America’s billionaires should resist the urge to support Donald Trump
WHEN DONALD TRUMP faces American voters in November he will do so with a band of billionaire backers. Last month Stephen Schwarzman, the chief executive of Blackstone, the world’s largest private-equity firm, said he would support Mr Trump. Miriam Adelson, a casino magnate who sat out the primaries, is expected soon to do the same. Bill Ackman, a hedge-fund manager who has previously donated to Democrats, is said to be edging towards a Trump endorsement. The former president even enjoys increasingly friendly relations with Elon Musk, with whom he once traded insults.
Joe Biden has raised more money overall (though Mr Trump has filled his boots since his conviction in a Manhattan courtroom) and some rich Republicans have yet to decide whom to back. But the former president’s growing support among the wealthy is evidence of his rehabilitation. Business-minded Republican elites had shunned Mr Trump after he tried to overturn the last election result. Today those same people appear to be looking for a reason to set aside their scruples.
The benefit to Mr Trump is much more than financial. Politicians seek the support of moguls because it is taken as proof that they would be good for the economy. For their part, many billionaires doubtless think it is in their self-interest to back Mr Trump. He is the narrow favourite to win, and courting him now could secure a valuable pay-off for those who crave influence or need political favours (or fear his vindictiveness). Businesses, and billionaires themselves, would benefit directly from Trumpian tax cuts and deregulation.
Yet Trump 2 poses a threat to the economy—a greater one than a second Biden presidency. In 2016 many observers, including this paper, fretted about the consequences of Mr Trump’s economic populism, only for America to enjoy strong gdp and jobs growth. This time, however, the economy is closer to its speed limits, meaning that tariffs and deficit-financed tax cuts would cause an inflationary surge. If Mr Trump deported illegal immigrants en masse, as he has promised, it would only add to the pressure.
Moreover, tax cuts would strain the already parlous public finances. In 2016 the budget deficit was 3.2% of GDP and net debt was 76% of output; today America is running an underlying deficit of 7%, and debt is nearing 100%. The Federal Reserve would be forced to offset the stimulus, pushing up debt-servicing costs. If Mr Trump appointed a pliant ally to lead the Fed when the term of its current chairman expires in 2026, the inflation problem could grow bigger still.
Mr Schwarzman has cited the spread of antisemitism as a reason for his decision. Yet far from being a campus leftist, Mr Biden is one of the protesters’ targets. Both political extremes have an antisemitism problem. As hard-right torchbearers marched through Charlottesville during Mr Trump’s first term, they chanted “Jews shall not replace us.” If Mr Schwarzman is worried about extremism, he should consider Mr Trump’s ties to the mob that attacked Congress on January 6th 2021.
Indeed, Mr Trump holds many American institutions besides elections in contempt, including federal agencies and the courts. When you adjust for the tail risk of something going very wrong, supporting him offers poor returns. A slide towards cronyism or bias would make doing business harder and more politicised—and pose a far more profound threat to America’s prosperity than slightly higher taxes or tiresome red tape. Ordinary Americans may have concluded that Mr Trump is the choice of practical people interested in the bottom line. The real message is that he should not be. ■