Former Clinton Treasury Secretary Larry Summers warns that Donald Trump's bullying tactics on American companies will only backfire and eventually cost more U.S. jobs than they create.
"Yes, our president-elect has made four or five phone calls to four or five companies, largely suspending the rule of law and extorting them into relocating dozens -- or perhaps even a few hundred jobs -- into plants in the United States," Summers told CNN Money.
Summers, now a Harvard professor, warned that Trump's rhetoric has beaten down the value of the Mexican peso against the dollar and that will end up costing the U.S. many more jobs, CNN Money explained.
"It is a major change in the relative attractiveness of locating production activity in Mexico, versus locating it in the American heartland, and the consequence of that is measured not in the dozens or hundreds, but in the thousands or ten thousands or even hundreds of thousands of jobs," said Summers, who served as President Clinton's treasury secretary and President Barack Obama's National Economic Council director.
Appearing on CNBC from the World Economic Forum in Davos, Switzerland, Summers said "there's a lot anxiety here" about what's happening politically in many parts of the industrialized world, including Brexit, upcoming elections in Europe and the Trump effect in the United States.
"If it's not put to rest ... populist policies we're pursuing will only have very short-run benefits," Summers said. "Ultimately, there will be more uncertainty, reductions in confidence and a bit of a downward spiral," he warned.
"There's a sense of new energy in business. Some of that is a welcome corrective to what probably was some feeling that it had become a bit overly punitive in some sectors," Summers acknowledged.
"[But] there's also a deep concern about populist policy, particularly populist nationalist policy that lurks into protection. And that's a very real risk hanging over the global economy," he warned.
But one of the most-respected economic gurus of modern times politely disagrees with Summers.
Veteran financial guru Larry Kudlow, who served as the Trump campaign's senior economic adviser, said the president-elect's plan for a ''tax holiday'' so that American companies can bring back profit that was generated overseas at a lower rate will revitalize America.
"You will re-oxygenate the entire economy," said Kudlow, a Newsmax Finance Insider, radio talk-show host and CNBC senior contributor. "I just think repatriation of cash is absolutely terrific," he told CNBC.
While Trump thinks the influx of cash will create jobs, the New York Times reported that corporate boards and executives may have different ideas. “They are likely to use much of the estimated $2 trillion held overseas to acquire businesses in the United States, to buy back their own stock or to pay down debt, say advisers of America's top corporate executives,” the Times reported.
Trump has said he wants to repatriate such corporate profits with a one-time rate of 10 percent. That is about a third of what is required by the current law, which says companies need to pay up to 35 percent of their earnings to the government, and then get credited for taxes they have already paid overseas, which usually is not much.
“If they were to bring that capital back, those companies could use it to invest in their businesses, which may in turn create jobs. Yet that is only one of several options,” the Times reported.
(Newsmax wire services contributed to this report).
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