Trump's Cabinet Proves High-Priced CEOs Aren't Worth It

We are five months into the Trump presidency and the administration has proven its incompetence in almost every area except those benefiting Russia. Especially disappointing is the supposed Wall Street brain trust of Gary Cohn, head of the National Economic Council and Trump’s top economics adviser, Treasury Secretary Steve Mnuchin, and Commerce Secretary Wilbur Ross.

And when you look at the missteps and pathetic output of these three, you really have to wonder if these guys actually do anything. In late April, Trump announced his tax plan, which turned out to be a laughable one-page document of “principles”. Now, Mnuchin and Cohn had three months to work on a tax plan. The AHCA was largely created in the House and hardly required a lot of input from Cohn and Mnuchin so they can hardly say they were distracted by other issues. So they had plenty of time to craft a real and detailed tax plan. But when the time came they were obviously not ready and had nothing. And, to this day, there seems to be no real progress on any tax plan, either in the Trump administration or in Congress.

Then, in early May, Trump announced a trade deal with China that largely incorporated agreements that the Obama administration had already reached with the Chinese. In effect, the deal allowed the US to finally resume beef exports to China, opened up China for US liquefied natural gas exports as well as certain financial opportunities in return for better access to the US market for the Chinese in cooked poultry and their own financial industry.

Nothing in this deal dealt in any way with all those manufacturing jobs that Trump claimed that had been lost to China. In fact, it was generally considered to be a bad deal that really got very little for the US in return for a bunch of promises for the future for the Chinese. But that didn’t stop Ross from saying the deal was a “herculean effort” that “more than has been done in the whole history of U.S.-China relations on trade”. This comment, like much of what the CEO does and is part of this administration’s tendency towards the idolatry of the President that borders on what we see in totalitarian societies, is pure spin.

Then, yesterday, there was the announcement of the long-awaited infrastructure plan. The initial reactions to the plan focused on the plan to privatize the air traffic control system, so it seemed like this was a detailed plan that laid out the reported plans for the public-private partnerships on infrastructure that Trump favors. But again, after five months of time to prepare, there was nothing other than what the NY Times calls “the contours of a plan“.

The contours of the plan essentially require minimal federal investment, the use of state and city moneys with the rest borrowed, and the privatization of public good. But, beyond the air traffic control issue which was apparently a bill that was already in the can, there are again no details. As has been pointed out repeatedly, the public-private partnership approach will only draw investors for projects with sufficient density, once again leaving rural areas underserved. According to Cohn, “We like the template of not using taxpayer dollars to give taxpayers wins”. That is certainly an approach that Wall Street and Trump has used for years, using other people’s money for their own benefit. In this case, what Cohn really means is that he can use public resources to line the pockets of private investors and executives.

Perhaps these guys are playing three dimensional chess and are working feverishly with Congress and will spring a detailed tax and in infrastructure on us that will get rammed through the House and Senate in short order. But, so far, there are absolutely no indications that this is so.

As studies have shown, higher executive pay is actually negatively correlated with company performance. In many cases, especially Cohn and Mnuchin, CEOs are simply better internal political operatives than their counterparts allowing them to rise to the top. Actual aptitude at their specific job may not even be necessary, especially if they are surrounded by people who actually do know what they are doing and do it well. In my Wall Street career, I have seen many people vault to another high priced opening and then fail, primarily because they had been part of a great team in their prior position and could not succeed on their own when that team was not there to support them. It looks pretty clear that Cohn, Mnuchin, and Ross fall into this category.