What's this? Trump vs. Wall Street, CEOs, "hedge fund guys"
Last week, Donald Trump took an unusual stand for a Republican presidential candidate by blasting Corporate America's top-paid executives and Wall Street's vaunted "hedge fund guys," as Trump has called them. The GOP front-runner proposed a tax hike on America's wealthiest households -- and his poll numbers went up among Republicans. In a party where declining to take a "no tax increase" pledge is considered akin to political suicide, Trump's stand was seismic.
This week on CBS's Face the Nation with John Dickerson, Trump also went after crony capitalism with his usual penchant for being outspoken, calling the official U.S. unemployment statistics "a total joke" and pledging to cut corporate taxes as a way to stimulate job growth.
When asked by CBS's Dickerson how he felt about the fact that the average American CEO makes 350 times what the average American worker makes, Trump typically didn't pull his punches. The billionaire said most CEOs get the pay they do because they install their friends on their boards of directors, who in turn give the executives "whatever they want because the friends love sitting on the boards."
Trump, whose business empire is privately controlled, asserted that only 10 percent of the boards of America's public companies exercise what he believes is the required independent judgement when they set executive compensation. "So that's the system we have, and it is disgraceful," said Trump. "You see those guys making these enormous amounts of money. It is a total and complete joke."
Trump mentioned in passing that he felt department store chain Macy's (M) was an example of a public corporation with a board of directors that's unduly influenced by the CEO, and as a result it paid CEO Terry Lundgren too much. According to Bloomberg, Lundgren, Macy's CEO since 2003, received $16.5 million in total compensation last year. Macy's declined to comment for this story.
Oddly enough, Trump's latest critique of how business is done in most corporate boardrooms resonates with the academic work think tanks from America's progressive political wing are doing. Last year in a white paper entitled "Understanding the CEO Pay Debate," Roosevelt Institute researchers Susan Holmberg and Michael Umbrecht flagged the same quid pro quo culture Trump fingered.
"In fact, there is strong evidence that companies with higher CEO pay compensate their board members more generously, an indication that board members are engaged in a corporate liaison with CEOs rather than serving as independent parties that can assess the appropriate award for the CEO's performance," Holmberg and Umbrecht wrote.
In his Face the Nation appearance, Trump's disdain wasn't just limited to most of America's top-paid corporate CEOs. He also included "the hedge fund guys," who he said need to have their taxes raised. Under the existing tax code, hedge fund profits are taxed at a significantly lower tax rate than traditional wage income. Last month fellow billionaire Warren Buffett, a staunch supporter of former Secretary of State Hillary Clinton, also called for an end to the tax advantage hedge funds get from what's known as the "carried interest" provision.
In the next few weeks, Trump says he'll release his version of a new federal tax plan."We have an amazing tax plan," Trump said. "We are going to be reducing taxes for the middle class. But for the hedge fund guys, they are going to be paying up." As a measure of how off-script this GOP presidential campaign has gone at times, Jeb Bush has also come out in favor of abolishing the carried interest provision.
Trump said a centerpiece of his tax plan includes cutting the 35 percent corporate tax rate as a way of encouraging U.S. multinationals to bring home what Trump said is in excess of $2 trillion they're holding offshore. It remains to be seen just what form the Trump corporate tax cut will take or for how long it would be in place. This idea has been kicking around Washington in one form or another for years. Other developed nations have a 25 percent corporate tax rate.
"We are going to have a lot of money pouring into the United States if I get elected," Trump predicted. "We are going to be lowering (the tax rate) for corporations because we want jobs. We want jobs coming back to this country."
Trump also dismissed the official 5.2 percent unemployment rate reported by the federal government as "a total joke" asserting that the actual percentage of idle Americans who would work was far greater than the impression left by reviewing officials statistics. "We are close to 100 million people are out of work," Trump said, noting that most widely quoted unemployment statistic doesn't include people who have stopped looking for work. "It is a phony number because when you stop looking for a job, you're no longer in that statistic," said Trump.
Jared Bernstein, a senior fellow at the liberal Center on Budget and Policy Priorities and a former top economic adviser in the Obama administration, said he considers Trump "well informed" and capable of picking up on the issues that are likely to resonate with "working families." Bernstein maintains that the continued underutilization of the American workforce, as revealed in part by the historically low labor force participation rate, has been a real impediment to recovering from the Great Recession.
"The troublesome part is people of working age who should be in the work force but have not found their way there yet," Bernstein told CBS MoneyWatch.