Sunday, May 14, 2017

How to handle a computer hack such as RANSOMWARE Virus - Financial Times

How to handle a computer hack such as RANSOMWARE Virus
Sometimes a hack is obvious. When Sony Pictures employees arrived at work on the morning of November 24, 2014 they found their computers were inoperable and the screens displayed a creepy-looking red skull with the message: “Hacked by #GOP”. 
More often, attacks are harder to recognise. For TalkTalk, the UK telecoms company that discovered on October 21 2015 that it had been hacked, the truth sank in much more gradually. Dido Harding, the chief executive, explained in a television interview two days later that by “lunchtime all we knew was that our website was running slowly and that we had the indications of a hacker trying to attack us”. 
It took TalkTalk 36 hours after discovering the hack to release a statement saying it had been attacked and warning customers that their data may have been compromised — a delay for which it would later be criticised.
Most hacks follow warnings that were overlooked: emailed tip-offs, both internal and external, about a potential security risk that were never read, phone calls that were ignored. 
Richard De Vere, a consultant at cyber security company The AntiSocial Engineer, says he contacted TalkTalk about a separate problem two weeks before the hack was made public. He had discovered that several self-hosted websites that used the company’s talktalk.net domain were infected with malware and could be used to aid social engineering attacks, where criminals trick people into revealing confidential information. 
He felt TalkTalk did not take him seriously. “After a week of emails and calls, nothing seemed to happen,” he recalls. Frustrated with the lack of progress, on October 9 Mr De Vere published a blog making the matter public. TalkTalk’s head of IT then contacted him via LinkedIn and the company decommissioned the talktalk.net domain. 
‘Most of the time these calls are not serious’
Mr De Vere says he later alerted TalkTalk to the main attack. This time the company’s senior technicians were listening.
John Smith, who worked as a chief information security officer (CISO) for private sector companies for 14 years, says IT security professionals often do not give tip-offs the necessary attention straight away. “Most of the time these calls are not serious, but you need to pay attention every time,” says Mr Smith (who is quoted under an assumed name to protect the identity of the organisations he has worked for). 
Verifying that there really has been a breach can be difficult, says Tammy Moskites, chief information officer and CISO at Venafi, a Utah-based IT security company. Leaked credit card numbers, for example, can be checked. But if a mix of types of information appears to have been exposed — for example, emails, credit card numbers and passwords — it can be difficult to know for sure whether this is due to an attack on a company’s computer systems or if information has leaked in other ways. These include customers falling victim to a scam or another company, which stores similar customer data, being attacked.
Once the hack is confirmed, things begin to move very quickly. “This is the ‘golden hour’ where every minute counts,” says Jamie Saunders, who leads the UK’s National Crime Agency’s efforts to fight cyber crime. 
The company’s first call should be to its incident response unit — a dedicated team trained to deal with attacks. This can be an in-house group or an external company on retainer. Having an incident team makes the biggest difference in reducing the cost of an attack, says Larry Ponemon, chairman and founder of the US-based Ponemon Institute, a security research group. However, only 29 per cent of UK companies have formal written cyber security policies, according to a 2016 UK government survey. 
“Detecting [a cyber attack] early is key,” says James Hatch, director of cyber services at BAE Systems, who advises companies on how to defend themselves. “It could be the difference between losing 10 per cent of your [computers] and 50 per cent.” 
“You are trying to get everyone into the war room very quickly,” says Mr Smith. “You have a plan for this kind of incident, you may have practised it. But right now you are wondering if the right people are reachable. It always seems to happen at the start of a long weekend and no one is around.” Having 24-hour-a-day, seven-day a week rota for staff can be crucial, he says.
JPMorgan, for example, did not have a CISO when it suffered a security breach in 2014. Neither did Target, the US retailer, when it was hacked in 2013, exposing 40m customer records. The cyber attack against Sony Pictures also came at a particularly vulnerable time for the company, when a new CISO was less than three months into the job. 
“For the first few hours you are just trying to find out what happened. Are the hackers still in your system? Can you see data still being transferred out? Some companies panic and want to just pull the plug out of the socket at that point to protect their system, but you cannot simply switch off. It sends a bad message to the outside world and impacts business operations,” says Mr Smith. 
‘You are actually wetting your pants at this point. Your goal was to prevent something like this happening and that hasn’t worked. No one wants this kind of blot on their career.’ 
