Mandate for Misleadership, Chapter 22
The Heritage Foundation's Master Plan for a Second Trump Administration
Much attention has been drawn to Project 2025, the campaign organized by the right-wing Heritage Foundation to staff a conservative Republican presidential administration starting in January 2025 and to provide a guidebook for such an administration's executive and legislative agenda. That agenda has been consolidated in a book, Mandate for Leadership: The Conservative Promise, that weighs in at over 900 pages (PDF). I suspect that most attention has been focused on the report's first section, "Taking the Reins of Government", so I decided to take a dip into other sections touching on topics we focus on here at Political Economy Watch. Today I'll focus on Chapter 22 on the Treasury Department. In a subsequent post I'll focus on Chapter 24, whose subject is the Federal Reserve.
Note to Readers: Today's post consists largely of my research notes on the Mandate. Unlike most of my posts, it's not intended to be a (semi-)polished,
"op-ed"-like essay. My intention in presenting this material here is to provide other people who want to study what the U.S. right-wing is planning with an introduction to the material. I quote extensively from the Mandate; that makes this post much longer than usual. If you don't want to wade through all of this, just read the Impressions section which immediately follows. As always, you are welcome to share your thoughts in the Comments section at the end of the post.
Impressions
Much, if not most, of what the Mandate authors have to say about economic policy could have been written as far back as the 1960s. Was Milton Friedman their high-school hero? The parts that couldn't have been written about back then are the parts where the Heritage Foundation is reflecting the poisonous, polarizing politics of the Trump/MAGA era.
Even a quick reading reveals places where the Mandate authors take statistical data out of context.
The Mandate authors take as given inter-imperialist rivalry with the People's Republic of China and believe that Treasury Department policy should be shaped with that in mind.
Project 2025 on the Treasury Department: Chapter 22 of the Mandate
The Authors: Chapter 22 was written by William L. Walton, Stephen Moore, and David R. Burton. Walton is a big finance guy, being ex-Chairman of the Board and CEO of Allied Capital Corporation and having served on Trump's 2016-17 transition team. Moore is ex-Wall St Journal editorial board. Burton is a Heritage Foundation staffer; he's also author of Mandate's Chapter 27 sub-section on the Securities and Exchange Commission.
Overall Economic Policy Goals: They write:
"The next Administration should make major policy changes to: (1) reduce regulatory impediments to economic growth that reduce living standards and endanger prosperity; (2) reduce regulatory compliance costs that increase prices and cost jobs; (3) promote fiscal responsibility; (4) promote the international competitiveness of U.S. businesses; and (5) better respect the American people’s due process and privacy rights." (691)
So far, standard pro-business Republicanism. There's a sense in which while these objectives may be ordinary Republican tenets, they're not very Trumpian. Did we associate the first Trump administration with promotion of 'fiscal responsibility'? Did he respect 'due process'?
Goals for the Treasury Department:
"The primary subject matter focus of the incoming Administration’s Treasury Department should be:
Tax policy and tax administration;
Fiscal responsibility;
Improved financial regulation;
Addressing the economic and financial aspects of the geopolitical threat posed by China and other hostile countries;
Reform of the anti-money laundering and beneficial ownership reporting systems;
Reversal of the racist “equity” agenda of the Biden Administration; and
Reversal of the economically destructive and ineffective climate-related financial-risk agenda of the Biden Administration." (691-692)
Which provokes these questions:
"Improved" financial regulation -- coming from Republicans, can we assume that means less financial regulation?
"[T]he geopolitical threat posed by China" -- are we back to good, old-fashioned inter-imperialist rivalry?
Reform to anti-money laundering systems -- so that Wall Street sharks can no longer fear prosecution?
Reversal of Biden's "racist 'equity' agenda" -- until a week ago, I had never heard of this 'agenda'; it deserves a post in itself.
Reversal of Biden's "climate-related financial-risk agenda" -- I guess this is where denial of global warming comes in.
