLELY FOCUS on Trump as a chaos agent, or an old man yelling at a cloud. In truth, he has directly contradictory policy impulses. Claiming to want to protect Americans from abusive lending practices in credit cards makes no sense when his administration has basically stopped prosecuting white-collar crime and eviscerated the Consumer Financial Protection Bureau. The CFPB would have been totally defunded if its union didn’t win a court case that forced Russ Vought to grudgingly reverse course. When not trying to fire everyone at CFPB, Vought canceled … wait for it … a credit card late fee rule that would have saved customers billions. Trump’s Antitrust Division facilitated the credit card merger between Capital One and Discover that will lead to higher consumer costs, too.
Separately, the president just nominated as a commissioner of the Federal Trade Commission, one of our key consumer protection agencies, the CEO of the company that makes floor mats for cars. This is not someone laser-focused on the public interest.
Agencies buying $200 billion in mortgage-backed securities on the secondary market (not even a big number; at most, this would reduce mortgage rates on its own by a quarter-point) won’t reduce long-term interest rates like mortgages if Trump is simultaneously threatening the Fed, which is actually causing those rates to increase by hiking uncertainty. Incidentally, while Trump is trying to control the Fed’s monetary policy, through his appointment of Michelle Bowman as vice chair for supervision, he already controls Fed regulatory policy, and it’s been uniformly deregulatory in ways that will certainly harm customers.
Threatening homebuilders who sit on land that could be built upon doesn’t feel credible coming from Federal Housing Finance Agency head Bill Pulte, whose family is one of those homebuilders. Trump cracking down on defense stock buybacks and dividends is offset by him literally calling for a 50 percent increase in the defense budget, to $1.5 trillion.
The Economic Policy Institute just released 47 discrete ways that Trump accelerated the affordability crisis over the past year, including by slashing labor protections that will cut wages, stripping collective-bargaining rights from more workers than any president in history, pausing projects that cost thousands of jobs, imposing tariffs, and of course, cutting trillions in benefits for working families in order to funnel tax cuts to the wealthy. The ongoing surge in health insurance premiums is a direct result of Republican failure to extend Biden-era Affordable Care Act enhanced subsidies.
Big-picture, Trump has been primarily concerned with rich Americans’ stock portfolios. He has facilitated flows and combinations of capital whenever possible, and the beneficiaries’ equity valuations depend on the record profits that proceed from high prices. There’s no way out of this box Trump has created for himself.
Just last week, his Justice Department Antitrust Division cleared another merger despite internal objections, after one of the merging companies hired MAGA lobbyist Mike Davis to get it done. The merger happens to be in the real estate business, between the largest broker in America, Compass, and conglomerate Anywhere Real Estate. It’s likely to mean higher closing costs and home prices more generally, the clear opposite of the stated affordability goal.
Pay-to-play corruption from actors who don’t want things to be more affordable for ordinary people is in direct conflict with Trump’s alleged newfound populism. Just because the Music Man has returned to River City with big promises about 76 trombones doesn’t mean we have to believe him. As Warren said just before talking to Trump this week, “Americans know a fraud when they see one.”
The post Trump’s Music Man Populism appeared first on The American Prospect.