Risks of Treating the Economy Like a Wall Street Game

Executives aiming to decode President Trump’s policies are revisiting his 1987 bestseller, The Art of The Deal. Alternatively, they might reflect on Barbarians at The Gate: The Fall of RJR Nabisco, the iconic 1989 book detailing a pivotal takeover battle.

Frederick Ross Johnson, the then CEO of RJR Nabisco, was at the forefront of this narrative, leading a company known for its Ritz crackers and Winston cigarettes. The authors described him as part of a generation of executives who prioritized deal-making over traditional corporate values.

According to Bryan Burrough and John Helyar, the book’s co-authors, these leaders claimed to act in the best interests of investors, often placing personal gain alongside corporate objectives.

Johnson famously contended that true success comes from audacious decisions that cannot be foreseen, and his tenure saw multiple reorganizations, job cuts, and significant culture shifts within RJR Nabisco.

His leadership was marked by a reputation for excess, including personal travel via corporate jets and elite club memberships. Upon facing scrutiny regarding his expenditures, he strategically appointed allies to key positions within the company.

Discouraged by the stagnant market performance of RJR Nabisco, Johnson proposed a controversial leveraged buyout plan, which would involve taking the company private after selling off food brands. This scheme ignited scandalous revelations that he and some executives stood to pocket over $100 million in profits.

The bidding war for RJR Nabisco culminated in 1988 with Kohlberg Kravis Roberts & Company (KKR) acquiring the company for $25 billion, a record at the time. Despite the unsuccessful bid for control, Johnson exited with an estimated golden parachute ranging from $23 million to $50 million.

Currently, Trump’s management style mirrors the 1980s corporate playbook, regarding the United States as a conglomerate ripe for a leveraged buyout.

With guidance from the Department of Government Efficiency, Trump is pursuing cost reductions by eliminating departments labeled inefficient or ideologically misaligned.

This February, he initiated a proposal for a sovereign wealth fund supported by the monetization of public assets.

His aggressive deal-making strategy, including threats of increased tariffs on international partners, aims to enhance revenue.

However, Wall Street expresses concerns over the potential of escalating national debt due to Trump’s ambitious tax cuts, estimating an increase of $2.4 trillion in debt over the next decade, already nearing 100% of the GDP.

The White House maintains that Trump’s strategies will energize the economy, create jobs, and elevate household incomes.

Amid rising debt levels, Moody’s has downgraded the US credit rating, suggesting that if left unaddressed, these debt concerns might trigger turmoil in the bond markets. Economists are warning that Trump’s trade policies could heighten the risk of a recession.

Despite the uncertainty surrounding his economic policies, Trump’s family appears to be poised for a favorable outcome. Since initiating his re-election campaign, Trump’s net worth has reportedly increased to approximately $5.4 billion, bolstered by significant involvement in real estate projects valued at over $10 billion.

Additionally, the Trump family is anticipated to reap benefits from Trump’s deregulation promises in the cryptocurrency sector, with World Liberty Financial (WLF), affiliated with the Trump family, launching a $WLFI coin, which attracted investments totaling $2.7 million by October, following Trump’s election victory last year.

Despite ongoing high inflation, the president is calling on the Federal Reserve to reduce interest rates, a move that could potentially enhance the value of his family’s real estate and crypto investments.

While Trump’s agenda seems to jeopardize America’s economic standing, it appears to ensure a lucrative safety net for Trump Inc.

Louisa Clarence-Smith serves as the US business editor.