JOHN SMITH, A FORMER CHIEF INFORMATION SECURITY OFFICER
It is reasonable for executives to be anxious. Both Gregg Steinhafel and Beth Jacob, Target’s former chief executive and ex-information officer respectively, lost their jobs following the data breach. The average tenure of a CISO at a company is a little more than two years, according to the Ponemon Institute. This is partly due to the fact that these professionals are in such high demand, but also due to job insecurity of those in the role.
At this stage, companies are often most concerned about making sure news of the hack does not spread. “You want as few people as possible talking about it,” says Mr Smith. “You call the CEO and tell him to keep his mobile phone switched on. You issue a gag order to everyone else.” 
There will be difficult discussions about which external bodies — from law enforcement and regulators to customers — must be told. “Nobody wants anyone else involved,” says Mr Smith. 
Another consideration is not wanting to let the hackers know they have been discovered, says Ms Moskites, the Venafi CISO. “If the hackers are still inside your system you may have to be creative about how you communicate if you don’t want to alert them.”
But complete secrecy may not be an option. If the cyber attack came from hacktivists who want to make a political statement, news is probably already leaking out. During the Sony hack, several Sony-related Twitter accounts were taken over and posted a picture showing Michael Lynton, chief executive of Sony Pictures, in an eerie environment, surrounded by skeletons and gravestones.
Most states in the US require companies to notify their customers, immediately or without unnecessary delay, if their personal data have been lost. In Europe, some countries, including Germany, Austria, Norway and the Netherlands, have introduced similar laws. EU data protection regulation, due to come into force in 2018, will extend this requirement across all member states. Under the new rules companies can face hefty fines for failing to disclose a loss of data. 
Even before the new rules come in, European telecoms companies are obliged to notify regulators about data breaches and if a company holds data on US citizens, it may be required to disclose the breach in the US. Disclosure rules in each US state differ slightly. 
“It is a potential nightmare,” says Antonis Patrikios, partner at Field Fisher Waterhouse, a UK-based law firm. “Companies are just starting to realise how complex this can be. It is important to think about your notification strategy before an incident happens. If you leave this to be decided when you are in the middle of dealing with an attack it can be a lot more complicated.” 
The company must also consider whether to call the police. Some 2.5m cyber crime offences take place in the UK each year, according to estimates by the government’s Office for National Statistics. “Almost every large organisation will have some kind of breach each year,” says Mr Hatch of BAE Systems. Only a fraction of these are ever reported to the authorities. 
“We are seeing companies that are more willing to engage us, but that is not the majority,” says Mr Saunders of the UK government’s National Cyber Crime Unit. “Some have had bad experiences. There are plenty of disincentives for companies on reporting. They don’t want PC Plod to come in and stop them from working. We are trying to become more sensitive to business priorities.” 
In the TalkTalk case, the police became involved immediately after the hack was detected, but there was tension over priorities.
“The advice we received from the Metropolitan Police was not to tell our customers,” said Baroness Harding, TalkTalk’s chief executive, in a testimony to the UK government’s Culture, Media and Sport Committee. “I totally understand why the police wanted us to stay quiet because they have a different objective. They want to catch the criminals. We had some constructive discussion with them … on how to marry the conflicting objectives.” 
Mr Smith admits he, like many corporate CISOs, believes pursuing criminals is a waste of time. “It is difficult to ascertain exactly where the hack came from — they are typically routed through so many countries,” he says. “Even if you found the computer that the attack was coming from, would you know you had really found the right people? If you have your business hat on you don’t really want to spend time on that.”
The company’s IT security team will be working around the clock at this stage. Some will have been in the office for 30 hours straight after the hack was discovered, surviving on takeaway pizza and strong coffee. 
The work will be tedious, often involving going through millions, if not billions, of log entries to find out exactly when and how the breach took place. 
The company should brace itself for unpleasant surprises — starting with finding out just how long the hackers have been in the system. “As you investigate you suddenly realise, ‘Oh my God, we were breached in April and it is now October — what happened?’” says Ms Moskites. 
It takes companies an average of 229 days — more than seven months — to discover a malicious attack, according to research by the Ponemon Institute. “It is not unusual for a problem to have been there a long time,” says Dave Palmer, director of technology at Darktrace, a UK-based cyber security company. “In one case we found that the problem had been there for eight years.”
