Trump’s version of capitalism looks a lot like revenge — and it endangers our democracy

In response to the Carrier caper after the election last year, I decried the Trump administration’s preference for what I called ad hoc deal capitalism. I noted that the practice was characteristic of developing countries and earlier times in the United States and that it was much less conducive to prosperity and freedom than capitalism based on the predictable rule of law.
Until last month, there had been fewer cases of deal capitalism than I had feared. But in the last month, policy has taken an ugly turn toward the selective and ad hoc use of government power — not to reward political friends but to punish political adversaries. Government rewards encourage cronyism and rent-seeking and waste public resources. Targeting adversaries may chill dissent and threaten democracy.

Two examples stand out.
First, the tax bill contains a provision directed at the investment income of large private university endowments. The revenue raised by such a move could be offset by raising the corporate tax rate from 20 percent to 20.03 percent, so the revenue impact is trivial. There might be a case for revisiting the taxation of nonprofits and looking at issues like unrelated business income, excessive accumulation, diversion of funds for private benefit or the perpetuation of privilege. But it is hard to see any principled tax policy case for focusing only on large private university endowments and not those of state universities, operas or hospitals.
As numerous congressional figures have made clear, however, the motivation behind the proposal is simple. They believe it is time to punish universities for their opposition to Republican positions and their advancement of what they see as “political correctness.” I have some sympathy with concerns about ideological diversity at universities, but using the tax system to punish them is inconsistent with any reasonable principle of taxation and with the idea of a free society. If sectors of our society come to think that they cannot speak out on issues of public concern for fear of retribution, our democracy will be traduced.
Second, the targeting by the Justice Department of the proposed AT&T-Time Warner merger invites suspicion of selective prosecution. There are, to be sure, legitimate arguments for attacking vertical combinations of the type this deal represents, and many across the political spectrum have called for enhanced antitrust enforcement. But, again, the circumstances here are suspicious.
In every other area of public policy, the administration has come down on the side of more freedom for businesses to do as they wish and reliance on market forces rather than on regulatory discipline. Indeed, the administration’s position on net neutrality only makes sense if one is relatively unconcerned with the possibility of carriers like AT&T having monopoly power. Moreover, the head of the antitrust division, Makan Delrahim, was recently of the view that the merger was not problematic. And rumors that President Trump’s anger with CNN could affect the merger have been pervasive, with Trump taking the extraordinary step of publicly commenting on Justice Department enforcement actions.
This kind of thing is not without precedent. President Richard Nixon’s enemies list was intended in part to influence policy toward his adversaries. But I believe that the Trump administration’s selective economic punishment of political opponents is a targeted attack on our democratic values, and I hope the business community, and at least a few Republicans in Congress, will speak out.
Previous Revisiting Harvard and the American Dream Next Dear colleagues, please explain your letter to Steven Mnuchin

Comments are closed.