"Sound Money" Republicanism: The authors blame Biden for a $4 trillion expansion of national debt in his first two years of office. (692)
"The soundness and stability of U.S. currency, the dollar, has been put at risk because of the worst inflation in four decades. American families have been made poorer by Biden’s economic strategy of taxing, spending, borrowing, regulating, and printing money." (692)
The use of the phrase "printing money" is a dead giveaway that much traditional Republican "Sound Money" advocacy remains intact.
Questionable Use of Economic Statistics: We should not be surprised to find the authors of a partisan report cherry-picking statistics to make the incumbents look bad. Here's one case that caught my eye. The authors write:
"In 2022, the average American’s 401(k) plan dropped in value from $130,700 to $103,900—more than 20 percent." (692)
The authors intend this statement to demonstrate the Biden's mismanagement of the U.S. Economy. Their source is a confusing press release from the investment management firm Fidelity from early 2023. (I'm seeking clarification from Fidelity.) The statistic which the authors describe as an "average" was probably a mean rather than a median, since a comparable Vanguard study reported:
"Each year, Vanguard collects data from approximately 5 million retirement accounts. Based on its analysis in 2023, the average 401(k) balance was $112,572 in 2022, down about 20% from 2021. The drop was largely due to declines in the stock and bond markets through the end of 2022." (https://www.fool.com/retirement/plans/401k/average-balance-by-age/) (https://institutional.vanguard.com/how-america-saves/overview.html)
And from Yahoo! Finance we learn:
Jan 1 2022: S&P 500 4515.55
Jan 1 2023: 4076.60
So the market was down for the year in 2022.
From a different source we learn that, in contrast, 2023 was an up year for the market and for 401(k) plan balances.
"401(k) account balances recovered in 2023, after a dip the previous year
"The average 401(k) account balance increased by 8.0% to $90,101, recovering from a 10.01% decrease in 2022, which ended with an average 401(k) account balance at $83,445. What factors influence 401(k) account balances? The primary determinants are market performance of account investments, contributions from employees and employers, and account activities such as loans or withdrawals. However, on an aggregate level contribution rates and account activities tend to vary slowly over time, while market performance is the main contributor to year-over-year changes in account balances."
Mandate's authors apparently believe that a down year for the stock market makes presidential mismanagement of the economy self-evident. (We should note that much of Mandate was written in early 2023 when inflation was much more severe than in the first half of 2024.)
Tax Reform
Economists of all persuasions have a nerdy interest in the tax system. Republicans of all persuasions have a vested interest in lowering taxes -- except, as we'll see, when they can raise taxes that hit Democrats harder. For most of my lifetime, Republicans positioned themselves as the party of Law and Order, but their interest in seeing tax laws enforced is, shall we say, modest. Let's hit the highlights of what the Mandate's authors have to say about taxation.
"Intermediate Tax Reform. The Treasury should work with Congress to simplify the tax code by enacting a simple two-rate individual tax system of 15 percent and 30 percent that eliminates most deductions, credits and exclusions. ...
"In addition, intermediate tax reform should repeal all tax increases that were passed as part of the Inflation Reduction Act including the book minimum tax, the stock buyback excise tax, the coal excise tax, the reinstated Superfund tax, and excise taxes on drug manufacturers to compel them to comply with Medicare price controls. The next Administration should also push for legislation to fully repeal recently passed subsidies in the tax code, including the dozens of credits and tax breaks for green energy companies in Subtitle D of the Inflation Reduction Act." (696)
"The individual state and local tax deduction, which was temporarily capped [in 2017] at $10,000, should be fully repealed." (697)
"Wages vs. Benefits. The current tax code has a strong bias that incentivizes businesses to offer employees more generous benefits and lower wages. ...
"To reduce this tax bias against wages (as opposed to employee benefits), the next Administration should set a meaningful cap (no higher than $12,000 per year per full-time equivalent employee—and preferably lower) on untaxed benefits that employers can claim as deductions." (697)
Even Wonkier Tax Reforms
The Mandate authors now get on a roll for re-imagining the tax system.
"Fundamental Tax Reform: ... "The public finance literature is clear that a consumption tax would minimize government’s distortion of private economic decisions and thus be the least economically harmful way to raise federal tax revenues. There are several forms that a consumption tax could take, including a national sales tax, a business transfer tax, a Hall–Rabushka flat tax, or a cash flow tax." (698)
I'll buy the next round for the first person outside the Beltway who can tell me (without looking it up on the internet) what a Hall-Rabushka flat tax is!