‘You need a war room that has a washroom connected to it and a couple of sofas that people can sleep on. The team will bring in sleeping bags’
The way in which the company was breached may also be a surprise. Hardware that was not even considered an issue may have been the weak point. Mr Palmer gives the example of a law firm that discovered its video conferencing system had been compromised and had been livestreaming all the conversations to an unknown location from the boardroom for a week. 
Part of the challenge is keeping up security for an increasingly complex network. The IT team may have decommissioned old servers and simply forgotten to disconnect a couple. “It is like forgetting to get the old food from out of the back of the fridge,” says Ms Moskites. 
The attack may also have been embarrassingly simple. Former hackers themselves say that the skill level in many hacks is not high. “There is this joke in the hacker community that companies always say they got hit by an ‘advanced persistent threat’ to make it sound like it was something very complicated,” says Lauri Love, a British hacker who is accused of breaking into Pentagon computers and is currently fighting extradition to the US. Mr Love is now part of Hacker House, a social enterprise start-up that aims to encourage young computer experts to use their skills for positive ends. 
“There is a lot of code running on computers and some of it is kept up-to-date ... and some of it is not up to scratch. If you are persistent you will find it,” Mr Love says.
“It isn’t about Russia, China or GCHQ [the UK’s information security agency] launching outlandish, Mission Impossible-style attacks,” agrees Mr Palmer. “Mostly it is about routine, indiscriminate attacks.” Cyber attack tools can be bought on the black market by non-experts and criminals will often use these to target a wide range of companies, seeing which businesses are most vulnerable. 
In its review of the TalkTalk hacking case, the Culture, Media and Sport Committee noted that it was “no longer a defence” for a company to claim to be unaware of “established and in some cases routine” forms of cyber penetration. The committee recommended introducing an escalating series of fines if companies are caught out by basic attacks.
The average cost of a data breach is $4m, according to security researcher Mr Ponemon, or around $158 for each compromised record. In fact, the figure can vary considerably. Sony estimated in early 2015 that the combined cost of investigating its hack and offering remediation would be $15m, after recovering some losses from insurance. It will also pay up to $8m to settle a lawsuit brought by former employees whose personal data were stolen. 
By the end of 2015, according to Target’s financial statements, the company recorded costs of nearly $291m related to the 2013 data breach, including crisis communications, the forensic investigation and law suits.
The longer it takes to find a hack, the more costly it is to deal with. If a data breach can be identified within 100 days the cost to the company will on average be $3.2m, compared with an average of $4.4m to deal with hacks found after 100 days, according to the Ponemon Institute. 
TalkTalk has so far estimated that the October 2015 cyber attack will cost about £60m ($78m) to rectify. The company’s business has also taken a hit. Its pre-tax profit for 2016 fell to £14m, compared with £32m last year as about 100,000 customers left. 
TalkTalk's shares fell sharply in the aftermath of the hack and were down 30 per cent nearly a year later. The good news for companies is that the share price tends to recover relatively quickly following a cyber attack. 
Target, for example, saw its share price fall sharply in the immediate aftermath of the December 2013 attack. Nine months later, however, it had recovered. Even revelations that the company would have to pay more than $118m to settle lawsuits filed against it by banks, card issuers and customers failed to depress the share price. Sales growth and other corporate news gradually began to outweigh news of the hack. 
“People have short memories,” says Mr Palmer of Darktrace.
Insurance becomes a key consideration at this point. Insurance can cover the cost of the forensic investigation, the cost of notifying customers affected by the attack and even the cost of lawsuits. But companies must check carefully what they are buying, warns Sarah Stephens, head of cyber, technology and media at JLT Speciality, a UK-based insurance broker. 
‘Cyber insurance can cover the cost of dealing with the crisis, but not the extra work needed to fix the company’s security flaws’
“It can cover lost income from an attack, but not the longer-term impact on reputation,” says Ms Stephens. If cyber criminals transfer money from company accounts, this would not be covered by cyber insurance — but it should be covered under a different, criminal insurance policy. 
Documents leaked as part of the Sony Pictures hack suggest the company had at least $60m worth of cover at the time and Mr Lynton, the chief executive, told reporters the costs would be within insurance limits. 
Target was less lucky. Its cyber insurance policy will cover just $90m, less than a third of the costs. “They did have cyber insurance — just not enough,” says Ms Stephens.
