One In Five American CEOs Are Psychopaths-- So Not Just Trump

I don't know CNBC lives on my TV and I rarely read their stuff when I'm looking for information. That said, yesterday I found two pieces of theirs-- somewhat related-- worth passing on. Why don't we start with a specific piece of news-- Wall Street gives thumbs down on both Trump's FED picks-- and close with something a bit more general. The 48-person panel of fund managers, economists and strategists who took CNBC's new Fed Survey over the weekend prefer that the Senate not confirm either Stephen Moore (60%) or Herman Cain (53%). The panel considered both "too political" and "not qualified."

Kathy Bostjancic, chief U.S. Financial Market Economist at Oxford Economics: "Both Moore and Cain are highly unconventional and politically-biased choices and, if confirmed to the board, would be very disruptive at a time when monetary policy is at an important crossroads.

After announcing he planned to nominate Moore and Cain to the Fed, Trump on Friday substantially raised the ante in his comments and criticism of the Federal Reserve, not only calling for rate cuts but also advocating for the first time new quantitative easing. The Fed used so-called QE in the wake of the financial crisis to drive down interest and stimulate the economy, buying bonds and mortgages.

Not a single respondent agreed with the president’s call for new QE and just 9% think the Fed should cut rates now.

A 47% plurality of respondents believes the nominations along with the president’s critical remarks about the Fed are “reducing the central bank’s independence” and they think that could have implications for markets and the economy.

“Stacking the Fed with partisan hacks would alter how the market views the Fed’s decisions even if two appointments don’t change the Fed’s decision making,″ said Diane Swonk, chief economist at Grant Thornton. “Over time, the loss in credibility will mount.”

The second piece comes from Tomas Chamorro-Premuzic and it seeks to explain why 20% of CEOs are psychopaths or, at least, have psychopathic tendencies. Think of the psychopath-- no need to talk about "tendencies" here-- who runs the Trump Organization.

Narcissism involves an unrealistic sense of grandiosity and superiority, manifested in the form of vanity, self-admiration and delusions of talent. Here are the main characteristics of narcissistic and toxic bosses:

1. They often crave validation and recognition from others. This is primarily because their self-esteem is high but fragile. Bosses who constantly show off are probably desperate for others’ admiration.

2. They tend to be self-centered. This means they’re generally less interested in others and have deficits in empathy. For this reason, they are rarely found displaying any genuine consideration for people other than themselves.

3. They have high levels of entitlement. Narcissists commonly behave as if they deserve certain privileges or enjoy higher status than their peers enjoy.

As I highlight in my most recent book, Why Do So Many Incompetent Men Become Leaders? (And How to Fix It), many wildly celebrated character traits, such as courage and risk-taking, often coexist with psychopathic tendencies.

...By the same token, psychopathic tendencies often co-exist with entrepreneurial traits. This explains why there are so many famous cases of self-made billionaires-- from Bernie Madoff and Jeff Skilling to Steve Jobs and Elon Musk-- whose disruptive personalities made them as unemployable as innovative.

Jobs got fired from his own company and displayed clear patterns of low empathy and antisocial behavior: Parking in the disabled parking spots and bullying and intimidating his employees. Musk’s narcissistic side has also been manifested-- rather often-- in his combative rants with investors, the media and his employees, as well as his confrontational and erratic social media presence.

But it’s not all bad. Jobs and Musk undeniably have talent for entrepreneurship, defined as the ability to translate original and useful ideas into practical innovations.

That can’t be said for every entrepreneur, though. While Elizabeth Holmes lost her “billionaire” title, she styled herself as the Steve Jobs of health care and was clearly ruthless in deceiving investors. Instead of bringing an innovative product to the market, she was selling nothing but a fairy tale.

To some degree, all successful entrepreneurs have problems with authority, which is why they are so eager to demolish the status quo and replace it with something else.

To be sure, too much psychopathy will predispose someone to crime and prison rather than Apple or Amazon. But at the other extreme of the continuum, people who are so conforming and eager to please would much rather follow established rules and remain “good employees” rather than be disruptive leaders.

So while a certain degree of nonconformity and unconventionality is needed to drive innovation and entrepreneurship, any leader will need to have a minimum level of integrity, empathy and altruism to be able to connect with and focus on the well-being of their teams, rather than on advancing their own personal agenda.

