Handelsblatt Exclusive

Holding the Line

Eric Cantor in conversation with Handelsblatt's Daniel Schäfer. Source: Dermot Tatlow for Handelsblatt
  • Why it matters

    Why it matters

    President-elect Donald Trump burned many bridges running a nasty anti-establishment campaign, but he’ll have to find a way to work with establishment Republicans in Congress if he hopes to get anything done.

  • Facts


    • Donald Trump will become president of the United States on January 20, 2017.
    • His Republican Party holds a majority in both houses of Congress, though a narrow one of just 51-48 in the Senate.
    • Mr. Trump has said an infrastructure package, reducing immigration and tax reform are among his top domestic priorities.
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Eric Cantor in conversation with Handelsblatt's Daniel Schäfer. Source: Dermot Tatlow for Handelsblatt

Eric Cantor wasn’t an early Donald Trump supporter. The former majority leader of the U.S. House of Representatives, who abruptly lost his congressional seat to a challenge from the right in 2014, supported Jeb Bush in the Republican primaries and called both Hillary Clinton and the president-elect “very imperfect” candidates.

With the election over, Mr. Cantor said he’s hopeful the president-elect will moderate some of the extreme positions he took on the campaign trail, including on trade and immigration and that he will reach out to the Republican establishment when it comes to cabinet positions and advice. If he does, Mr. Trump will find a willing partner on Capitol Hill – even among opposition Democrats – to implement his domestic agenda.

And if he doesn’t, congressional Republicans will be ready to push back, including using the debt ceiling when it comes to raising government debt and highlighting the importance of free trade for the world.

“If he takes a sledgehammer to free trade, to NAFTA and others, that would be a real problem and you would see some pushback on the part of the Republicans and any free-trade Democrats that are left. But my sense is that you are not going to see that,” Mr. Cantor said in an exclusive interview at Handelsblatt’s Washington election camp.

“We have this beautiful document called the Constitution, which is elegantly drawn to create checks and balances for the executive branch...we have some history of Congress restraining executive power.”

Eric Cantor, Former Republican Majority Leader

Perhaps most surprisingly, Mr. Cantor suggested the president-elect may actually start making the case for free trade once he enters office: “It starts with actually being honest with the voters that free trade ultimately has a lot more good than bad. We have benefited from it…but there are downsides to it and that has to be dealt with.”

When it comes to broader foreign policy, even Mr. Cantor admits that the president-elect is an unknown quantity. Will he be a loose cannon? “You don’t know, you just don’t know. It may be that the position begins to humble the man, it may be that the man is 70 years old and stays who he is. I would suspect that we will soon find out.”

Read an abridged version of our full interview with Eric Cantor below.

Mr. Cantor, has the U.S. electorate voted a “very imperfect” president into office?

This election is about change, there is no question about it. A definitive statement has been made by the electorate in which they have said “enough of the status quo, we need to see something change.” Regardless of the things that Donald Trump has said along the way, the positions that he has espoused, they said “enough is enough.” And I do think that there is a lot of momentum to see that change happen.

I asked the question because, during the election campaign, you described both candidates as very imperfect.

The polls consistently said that Americans have very negative feelings toward both of the candidates. But I’m sure now that Donald Trump has won his polls will be more favorable. Americans do like winners. But I do still think he comes into office with a very divided country, so his challenge as a leader is going to be to actually bring this country back together.

Do you think he will be able to?

There is a large swath of people in this country who feel that they have been left out, particularly economically, in terms of the ability to rise in America… Donald Trump was able to tap into the anger that resulted from that. I think that he has that mandate to come in and shake it up and I think there is a great chance for it to happen.

What do you think he will focus on in his first year in office?

My sense is that his focus will be on economic growth. He has already said that one of the first things he would do upon taking office is that he would impose a moratorium on regulation that is strangling the business community here in the U.S. and inhibiting growth. He will ask for a total examination of existing regulation in and among the federal agencies here in Washington. That is just the beginning of the things he can do by executive order. There will also quickly be a move to repeal and replace Obamacare. You will also see this administration providing a big infrastructure program … Together with that, you will see efforts to pry Congress into tax reform.

Republican presidential nominee Donald Trump appears at a campaign event in Geneva
Donald Trump ran an aggressive anti-establishment campaign. Mr. Cantor still believes he can be brought into the fold. Source: Reuters

As you said, Mr. Trump plans to embark on an infrastructure spending binge and at the same time reduce taxes. With U.S. government debt levels already approaching $20 trillion, how will he able to finance this?

As you know, our corporate tax code is very uncompetitive versus countries like Germany. So there is a real commitment of many in Washington to make sure that we can rewrite the code and have a more competitive tax system in the United States. But that does not mean that they won’t try to affect additional revenues. One of the big things has to do with American multinational companies and how they have a lot of profits stranded overseas.

But won’t he face opposition from the Republican leaders in Congress, who are known to be fiscal conservatives?