After the hack, the company will typically have a serious review of its IT security. Meanwhile, the CISO, provided they are still in the job, will go on a shopping spree. “If you asked for $1m for a project before the hack and were turned down, you will now get $2m — no questions asked,” says Mr Smith, the former CISO.
“You do get more money. I have seen that quite a bit. But you have to move quickly because there are peaks and valleys in the spending and the further you get from the incident the more it will start to trickle off again,” says Ms Moskites, CISO at Venafi. 
Following the 2013 hack, for example, Target built a new cyber centre, bringing together all its IT security teams. 
But buying in technology will not on its own make companies safer. A complete change of tactics may be needed. TalkTalk is working not only with conventional security companies such as BAE Systems, but is looking for new ways to test its systems.
Mr Love of Hacker House says companies need to go back to basics. For example, they should review how reliant they are on third-party code they have not written themselves, which is probably more vulnerable. Companies must also train employees to become more vigilant and suspicious of emails that look unfamiliar, he says. 
Collaboration with other security professionals could also be improved. One idea that companies are increasingly exploring is so-called bug bounty programmes, where the company pays outsiders who notify it of security flaws. Big US technology companies such as Google and Facebook have operated such programmes for several years. More recently platforms such as Bugcrowd and HackerOne have created places where any company can ask independent security researchers to test its systems.
“After the first week you have a postmortem,” says Ms Moskites. “But when is it done? Just because you fixed the inside of the system, it doesn’t mean it is over. There is brand reputation and possibly many people who are impacted.” 
The fallout from the Sony Pictures hack was widespread. Employees had their social security numbers exposed and will have to be vigilant about identity theft for the rest of their lives. Leaked emails caused embarrassment to the studio, fuelling weeks of showbiz media stories. It ultimately led to the departure of Amy Pascal, co-chair of the film studio. 
Nearly three years after its attack, Target is still dealing with lawsuits.
TalkTalk says it is starting to see customer numbers growing again, but the investigation into the incident is continuing. London’s Metropolitan Police has so far arrested six people in connection with the data breach, ranging in age from 15 to 20 at the time of arrest. The young ages suggest the hackers were cyber vandals rather than career criminals.
The FBI and US President Barack Obama officially linked the Sony Pictures hack to North Korea, although some security professionals say the evidence presented by the FBI was scant. There has also been speculation it could have been an inside job by disgruntled employees. No one has yet been arrested in connection with the hack.








Is there such a thing is Trumponomics ? - Economist

Trumponomics
Donald Trump's economic policy is based on a picture of America that is out of date

From the print edition, May 13th 2017
DONALD TRUMP rules over Washington as if he were a king and the White House his court. His displays of dominance, his need to be the centre of attention and his impetuousness have a whiff of Henry VIII about them. Fortified by his belief that his extraordinary route to power is proof of the collective mediocrity of Congress, the bureaucracy and the media, he attacks any person and any idea standing in his way.
Just how much trouble that can cause was on sensational display this week, with his sacking of James Comey—only the second director of the FBI to have been kicked out. Mr Comey has made mistakes and Mr Trump was within his rights. But the president has succeeded only in drawing attention to questions about his links to Russia and his contempt for the norms designed to hold would-be kings in check.
Just as dangerous, and no less important to ordinary Americans, however, is Mr Trump’s plan for the economy. It treats orthodoxy, accuracy and consistency as if they were simply to be negotiated away in a series of earth-shattering deals. Although Trumponomics could stoke a mini-boom, it, too, poses dangers to America and the world.
AKLHk4sCSNmIQaYuMbV1.jpg

Trumponomics 101
In an interview with this newspaper, the president gave his most extensive description yet of what he wants for the economy. His target is to ensure that more Americans have well-paid jobs by raising the growth rate. His advisers talk of 3% GDP growth—a full percentage point higher than what most economists believe is today’s sustainable pace.
His target is to ensure that Americans have well-paid jobs by raising the growth rate
The Economist
In Mr Trump’s mind the most important path to better jobs and faster growth is through fairer trade deals. Though he claims he is a free-trader, provided the rules are fair, his outlook is squarely that of an economic nationalist. Trade is fair when trade flows are balanced. Firms should be rewarded for investing at home and punished for investing abroad.