It is this range of pro-social and ethical traits that can turn even contrarian and combative personalities into a catalyst for good in society: Replacing the status quo with a better version of progress.

Can Trump Turn The Fed Into A Bastion Of Trumpnomics-- Enough To Make The Coming Recession Into A Depression?

When Trump nominated crackpot Stephen Moore for a spot on the Fed, I was shocked. That's even a crazy move for Trump. What was I missing? I asked the smartest economist I know, Stephanie Kelton. All she would say is that "It’s not an inspired choice, to say the least. Paul McCulley would have been an inspired choice." Conservative economist Greg Mankiw was considerably more forthcoming on his thoughts about the nomination.

Mankiw isn't famous because he teaches economics at Harvard, though he does. He's famous because he worked for both Bush-- for whom he served as chairman of the Council of Economic Advisors-- and for Mitt Romney. In 2011, while he was advising Romney and teaching at Harvard, dozens of students walked out of his lecture and went to a Occupy Wall Street demonstration, handing him an open letter on the way out:

Today, we are walking out of your class, Economics 10, in order to express our discontent with the bias inherent in this introductory economics course. We are deeply concerned about the way that this bias affects students, the University, and our greater society.

As Harvard undergraduates, we enrolled in Economics 10 hoping to gain a broad and introductory foundation of economic theory that would assist us in our various intellectual pursuits and diverse disciplines, which range from Economics, to Government, to Environmental Sciences and Public Policy, and beyond. Instead, we found a course that espouses a specific-- and limited-- view of economics that we believe perpetuates problematic and inefficient systems of economic inequality in our society today.

A legitimate academic study of economics must include a critical discussion of both the benefits and flaws of different economic simplifying models. As your class does not include primary sources and rarely features articles from academic journals, we have very little access to alternative approaches to economics. There is no justification for presenting Adam Smith’s economic theories as more fundamental or basic than, for example, Keynesian theory.

Care in presenting an unbiased perspective on economics is particularly important for an introductory course of 700 students that nominally provides a sound foundation for further study in economics. Many Harvard students do not have the ability to opt out of Economics 10. This class is required for Economics and Environmental Science and Public Policy concentrators, while Social Studies concentrators must take an introductory economics course-- and the only other eligible class, Professor Steven Margolin’s class Critical Perspectives on Economics, is only offered every other year (and not this year). Many other students simply desire an analytic understanding of economics as part of a quality liberal arts education. Furthermore, Economics 10 makes it difficult for subsequent economics courses to teach effectively as it offers only one heavily skewed perspective rather than a solid grounding on which other courses can expand. Students should not be expected to avoid this class-- or the whole discipline of economics-- as a method of expressing discontent.

Harvard graduates play major roles in the financial institutions and in shaping public policy around the world. If Harvard fails to equip its students with a broad and critical understanding of economics, their actions are likely to harm the global financial system. The last five years of economic turmoil have been proof enough of this.

We are walking out today to join a Boston-wide march protesting the corporatization of higher education as part of the global Occupy movement. Since the biased nature of Economics 10 contributes to and symbolizes the increasing economic inequality in America, we are walking out of your class today both to protest your inadequate discussion of basic economic theory and to lend our support to a movement that is changing American discourse on economic injustice. Professor Mankiw, we ask that you take our concerns and our walk-out seriously.

His fame increased when he announced on CNBC that he wouldn't vote for Trump in 2016. On his blog he explained in more detail why he wouldn't vote for the Republican candidate for president:

I have Republican friends who think that things couldn't be worse than doubling down on Obama policies under Hillary Clinton. And, like them, I am no fan of the left's agenda of large government and high taxes. But they are wrong: Things could be worse. And I fear they would be under Mr. Trump.

Mr. Trump has not laid out a coherent economic worldview, but one recurrent theme is hostility to a free and open system of international trade. From my perspective as an economics policy wonk, that by itself is disqualifying.

And then there are issues of temperament. I am not a psychologist, so I cannot figure out what Mr. Trump's personal demons are. But he does not show the admirable disposition that I saw in previous presidents and presidential candidates I have had the honor to work for.

I don't get the feeling he intends to vote for Trump in 2020 either. On Friday he wrote that the only good thing he credited Trump with, in his opinion, "making good appointments to the Fed.... Jay Powell, Rich Clarida, and Randy Quarles. Then today the president nominates Stephen Moore to be a Fed governor. Steve is a perfectly amiable guy, but he does not have the intellectual gravitas for this important job. If you doubt it, read his latest book Trumponomics (or my review of it). It is time for Senators to do their job. Mr. Moore should not be confirmed."