The Mandate authors call for three-fifths supermajorities in both houses of Congress in order to raise taxes. (698) Grover Norquist would be pleased.
When It Comes to Collecting Taxes, Don't Push Yourself Too Hard!"
The Mandate authors endorse competition to see who can be least effective when it comes to collecting taxes.
"Tax Competition. Tax competition between states and countries is a positive force for liberty and limited government. The Biden Administration, under the direction of Treasury Secretary Janet Yellen, has pushed for a global minimum corporate tax that would increase taxation and the size of government in the U.S. and around the world. This attempt to “harmonize” global tax rates is an attempt to create a global tax cartel to quash tax competition and to increase the tax burden globally. The U.S. should not outsource its tax policy to international organizations." (698)
Translation: the U.S. should not attempt to squash tax havens. And while we're at it, let's keep hobbling the Internal Revenue Service. "The operating budget of the IRS should be held constant in real terms." (701)
Promote Debt Panic as Incentive to Balance the Budget!
"To promote transparency of finances, each year Americans should receive a financial statement of the U.S. government alerting citizens of the revenues, expenditures, deficit, and debt for the preceding fiscal year. The statement should also include this individual family’s pro-rata share of the debt based on family size." (702)
Could there be a more clear statement of the Household Budget Analogy?
China and Other Geopolitical Threats
While all sections of the U.S. ruling class are conscious of the economic, political and military competition between the United States and the People's Republic of China (PRC), the Mandate authors (at least in this chapter) are curiously most focused on just one aspect of that competition: Chinese "greenfield" investment in the United States. Chinese state-owned enterprises are said to be investing in the U.S.
... to siphon assets, technological innovation, and influence away from U.S. businesses in order to expand the global presence of the Chinese Communist Party. While the Chinese government keeps its domestic markets largely insulated from foreign influence, it regularly invests in the U.S. and other countries under the “greenfield” model. Firms fully owned by China’s Communist regime are increasingly buying land, building factories, and taking advantage of state and local tax breaks on American soil." (704, emphasis added)
The Mandate authors have apparently not been paying much attention to what has happened politically within the PRC since, oh, 1976 at the latest.
In the 1960s and 1970s, the Communist Party of China (CPC) did seek international influence, but the objective was primarily ideological: to win communist allies for the CPC and to neutralize fear of China as a state and nation. But with the party's cultivation of capitalist enterprises (albeit partially state-owned) from the late 1970s onwards, the objectives of the Chinese government has become (a) to have Chinese businesses make money, permitting a rise in Chinese standards of living; and (b) to project Chinese national power outward. Neither the CPC nor the Chinese government do anything to promote Marxism, socialism or communism abroad these days. The Chinese business sector aims at beating foreign capitalists at their own game. The Mandate authors’ frame of reference for China is old-fashioned anti-communism.
Moreover, while it is quite clear that once U.S. corporations began to build factories in China, their Chinese partners had no more compunctions about theft of trade secrets than the U.S. had with respect to Great Britain in the late eighteenth century, and while it is not surprising that the U.S. would have national security concerns about Chinese investments in, say, telecommunications and information technology in the U.S., those concerns have next to nothing to do with ideology or with the CPC per se. This is much more a case of inter-imperialist rivalry.
As the Mandate authors eventually realize when they advocate that:
"Treasury should examine creating a school of financial warfare jointly with DOD. If the U.S. is to rely on financial weapons, tools, and strategies to prosecute international defensive and offensive objectives, it must create a specially trained group of experts dedicated to the study, training, testing, and preparedness of these deterrents." (704)
"Improved" Financial Regulation
By "improvements" in financial regulation, the Mandate authors apparently mean: Gut whatever is left of the New Deal financial reforms and is still standing over the neoliberal "reforms" of the Clinton era. The Mandate authors argue that:
"U.S. banking law remains stuck in the 1930s regarding which functions financial companies should perform. It was never a good idea either to restrict banks to taking deposits and making loans or to prevent investment banks from taking deposits. Doing so makes markets less stable. All financial intermediaries function by pooling the financial resources of those who want to save and funneling them to others that are willing and able to pay for additional funds. This underlying principle should guide U.S. financial laws." (705)
So the New Deal-era separation of commercial and investment banking was "never a good idea" notwithstanding the collapse of the banking system in 1931-1933. Note that the antiquated belief that the primary role of banks is financial intermediation.