The second and third strands of Trumponomics, tax cuts and deregulation, will encourage that domestic investment. Lower taxes and fewer rules will fire up entrepreneurs, leading to faster growth and better jobs. This is standard supply-side economics, but to see Trumponomics as a rehash of Republican orthodoxy is a mistake—and not only because its economic nationalism is a departure for a party that has championed free trade.
The real difference is that Trumponomics (unlike, say, Reaganomics) is not an economic doctrine at all. It is best seen as a set of proposals put together by businessmen courtiers for their king. Mr Trump has listened to scores of executives, but there are barely any economists in the White House. His approach to the economy is born of a mindset where deals have winners and losers and where canny negotiators confound abstract principles. Call it boardroom capitalism.
That Trumponomics is a business wishlist helps explain why critics on the left have laid into its poor distributional consequences, fiscal indiscipline and potential cronyism. And it makes clear why businessmen and investors have been enthusiastic, seeing it as a shot in the arm for those who take risks and seek profits. Stockmarkets are close to record highs and indices of business confidence have soared.
His approach to the economy is born of a mindset where deals have winners and losers
The Economist
In the short term that confidence could prove self-fulfilling. America can bully Canada and Mexico, into renegotiating NAFTA. For all their sermons about fiscal prudence, Republicans in Congress are unlikely to deny Mr Trump a tax cut. Stimulus and rule-slashing may lead to faster growth. And with inflation still quiescent, the Federal Reserve might not choke that growth with sharply higher interest rates.
Unleashing pent-up energy would be welcome, but Mr Trump’s agenda comes with two dangers. The economic assumptions implicit in it are internally inconsistent. And they are based on a picture of America’s economy that is decades out of date.
Contrary to the Trump team’s assertions, there is little evidence that either the global trading system or individual trade deals have been systematically biased against America. Instead, America’s trade deficit—Mr Trump’s main gauge of the unfairness of trade deals—is better understood as the gap between how much Americans save and how much they invest. The fine print of trade deals is all but irrelevant. Textbooks predict that Mr Trump’s plans to boost domestic investment will probably lead to larger trade deficits, as it did in the Reagan boom of the 1980s. If so, Mr Trump will either need to abandon his measure of fair trade or, more damagingly, try to curb deficits by using protectionist tariffs that will hurt growth and sow mistrust around the world.
Trumponomics draws on a blinkered view of America's economy
The Economist
A deeper problem is that Trumponomics draws on a blinkered view of America’s economy. Mr Trump and his advisers are obsessed with the effect of trade on manufacturing jobs, even though manufacturing employs only 8.5% of America’s workers and accounts for only 12% of GDP. Service industries barely seem to register. This blinds Trumponomics to today’s biggest economic worry: the turbulence being created by new technologies. Yet technology, not trade, is ravaging American retailing, an industry that employs more people than manufacturing. And economic nationalism will speed automation: firms unable to outsource jobs to Mexico will stay competitive by investing in machines at home. Productivity and profits may rise, but this may not help the less-skilled factory workers who Mr Trump claims are his priority.
The bite behind the bark
Trumponomics is a poor recipe for long-term prosperity. America will end up more indebted and more unequal. It will neglect the real issues, such as how to retrain hardworking people whose skills are becoming redundant. Worse, when the contradictions become apparent, Mr Trump’s economic nationalism may become fiercer, leading to backlashes in other countries—further stoking anger in America. Even if it produces a short-lived burst of growth, Trumponomics offers no lasting remedy for America’s economic ills. It may yet pave the way for something worse.

Economist

Cooking up an economic policy - Economist

Cooking up an economic policy
Donald Trump’s strategy is unimaginative and incoherent

From the print edition, May 13th 2017
“IF YOU want to test a man’s character, give him power.” To those sitting across the Resolute desk from Donald Trump, Abraham Lincoln’s dictum was less than reassuring. In his first interview with The Economist since taking office, which was dedicated to economic policy and took place five days before the sacking of FBI director James Comey, Mr Trump already seemed altered by the world’s most powerful job. The easy charm he displayed in his comfortable den on the 26th floor of Trump Tower when interviewed during last year’s campaign had acquired a harder edge. The contrast then visible between solicitous private Trump and public Trump, the intolerant demagogue of his rallies, was a bit less dramatic. Perhaps his advisers—including Gary Cohn and Steve Mnuchin, both of whom were in attendance in the Oval Office, and Jared Kushner, Reince Priebus, and Vice-President Mike Pence, who drifted in for parts of the interview—are succeeding in their effort to keep the freewheeling president to a more precise schedule. When it comes to the president’s economic policy agenda, however, it seems only one voice counts: Mr Trump’s.