Moore wrote the universally panned book with Arthur Laffer and Mankiw's review for Foreign Affairs was titled Snake-Oil Economics-- The Bad Math Behind Trump’s Policies. Moore and Laffer, he wrote, presented their findings in the voice of "rah-rah partisans... who do not build their analysis on the foundation of professional consensus or serious studies from peer-reviewed journals. They deny that people who disagree with them may have some logical points and that there may be weaknesses in their own arguments. In their view, the world is simple, and the opposition is just wrong, wrong, wrong. Rah-rah partisans do not aim to persuade the undecided. They aim to rally the faithful." He feels that their "over-the-top enthusiasm" for Señor Trumpanzee's "sketchy economic agenda is not likely to convince anyone not already sporting a 'Make America Great Again' hat." 

Moore and Laffer served as economic advisers to Trump during his campaign and after he was elected president (along with Larry Kudlow, the current director of the National Economic Council, who wrote the book’s foreword). From this experience, Moore and Laffer apparently learned the importance of flattering the boss. In the first chapter alone, they tell us that Trump is a “gifted orator” who is always “dressed immaculately.” He is “shrewd,” “open-minded,” “no-nonsense,” and “bigger than life.” He is a “commonsense conservative” who welcomes “honest and fair-minded policy debates.” He is the “Mick Jagger of politics” with a contagious “enthusiasm and can-doism.”

The authors’ approach to policy is similarly bereft of nuance. In Chapter 3, they sum it up by proudly recounting what Moore told Trump about U.S. President Barack Obama during the campaign: “Donald, just look at all the things that Obama has done on the economy over the past eight years, and then do just the opposite.”

It is hard to imagine more simplistic, misguided advice. To be sure, Moore and Laffer can reasonably hold policy positions and political values to the right of those of Obama. (As someone who chaired the White House Council of Economic Advisers during the George W. Bush administration, so do I.) But the Obama administration was filled with prominent economic advisers who were well within the bounds of mainstream economics: Jason Furman, Austan Goolsbee, Alan Krueger, Christina Romer, and Lawrence Summers, to name but a few. It is not tenable to suggest that with all this talent, the administration made only wrong decisions, and that they were wrong simply because those who made them were Democrats.

The tribalism of Moore and Laffer’s approach stems primarily from their devotion to a single issue: the level of taxation. Obama pursued higher taxes, especially on higher-income households. His goal was to fund a federal government that was larger and more active than many Republicans would prefer and to use the tax system to “spread the wealth around,” as he famously told Joe Wurzelbacher, known as Joe the Plumber, a man he encountered at a campaign stop in Ohio in 2008. By contrast, Moore and Laffer want lower taxes, especially on businesses, which in their view would promote faster economic growth.

The debate over taxes reflects a classic, ongoing disagreement between the left and the right. In 1975, Arthur Okun, a Brookings economist and former adviser to President Lyndon Johnson, wrote a short book called Equality and Efficiency: The Big Tradeoff. Okun argued that by using taxes and transfers of wealth to equalize economic outcomes, the government distorts incentives-- or that, to put it metaphorically, the harder the government tries to ensure that the economic pie is cut into slices of a similar size, the smaller the pie becomes. Based on this argument, the main priority of the Democratic Party is to equalize the slices, whereas the main priority of the Republican Party is to grow the pie.

Yet Moore and Laffer aren’t willing to admit that making policy requires confronting such difficult tradeoffs. Laffer is famous for his eponymous curve, which shows that tax rates can reach levels high enough that cutting them would yield enough growth to actually increase tax revenue. In that scenario, the tradeoff between equality and efficiency vanishes. The government can cut taxes, increase growth, and use the greater tax revenue to help the less fortunate. Everyone is better off.

The Laffer curve is undeniable as a matter of economic theory. There is certainly some level of taxation at which cutting tax rates would be win-win. But few economists believe that tax rates in the United States have reached such heights in recent years; to the contrary, they are likely below the revenue-maximizing level. In practice, the big tradeoff between equality and efficiency just won’t go away.