No question that there will be some tension there with Republican fiscal hawks, who will feel that for years and years we have been adding on to the debt level as the deficit has increased. That is why I feel that part of the tax reform will be to identify additional revenues – not by raising taxes but by reforming the tax code to produce more growth. If there is growing tension, you may see a smaller infrastructure package if they cannot see eye to eye. But a lot of Republicans will want to help Trump to see some successes early on. That is why I believe that this package will happen early on.

How much power will the party generally have over Trump, will they be able to restrain him?

We have this beautiful document called the constitution which is elegantly drawn to create checks and balances for the executive branch. And those checks and balances come from the legislative as well as the courts. So institutionally we have some history of Congress restraining executive power.

And you think that the Republicans will make use of that?

There is no question, if need be they will. But right now there is the sense that the president-elect comes in to shake things up and change the status quo. And that is the essence of what the election is all about, and I think he will have some success.

What about his strongly protectionist stance. How much of that will he really follow through on once he will be in office?

My sense is that TPP is pretty much dead for a while … Trump has said even more things aggressively on trade. If he takes a sledgehammer to free trade, to NAFTA and others, that would be a real problem and you would see some pushback on the part of the Republicans and any free trade Democrats that are left. But my sense is that you are not going to see that.

But this aggressive stance was the ticket with which he was voted into office. Part of the reason why people voted for him was that he said I will increase tariffs for Chinese products and erect a wall on the Mexican frontier.

Peter Thiel has rightly said, the press is taking Trump literally and not seriously, whereas the voters are the other way round. I believe that.

He was elected on the fears of the American middle class that they are falling behind economically. Do you think he will really be able to address these issues? The U.S. has been mired in low growth for a while now.

When you ask is Trump actually going to be able to do something, the answer is yes. It starts with actually being honest with the voters that free trade ultimately has a lot more good than bad. We have benefited from it, you have benefited from it, but there are downsides to it and that has to be dealt with. We need honesty about the fact that a lot of people have been displaced from their jobs in the old manufacturing centers not only because of trade but also because of technology and lack of skills.

Before the elections, everyone was scarred by his erratic and unpredictable statements. Will a President Trump be a loose cannon, particularly when it comes to his foreign policies?

You don’t know, you just don’t know. It may be that the position begins to humble the man, it may be that the man is 70 years old and stays who he is. I would suspect that we will soon find out.

It is a bit scary that even you as a Republican don’t seem to be sure about this.

I don’t think anybody can be. He is 70 years old, he has had quite a career and he is the master of quite a bit of wealth and he has done it his way.

What about Russia? How do you think he will shape the relationship and what will it mean for the West?

Given his statements about Russia, I think clearly he is more open to trying to restart dialogue than the latter half of the Obama administration was. I think he will get some resistance from Republicans and Democrats if somehow there’s a notion that we are going to begin to trust too far in Mr. Putin. It goes back to what Ronald Reagan used to say about the Soviets – “trust but verify.” I think that will still apply.

Who do you expect Mr. Trump will pick for key government posts?

My sense is that he is someone who trusts in loyal advisers close to him … I hope that he goes in an expansive way, though, because governing is a rewarding but difficult job and we have a big country. There are 300 million people, and there are a lot of people on Capitol Hill that feel they have a better way. So I think it’s important that he thinks about expansion and not necessarily just having those people who have always been with him. If you look at what past presidents have done, they’ve reached out to have a much more diverse group of voices around them.

What about the Treasury Secretary? There are names floating around that seem to be people from Wall Street. Will that damage his credibility after he strongly criticized Hillary Clinton for her ties?

No, because throughout the campaign, nothing really seemed to have stuck (laughs). But seriously, the people are convinced that he is going to conduct and govern in a certain way, and my sense is they feel “he said he’s not going to be part of a system that’s rigged and he’s going to unrig it.” As long as he is communicating and demonstrating that he is moving towards that end, I think the voters will give him that discretion.

Looking to the next election in 2020: What will the United States look like in four years?

I’m sure that his administration will say that we are going to have a growing economy, more people back to work percentage wise in terms of labor participation, GDP back to a robust rate, not struggling to reach 2 percent annually. I do think that’s the ultimate goal. From an international standpoint, it’s about restoring the respect of our allies, the trust of our allies and the fear of our adversaries. It’s been a total disaster in the last several years I think there’s been a real lack of leadership on the part of this administration. I think you’re going to see a much more certain foreign policy and one in which the needs of our men and women in the military will be addressed.

Do you think he will be a one-term president?

It will all depend on whether things get done and he proves that he can govern responsibly. If you look at any of the public polling here in the United States, we have a lack of trust on the part of voters towards their government, towards business, towards courts, towards a lot of things. Really, it’s only local government that instills much more confidence. So I think the job at hand will be to prioritize and ensure that this administration regains the trust of the people.

You left politics abruptly after losing out to a Tea Party member in the primaries. How tempted are you now to return?

I’m good right now (laughs). I didn’t ask for my timing but it’s probably really good to be out. At Moelis & Company, we recently made some terrific hires in Frankfurt and have been very active in Germany. I was just there two weeks ago and six weeks before that. We are an international investment bank and we keep growing. I’m learning a whole lot in a very different world.

Has Donald Trump reached out to you?