Is there such a thing, we asked the president at the outset, as “Trumponomics?” He nodded. “It really has to do with self-respect as a nation. It has to do with trade deals that have to be fair.”

That is an unusual priority for a Republican president, but not for Mr Trump. The president has argued opposing sides of most issues over the years. But in his belief that America’s trade arrangements favour the rest of the world he has shown rare constancy. That makes Mr Trump’s apparent lack of interest in the details of the trade arrangements he fulminates against all the more astonishing. At one point he ascribed the faults he finds with the North American Free-Trade Agreement (NAFTA) to American officials being in a perpetual minority on its five-member arbitration panel: “The judges are three Canadian and two American. We always lose!” But an American majority on any given panel is as likely as a Canadian one.
Opportunism and gut feeling tend to guide Mr Trump's thinking
The Economist
His feelings about the failure of America’s trade regime show how opportunism and gut feeling tend to guide Mr Trump’s thinking. For almost half a century, he has sold himself a master negotiator. Rubbishing the government’s dealmaking record (which he, disdainful of geopolitics, reduces to the zero-sum terms of a property transaction) is part of that shtick. He is not merely cynical, however. An outsider who clung to memories of his father’s building sites in New York’s outer boroughs long after he made it in Manhattan, Mr Trump appears not merely to understand, but to share, the unfocused resentment of globalisation, and its hoity-toity champions, harboured by many working-class Americans.
The result is an emotional and self-regarding critique of America’s imperfect but precious trade architecture that appears largely waterproofed against economic reality. Having been recently persuaded not to withdraw America from NAFTA—a bombshell he had planned to drop on the 100th day of his presidency, April 29th—Mr Trump now promises a dramatic renegotiation of its terms: “Big isn’t a good enough word. Massive!”
Among Mr Trump’s economic advisers, perhaps only Peter Navarro, an economist with oddball views, and Stephen Bannon, the chief strategist, are outright protectionists. Most are nothing of the sort. Mr Mnuchin, the treasury secretary, and Mr Cohn, the chief economic adviser, are former investment bankers and members of a White House faction led by Mr Kushner, the president’s son-in-law, known as the globalists. So it is a sign of the issue’s importance to Mr Trump that all his advisers nonetheless speak of trade in Trumpian terms. “I used to be all for free trade and globalisation,” says an ostensible globalist. “I’ve undergone a metamorphosis.” Kafka, eat your heart out.
Notwithstanding the president’s concern for national pride, the main aim of Trumponomics is to boost economic growth. On the trail, Mr Trump sometimes promised an annual growth rate of 5%; his administration has embraced a more modest, though perhaps almost as unachievable, target of 3%. This makes Mr Trump’s ambition to mess with America’s trade arrangements all the more obviously self-defeating. A restrictive revision of NAFTA, an agreement that has boosted trade between America and Mexico tenfold, would dampen growth.
Toothsome morsels
Trumponomics’ other main elements are familiar supply-side tools. The most important, deregulation and tax reform, have been Republican staples since the Reagan era (see timeline). They are much needed; but they also need to be done well. There are reckonedto be 1.1m federal rules, up from 400,000 in 1970. Mr Trump has signed an order decreeing that federal agencies must scrap two for every new one they issue, which is laudable. He has also appointed as director of the Environmental Protection Agency a climate-change sceptic, Scott Pruitt, who appears not to believe in regulating industrial pollution, which is not. “I’ve cut massive regulations, and we’ve just started,” Mr Trump says.

The tax code, similarly, is so tangled that America has more tax preparers—over 1m, according to a project at George Washington University—than it has police and firefighters combined. The president promises to restore sanity by reducing income-tax rates and cutting corporate-tax rates to 15% while scrapping some of the myriad deductions to help pay for it. “We want to keep it as simple as possible,” he says.
A fourth element, infrastructure investment, is more associated with the Democrats, and equally desirable. Mr Trump and his advisers have promised anywhere between $550m and a trillion dollars to make America’s “roads, bridges, airports, transit systems and ports…the envy of the world”. A fifth ambition, to enforce or reform immigration rules, is rarely spoken of by him or his team as an economic policy. But if Mr Trump’s promises in this area are credible, it should be. He has launched a crackdown on illegal border crossings and also made it easier to deport undocumented workers without criminal records—a category that describes around half of America’s farm workers. Again, Mr Trump’s economic nationalism and his promises of redoubled growth are at odds.