"Policymakers should create new charters for financial firms that eliminate activity restrictions and reduce regulations in return for straightforward higher equity or risk-retention standards. Ultimately, these charters would replace government regulation with competition and market discipline, thereby lowering the risk of future financial crises and improving the ability of individuals to create wealth." (705)
Yes, competition among financial firms will impose market discipline and lower the risk of financial crises. What have these guys been smoking? Don't they realize that the finance guys will always oppose or undermine those "straightforward higher equity or risk-retention standards"? I guess they haven't read much Hyman Minsky.
Down with the "Equity Agenda"
Much of what we find in Chapter 22 of the Mandate we could have easily found in the writing of conservative intellectuals in the 1960s. The lingering hostility to the New Deal, for example, was a strong characteristic of Goldwater Republicans. But near the end of the chapter the authors launch into a tirade against the "woke" "equity agenda" allegedly being pursued by the Biden administration -- and here is one place where they focus specifically on the Treasury Department. They write:
"Under the Biden Administration, the Treasury Department has appointed a Counselor for Racial Equity, established an Advisory Committee on Racial Equity, and created an office for Diversity, Equity, Inclusion, and Accessibility. All these should be eliminated. Treasury has created several new offices to promote “equity” and has made this its first of five strategic goals in its Fiscal Year 2022–2226 Strategic Plan. “Equity” is identified as a cross-cutting theme in 15 of 19 of the plan’s objectives.
"The avowed purpose of these initiatives is to implement policies that deliberately favor some races or ethnicities over others. The casual acceptance and rapid spread of racist policymaking in the federal government must be forcefully opposed and reversed. The next conservative Administration should take affirmative steps to expose and eradicate the practice of critical race theory and diversity, equity, and inclusion (DEI) throughout the Treasury Department.
"These steps will include:
"Identify every Treasury official who participated in DEI initiatives and interview him or her for the purpose of determining the scope and nature of these initiatives and to ensure that such initiatives are completely ended.
"Make public immediately all communications relating to the work of the Treasury’s critical race theory and DEI initiatives.
"Treat the participation in any critical race theory or DEI initiative, without objecting on constitutional or moral grounds, as per se grounds for termination of employment.
"Expose and make public all training materials and initiatives designed to single out any race, ethnicity, or sex for special treatment." (708)
This is a call for an ideological purge within the federal government the likes of which we haven't seen since the Red Scares of the 1940s and 1950s. More than anyplace else in this chapter, here is where we see a Trumpian craving for retribution and revenge against those perceived as political enemies. Sounds like a witch-hunt.
We Shouldn't Acknowledge Climate Change Unless China Does So First
Chapter 22 does not use the term "climate change" except to dismiss its signifiance. A search for the term "global warming" turns up zero instances in the entire Mandate for Leadership. Chapter 22 will only go as far as acknowledging the existence of some "extreme weather events" which, we are told, can best be mitigated by "economic growth and technological/scientific advance through human ingenuity." (709) The United States, the authors tell us, should pull back from doing anything about this on the grounds that other countries aren't doing anything about this either.
"[V]irtually all of the initiatives that the Biden Administration has adopted would, even if successful, have a de minimis impact on changing global weather patterns, in part because most nations—notably China—are not cooperating with climate summits and international agreements. Virtually all nations, for example, that signed the Paris Agreement have not met their treaty obligations. Such routinely violated treaties weaken the U.S. economy with no offsetting societal benefits. To that end, the next conservative Administration should withdraw the U.S. from the U.N. Framework Convention on Climate Change and the Paris Agreement." (709)
To Go
We'll take a look at Chapter 24 in Mandate for Leadership, which covers the Federal Reserve, in an upcoming post. Share your thoughts in the Comments section below.