No. I was a Jeb Bush Republican, so I don’t know how much he’s reaching out to us (laughs).

But Moelis will profit from his de-regulation agenda…

I think our clients will. If you think about the regulated industries in the health care arena, the financial services arena, the energy arena, all those sectors’ stock have been moving in a very positive way since this election. I think you will see hopefully a regaining of confidence in this country in some of what goes on.

Republicans seemed to make a decision after the 2008 election to block Obama’s agenda. Why should Democrats work with a President Trump now?

Because I think that a President Trump is going to be a lot different than President Obama … You’ve got a situation where a President Trump doesn’t necessarily come with a strong ideological bent, much more of a practical bent. He may be influenced by some of the stronger ideologues in the House [of Representatives], but I think on the whole he will reach out to the other side. [Senate Majority Leader] Chuck Schumer has a lot of interest in New York and elsewhere to want to benefit from an infrastructure bill. So I think that’s an opportunity to stop that from happening.

You’re saying President Obama was not humble enough?

No, he blew an opportunity and I’ve been saying that for a long time. He had such an opportunity with the historic nature of his president as the first black president with huge numbers of support at the beginning and just didn’t want to work together. The White House will claim to this day that this wasn’t the case. I think if you spend enough time with my former colleagues and people on the other side of the aisle on the Hill, they will validate the fact that the White House and the president himself did not spend a lot of time nurturing and enhancing relationships with individuals on the hill.

President Obama campaigned as a relative political newcomer and was elected in 2008 with a mandate of changing Washington’s culture. You could argue the same with Donald Trump. You worked in this town a long time – what exactly does Washington expect will change under President Trump?

In comparing the two presidents from the outside, there’s a clear difference in that Donald Trump has run things.  He had to make payroll, he’s been responsible for consummating transactions and deals. Donald’s used to the commercial arena and working with others.

But he campaigned as a political outsider…

In politics, just like in business, it still starts with relationships. The focus has to be in understanding both your partners and those on the other side of the table. Hopefully, what I think the town expects and what this country – the people that elected him – expect number one is to get something done. They also expect him to “de-rig the system,” which to me means transparency. Limiting the power of the federal government and providing transparency to the people on how it works will go a long way toward responding to this cry for confidence. Also, Donald Trump I think has been the first social media – look at Twitter (laughs). But hopefully we’ll see more ability for consumption of the news emanating from this town by more people.

Will that deal-making attitude work with foreign relations, where there’s a more diplomatic code? You can’t strike deals like in the business world.

We’ll see. His mantra is certainly America first, and that is something that shocks the ears of many Europeans, I know. I think a lot of us who look to our alliances as being the bedrock of our global security order know that it’s important, and I think that he’ll have people certainly speaking out on that point – we have to appreciate and continue to enhance and support the relationships that we have with our allies, especially given the unconventional threats that continue to arise.

Four years ago, people thought the country was divided but it seems even more so now. There were protests on the streets just a few days ago. Do you worry about that?

I first came to Washington in 2001 – and that was the most polarizing election if you recall … I think ultimately we get over that in the United States. There is a big deal being made of Obama and Trump sitting down in the Oval Office for a reason. It is pretty stunning given the words and exchanges over the last few months. We do pride ourselves as Germany does in the peaceful transfer of power.

His deportation plans are frankly scary to many Americans. Will he be more flexible in his position than his rhetoric suggests?

Yes, I think behind those statements is a point he wanted to make with the electorate that he will be there to defend our country. And we have got to have borders or else we are not a sovereign nation. And my sense is that one of the first tings he will do is go to Congress, ask for some authorization and some money to build the wall – that’s before the check comes from Mexico to pay for it (laughs). And beyond that I think that most of the immigration issues will be done in executive orders and I hope balance the notion that we are a country of laws and a country of immigrants.

So you would hope he will not follow through with any type of deportation?

I always thought that’s preposterous. You’re not going to line up 11 million people in this country. I don’t think he’ll do that. And I think we’ll be much more compassionate given the realization and appreciation that the federal government is doing its job.

But that has been the bipartisan strategy all along: Secure the border and offer a path to citizenship.

Well I don’t think he will offer the latter. I do think though that the actual physical building he has promised is something that has never happened. If you’ve been to the southern border, it’s a challenge, but it may take that for the American people to see: Okay he means business.

Is there a chance Mr. Trump could actually raise the debt? Are the battles during the Obama administration about raising the debt ceiling a thing of the past?

No, I think it’s not a thing of the past. I think it is one of the basic principles of the Republican Party and the conservative movement to limit the size of the government and not mortgage your future just to continue funding this growing government … I don’t think that will go away. I don’t think most Republicans on the Hill are going to be enthused about increasing the statutory debt limit without having some offsetting spending cuts.


Christopher Cermak is an editor with Handelsblatt Global in Berlin, Daniel Schäfer leads Handelsblatt’s finance section from Frankfurt and Astrid Dörner is a Handelsblatt editor in Düsseldorf. To contact the authors: cermak@handelsblatt.com, schaefer@handelsblatt.com and adoerner@handelsblatt.com

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