Trumponomics, despite some tasty ingredients, is guilty of worse than incoherence. It also suggests a dismal lack of attention to the real causes of the economic disruption imposing itself on Mr Trump’s unhappy supporters. Automation has cost many more manufacturing jobs than competition with China. The winds of change blowing through retailing will remove far more relatively low-skilled jobs than threats aimed at Mexico could ever bring back (see article).
Mr Trump never mentions the retraining that millions of mid-career Americans will soon need. He appears to have given no thought to which new industries might replace those lost jobs. Nowhere in his programme is there consideration of the changes to welfare that a more fitfully employed workforce may require. Eyeing the past, not the future, he fetishises manufacturing jobs, which employ only 8.5% of American workers, and coal mining, though the solar industry employs two-and-a-half times as many people. Growth is good; but Trumponomics is otherwise a threadbare, retrograde and unbalanced response to America’s economic needs.
Where is this heading? The S&P500 has gained 12% since Mr Trump’s election, suggesting that investors believe his promises of growth and discount his crazier rhetoric. In recent weeks he has seemed to vindicate that confidence, preferring to moderate his views than pay a price for them. He was persuaded not to withdraw from NAFTA after his agriculture secretary, Sonny Perdue, presented him with a map showing that many of the resultant job losses would be in states that voted for him. Where once he railed against legal, as well as illegal, immigration, he appears to have been persuaded of the economic damage restricting the influx would do. Asked whether he still meant to curb legal immigration, he protested: “No, no, no, no!...I want people to come in legally...We also want farm workers to be able to come in...We like those people a lot.”
Bitter aftertaste
Yet this drift to pragmatism should not be relied on. On trade, especially, Mr Trump has deeply held views, sweeping powers, a history of intemperance and a portfolio of promises he thinks he should keep. The fact that he has not yet fired the self-styled custodian of those campaign promises, Mr Bannon, who is at war with the president’s treasured son-in-law, Mr Kushner, is emblematic of that bind.
Another reason for caution is that Mr Trump is losing control over those parts of his economic agenda, including tax reform and infrastructure spending, where he is largely reliant on Congress. Given how little of anything gets done on the Hill these days, this looks like another check on the president—one for which his own behaviour is additionally to blame. To pass ambitious tax or infrastructure bills would require support from the Democrats. Yet the president rarely misses an opportunity to insult the opposition party, including his predecessor, Barack Obama, whose health-care reform and regulatory legacy he is trying to dismantle. It is thus hard to imagine the Democrats voting for anything in Mr Trump’s agenda—and there are limits, the president concedes, to his willingness to persuade them to. Would he, for example, release his tax returns, as the Democrats have demanded, if they made that the price of their support for tax reform? He would not: “I think that would be unfair to the deal. It would be disrespectful of the importance of this deal.”
Trump is losing control over parts of his economic agenda, including tax reform and infrastructure spending
The Economist
The result looks likely to be no serious infrastructure plan and tax cuts which will be temporary and unfunded—the sort that Republicans, when in power, tend to settle for, and to which Mr Trump already appears resigned. Where once he claimed to see bubbles in the economy, he now says that a dose of stimulus is what it needs. If Mr Trump’s past brittleness under pressure is a guide, such setbacks, far from cowing him, could spur him to bolder action in fields where he sees less constraint.
Cooking up an economic policy
Donald Trump’s strategy is unimaginative and incoherent

From the print edition, May 13th 2017
“IF YOU want to test a man’s character, give him power.” To those sitting across the Resolute desk from Donald Trump, Abraham Lincoln’s dictum was less than reassuring. In his first interview with The Economist since taking office, which was dedicated to economic policy and took place five days before the sacking of FBI director James Comey, Mr Trump already seemed altered by the world’s most powerful job. The easy charm he displayed in his comfortable den on the 26th floor of Trump Tower when interviewed during last year’s campaign had acquired a harder edge. The contrast then visible between solicitous private Trump and public Trump, the intolerant demagogue of his rallies, was a bit less dramatic. Perhaps his advisers—including Gary Cohn and Steve Mnuchin, both of whom were in attendance in the Oval Office, and Jared Kushner, Reince Priebus, and Vice-President Mike Pence, who drifted in for parts of the interview—are succeeding in their effort to keep the freewheeling president to a more precise schedule. When it comes to the president’s economic policy agenda, however, it seems only one voice counts: Mr Trump’s.