Trumponomics is full of exhortations about the importance of economic growth. Why, Moore and Laffer ask, should Americans settle for the two percent growth that many economists have been projecting? Wouldn’t every problem be easier to solve with a more rapidly expanding economy? The book quotes Trump as claiming, when announcing his tax plan in December 2017, that it would not increase the budget deficit because it would raise growth rates to “three, or four, five, or even six percent.”

The authors offer no credible evidence that the tax changes passed will lead to such high growth. Most studies yield far more modest projections. The Congressional Budget Office estimates that the Trump tax cuts will increase growth rates by 0.2 percentage points per year over the first five years. A study by Robert Barro (a conservative economist at Harvard) and Furman (a liberal economist at Harvard) published in 2018 estimates that the tax bill will increase annual growth by 0.13 percentage points over a decade. And that is if the changes are made permanent. Barro and Furman estimate that as the legislation is written, with many of the provisions set to expire in 2025, it will increase annual growth by a mere 0.04 percentage points over ten years.

It is conceivable that standard economic models underestimate the impact of tax cuts on growth. A research paper by the economists Christina Romer and David Romer published in 2010 examined historical tax changes and found that they had larger effects on economic activity than standard models suggest. (It is worth noting that these two authors’ political leanings are left of center, so their findings are not the result of ideological taint.) One might reasonably argue that Trump’s tax cuts will increase growth over the next decade by as much as half a percentage point per year. But that is a long way from the one- to four-percentage-point boost that the president and his associates have bragged of, and that Moore and Laffer quote without explanation, caveat, or apology.

...Perhaps the most disappointing aspect of Trumponomics is the long list of crucial issues on which the authors are largely silent. They offer no cogent plans to deal with global climate change, the long-term fiscal imbalance from growing entitlement spending, or the increase in economic inequality that has occurred over the past half century. Many reasonable Republicans would support a tax on carbon emissions, for example. Such a policy would slow climate change by incentivizing the movement toward cleaner energy, as well as provide revenue that could be used to close the fiscal gap or to help those struggling at the bottom of the economic ladder.

Rather than suggesting coherent policies, Moore and Laffer seem to hope that a much more rapidly growing economy will provide the resources to address all these problems, and they seem to believe that this growth will follow ineluctably from the lower taxes and deregulation that lie at the heart of Trump’s agenda. It would be wonderful if that were possible. Maybe rah-rah partisans really believe it is. But more likely, it is just wishful thinking. Trump appears eager to avoid most of the economic problems facing the nation. By banking on so much growth from cutting taxes, Moore and Laffer are, in effect, giving him a pass and kicking the can down the road to a future leader more interested in confronting hard policy choices.

Are there enough Republicans in the Senate with enough good sense and courage to deny Moore his confirmation? I doubt it. In fact, it's probably more likely that Kyrsten Sinema and Joe Manchin vote to confirm that it is that more than one or two Republicans vote not to, even though some Republicans have been grumbling about Moore's column advocating that Trump fire Fed Chair Jay Powell (a Trump appointee who, like so many, Trump quickly soured on).

Trump In The White House Absolutely Predicts A Recession-- The Question Is Just How Soon

The Obama administration worked hard to turn the economy around after Trump inherited an economy that would have been a dream for any president. He immediately set out to sabotage it and, unfortunately, his policies are finally kicking in strongly enough to wreck everything that Obama did to right the economy Bush left him-- and us. But before we get into Trump's disastrous policies, one little note: his utter and complete lack of leadership abilities are working hand in hand with bad policy to bring down the economy. Take this insane tweet from yesterday announcing that the Treasury Department had slapped additional sanctions on North Korea and that just hours later Trump was countermanding them. How does something like that even happen? Was there a gnome working at Treasury and doing whatever he wanted to do with no supervision?

Worse yet, Trump announced that he is nominating another entirely unfit ideologue to a position where he will undoubtably harm everything he touches. Trumponomics author Stephen Moore, like Trump, a harsh critic of Trump-appointed Fed chair Jerome Powell, will soon be serving on the Fed. "Moore’s primary area of pseudo-expertise-- he is not an economist-- is fiscal policy," wrote Jonathan Chait. "He is a dedicated advocate of supply-side economics, relentlessly promoting his fanatical hatred of redistribution and belief that lower taxes for the rich can and will unleash wondrous prosperity. Like nearly all supply-siders, he has clung to this dogma in the face of repeated, spectacular failures."

