The US vice presidency was famously compared to a “warm bucket of piss” by FDR’s first veep. But JD Vance is more likely thinking buckets of champagne on ice — and so are fans of Trump’s economic populism.
Vance is well known on Wall Street and Silicon Valley. He worked in venture capital after graduating from Yale Law School. In his bestselling memoir “Hillbilly Elegy,” he wrote about the economic and social despair of the Rust Belt. He has since spent two years in the US Senate.
Years ago, he was a free-market man who believed foreign investment in the US helped save his Ohio factory town. He was no fan of Donald Trump’s nationalism, particularly on the economy. But something changed with Vance after his memoir hit in 2016.
Many hardcore liberals became conservative after being mugged by reality.
Vance’s mugging led him into economic populism — tariffs, a weak dollar, trade recriminations — away from free markets toward Trump populism.
It propelled him to the US Senate with Trump’s blessing after they patched things up, and now maybe the vice presidency.
Wednesday night, the American people will hear from him first hand as he speaks at the GOP convention in Milwaukee.
In Vance, Trump might well be signaling that in a second term he’s going full-on MAGA and passing the torch to someone with capable hands to carry out this agenda (though you never really know with The Donald, as I will explain).
True, Vance has been in the Senate for just two years, but he’s made his mark through his clear explanation of Trump-styled populism.
Trump picked maybe the most articulate spokesman of MAGA economics.
Recall: Trump economic populism was much more inchoate when he was first elected president, and in many ways it got softened by Trump’s selection to kill key economic advisory roles, supply siders, traditional conservatives and business types in key economic posts, including Mike Pence, Larry Kudlow, Gary Cohn and Steven Mnuchin.
He recently blurted out to Bloomberg he would consider a globalist’s globalist JP Morgan CEO Jamie Dimon as Treasury Secretary.
Yes, The Donald has proven to be a somewhat heterodox economic populist, and it worked.
Those folks helped craft an economic agenda that led to tax cuts, deregulation that softened the economic blow from his trade war policies as other countries retaliated.
That’s going to be more difficult with Vance whispering in Trump’s ear and having a say in key economic appointments.
So, what does this mean, exactly?
First, Trump has always been more moderate on economic issues than the spin from his detractors.
Tech billionaire Mark Cuban famously predicted he would tank the economy and markets with the protectionism he pushed during his first term.
In fact, the opposite happened.
Trump deregulated the economy, pushed for a lower corporate tax rate and correctly identified China as a pernicious global threat that feasted off of one-sided “free trade” where US businesses were forced to hand over trade secrets for access to its burgeoning economy.
Trump’s tariffs against China hurt the US farm belt, but they seem reasonable given the country’s continued intransigence.
But there’s a case to be made — and many on Wall Street are making it — that Trump Part II will be unburdened by a desire to appease the Reaganite economic conservatives of the party. Vance’s selection is evidence of this.
Financial pundit Lawrence G. McDonald, author of the book “How to Listen When Markets Speak,” tells me he expects Vance to push Trump to make his former populist trade rep, Robert Lighthizer, Treasury Secretary. A weak dollar policy will follow, designed to bring back jobs to the rust belt. Protectionism on steroids, in McDonald’s view — at least that will be the sales pitch to get votes from Middle America.
McDonald says some of this is being priced into the market as Trump has emerged the likely victor in November, particularly after Biden’s disastrous debate. The long end of the Treasury bond market has been selling off, the yield curve “Bear steepening,” in part because global investors are less comfortable buying US treasuries over fears of inflation that always comes when there’s a trade war.
“Vance and these will make the pitch that a little more inflation is worth bringing hundreds of thousands of jobs home,” McDonald says. “They have good intentions. The downside of free trade was loss of jobs. The downside here is that we have inflation, which is a tax on the middle and working class.”
You can also see this fear playing out in gold prices, hitting a new all-time high, and yes Bitcoin, which has increasingly been an inflation hedge (it should be noted that as my colleague Eleanor Terrett has reported, Vance actually owned Bitcoin).
I’m hesitant to brand Vance as a pure MAGA devotee. Among his advisers is tech guru Peter Thiel. He understands the economy and why we need some free trade. All those years as a VC must have done something even if he’s long-ago shed his Silicon Valley skin.
He’s been a proponent of drilling for oil (good for inflation), he would support some tax cuts (he appears on the fence when it comes to the corporate variety), and his penchant for regulation seems most focused on big tech, which is gaining near monopoly power. A blind spot in Trump’s first term was spending–way too much of it. Vance knows how to read a balance sheet so he must know that the spending-debt trajectory can’t go on forever.
Yet having a smart guy explain the need for protectionism could be catnip for many voters, including minorities.
McDonald tells me that over the last 30 years, he estimates there’s been a net loss of 5 million jobs lost because of globalism and free trade. The latter has been good for inflation, made the dollar strong, really good for big companies and the information economy has exploded.
Lots of jobs for coders, not a lot for factory workers. Globalism has been devastating for vast pockets of the working class in jobs and social disorder. Just look at the opioid crisis sweeping middle America that is now starting to shorten overall life expectancies.
Wall Street is preparing for JD Vance to make the case against globalism better than anyone before and after.
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