President Trump does not have to deliver on all his campaign promises—even all the big ones—but he does have to rev up growth and create more jobs if he is to avoid a dramatic setback for Republicans in the mid-term elections and maximize his chances in 2020.
Key elements of his economic program—tax, regulatory and trade reform—are delayed bythe considerable distraction of replacing ObamaCare. For now, he can only tout progress by pointing, as he did in his recent address to congress, to the deals with corporate leaders to move jobs back to America.
The list is impressive—United Technologies, Fiat Chrysler and other top companies have jumped on board —but the impact of those agreements pale in comparison to the task at hand.
The Obama recovery accomplished 2.1 percent annual economic growth and averaged about 186,000 new jobs a month. Mr. Trump would have to create at least 100,000 more jobs each month to bring growth up to 3 to 4 percent and substantially improve living standards for ordinary working Americans.
Generally, company announcements include many jobs that were planned before the president’s surprise election. For example, Lockheed Martin CEO Marillyn Hewson promised 1,800 jobs at its Fort Worth factory after meeting with the persuasive president, but those include some 1,000 that were announced in 2015.
Most deals announced only create 1,000 to 2,000 jobs. Calculating generously, Trump would need 50 new deals each month— a Herculean task—to hit his growth goals.
Even if Trump found the time for so much jawboning and enlisted Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross, the administration would quickly run out of big companies who could afford to placate the president's demands.
In fairness, Trump is countering foreign-government practices that sway multinationals to manufacture abroad even when U.S. locations may make good economic sense.
China tightly regulates foreign investment and requires most American companies to take joint-venture partners. Often, these deals entail shifting production and R&D to access the Chinese market.
In Germany, Volkswagen must restructure to accommodate the next generation of automation and mass produce electric vehicles. Thanks to German law, the union and the government of Lower Saxony combine to hold a majority of seats on the company board, creating a decided preference for domestic over foreign locations.
All this notwithstanding, congress and the president must recognize other countries have done a lot in recent years to become more competitive. For example, Mexico has negotiated an extensive network of free-trade agreements. U.S. and foreign auto makers can make cars and parts there for sale duty-free throughout North America, Europe and Japan—that is not something automakers can do in the United States. Given the dependence of the U.S. industry on components from Mexico, it is not at all clear that the United States would come out the winner in a trade war.
U.S. corporate tax rates are much higher than elsewhere and business regulations have grown more burdensome in recent years. And comprehensive free-trade agreements that accomplish fair market access, currency reform and balanced trade are sorely needed to motivate scores more businesses to keep manufacturing, R&D and administrative activities here without presidential attention.
Tax and regulatory reform face barriers posed by divisions within the Republican Party in congress, opposition from Democrats and the bureaucratic requirements of legislation that slow rule changes. And his new trade policy document emphasizes lodging individual company complaints against foreign governments instead, for example, of taking on China to accomplish comprehensive compliance with its WTO commitments.
Unfortunately, the impulse to rely on individual deals runs deep in the new administration—that's how Messrs. Trump, Mnuchin and Ross amassed fortunes.
As businessmen, they were great at exploiting the system—including controversial records of lobbying for protection and outsourcing jobs. Now they must try their hands at accomplishing radical systemic reform and need cooperation from congress and foreign governments, where leaders have ideas of their own and can't be fired by Trump.
Presidential blustering can motivate negotiating partners to offer some quick, token results but it won't work well for making the really big deals America needs to prosper again.