OK, tuck all that away for a moment while we consider two dire reports from Bloomberg News Friday morning, on just after sunrise and one at 11AM. First was the announcement of a curve inversion, an event that usually signals a recession is on the horizon.

The Treasury yield curve inverted for the first time since the last crisis Friday, triggering the first reliable market signal of an impending recession and rate-cutting cycle.

The gap between the three-month and 10-year yields vanished as a surge of buying pushed the latter to a 14-month low of 2.416 percent. Inversion is considered a reliable harbinger of recession in the U.S., within roughly the next 18 months.

Demand for government bonds gained momentum Wednesday, when U.S. central bank policy makers lowered both their growth projections and their interest-rate outlook. The majority of officials now envisages no hikes this year, down from a median call of two at their December meeting. Traders took that dovish shift as their cue to dig into positions for a Fed easing cycle, pricing in a cut by the end of 2020 and a one-in-two chance of a reduction as soon as this year.

“It looks like the global slowdown worries have been confirmed and the market is beginning to price in Fed easing, potential recession down the road,” said Kathy Jones, chief fixed-income strategist at Charles Schwab & Co. “It’s clearly a sign that the market is worried about growth and moving into Treasuries from riskier asset classes.”

Too abstract? How about U.S. Posts Largest-Ever Monthly Budget Deficit in February? Will Trump call a market crash "fake news?" Largest monthly budget deficit ever-- key word "ever"-- seem like a big deal, no? And that duet deficit is obviously a result, at least in part, of falling tax revenues because of the catastrophic GOP tax bill of last year, and increased spending as Trump attempts, entirely unsuccessfully, to buy his way into some kind of popularity.

The budget gap widened to $234 billion in February, compared with a fiscal gap of $215.2 billion a year earlier. That gap surpassed the previous monthly record of $231.7 billion set seven years ago, according to data compiled by Bloomberg.

February’s shortfall helped push the deficit for the first five months of the government’s fiscal year to $544.2 billion, up almost 40 percent from the same period the previous year, the Treasury Department said in its monthly budget report Friday. The release was delayed a week by the government shutdown earlier this year.

Receipts dipped less than 1 percent to $1.3 trillion in the October-February period from the previous year, while spending accelerated 9 percent to $1.8 trillion.

The fiscal shortfall is widening following President Donald Trump’s $1.5 trillion tax-cuts package that’s weighing on receipts and raising concerns about the national debt load, which topped a record $22 trillion last month.

Federal Reserve Chairman Jerome Powell reiterated his concern over the government deficit in a press conference Wednesday, saying that the nation’s growing debt pile needs to be addressed. At the same time, there’s a shift among some economists-- led by proponents of Modern Monetary Theory-- on the dangers of a growing deficit, with low inflation and cheap borrowing costs suggesting there’s room for additional spending.

The Treasury data show tax receipts declined for both corporations and individuals in the five-month period, while revenue from customs duties almost doubled, boosted by income from tariffs imposed by the Trump administration.

The 2017 tax law slashed the corporate tax rate from 35 percent to 21 percent.

Corporations have so far this fiscal year paid $59.2 billion, compared to $73.5 billion in 2018, when the tax law was only partially in effect for some corporations. In 2017, however, the year before the law was enacted, corporations had paid $87.4 billion at this point in the year.

Individual income tax receipts dropped slightly from this point last year, but have risen compared to some years before the tax law. Despite the law cutting tax rates for most people, rising wages and lower unemployment have spurred higher tax revenue.

Now think again about Trump's newest appointment to the Fed. "Stephen Moore’s career as an economic analyst has been a decades-long continuous procession of error and hackery. It is not despite but precisely because of these errors that Moore now finds himself in the astonishing position of having been offered a position on the Federal Reserve board by President Trump," was how Chait put it. "[F]or all their extravagant ignorance, Moore’s beliefs on fiscal policy are actually more sophisticated and well-developed than his views on monetary policy. It is the latter that he would be in a position to influence as a Federal Reserve governor... While the internal workings of his mind remain a matter of speculation, I doubt he is consciously venal enough to tailor his thinking explicitly to partisan goals. Rather, Moore has extremely strong partisan instincts and extremely limited analytical skills. The combination results inevitably in the latter giving way to the former. He should not be permitted any position of serious responsibility, in government or anything else."