Is there such a thing, we asked the president at the outset, as “Trumponomics?” He nodded. “It really has to do with self-respect as a nation. It has to do with trade deals that have to be fair.”
That is an unusual priority for a Republican president, but not for Mr Trump. The president has argued opposing sides of most issues over the years. But in his belief that America’s trade arrangements favour the rest of the world he has shown rare constancy. That makes Mr Trump’s apparent lack of interest in the details of the trade arrangements he fulminates against all the more astonishing. At one point he ascribed the faults he finds with the North American Free-Trade Agreement (NAFTA) to American officials being in a perpetual minority on its five-member arbitration panel: “The judges are three Canadian and two American. We always lose!” But an American majority on any given panel is as likely as a Canadian one.
Opportunism and gut feeling tend to guide Mr Trump's thinking
The Economist
His feelings about the failure of America’s trade regime show how opportunism and gut feeling tend to guide Mr Trump’s thinking. For almost half a century, he has sold himself a master negotiator. Rubbishing the government’s dealmaking record (which he, disdainful of geopolitics, reduces to the zero-sum terms of a property transaction) is part of that shtick. He is not merely cynical, however. An outsider who clung to memories of his father’s building sites in New York’s outer boroughs long after he made it in Manhattan, Mr Trump appears not merely to understand, but to share, the unfocused resentment of globalisation, and its hoity-toity champions, harboured by many working-class Americans.
The result is an emotional and self-regarding critique of America’s imperfect but precious trade architecture that appears largely waterproofed against economic reality. Having been recently persuaded not to withdraw America from NAFTA—a bombshell he had planned to drop on the 100th day of his presidency, April 29th—Mr Trump now promises a dramatic renegotiation of its terms: “Big isn’t a good enough word. Massive!”
Among Mr Trump’s economic advisers, perhaps only Peter Navarro, an economist with oddball views, and Stephen Bannon, the chief strategist, are outright protectionists. Most are nothing of the sort. Mr Mnuchin, the treasury secretary, and Mr Cohn, the chief economic adviser, are former investment bankers and members of a White House faction led by Mr Kushner, the president’s son-in-law, known as the globalists. So it is a sign of the issue’s importance to Mr Trump that all his advisers nonetheless speak of trade in Trumpian terms. “I used to be all for free trade and globalisation,” says an ostensible globalist. “I’ve undergone a metamorphosis.” Kafka, eat your heart out.
Notwithstanding the president’s concern for national pride, the main aim of Trumponomics is to boost economic growth. On the trail, Mr Trump sometimes promised an annual growth rate of 5%; his administration has embraced a more modest, though perhaps almost as unachievable, target of 3%. This makes Mr Trump’s ambition to mess with America’s trade arrangements all the more obviously self-defeating. A restrictive revision of NAFTA, an agreement that has boosted trade between America and Mexico tenfold, would dampen growth.
Toothsome morsels
Trumponomics’ other main elements are familiar supply-side tools. The most important, deregulation and tax reform, have been Republican staples since the Reagan era (see timeline). They are much needed; but they also need to be done well. There are reckonedto be 1.1m federal rules, up from 400,000 in 1970. Mr Trump has signed an order decreeing that federal agencies must scrap two for every new one they issue, which is laudable. He has also appointed as director of the Environmental Protection Agency a climate-change sceptic, Scott Pruitt, who appears not to believe in regulating industrial pollution, which is not. “I’ve cut massive regulations, and we’ve just started,” Mr Trump says.
xIPypKbVQcK2GgL4cV4P.jpg

The tax code, similarly, is so tangled that America has more tax preparers—over 1m, according to a project at George Washington University—than it has police and firefighters combined. The president promises to restore sanity by reducing income-tax rates and cutting corporate-tax rates to 15% while scrapping some of the myriad deductions to help pay for it. “We want to keep it as simple as possible,” he says.
A fourth element, infrastructure investment, is more associated with the Democrats, and equally desirable. Mr Trump and his advisers have promised anywhere between $550m and a trillion dollars to make America’s “roads, bridges, airports, transit systems and ports…the envy of the world”. A fifth ambition, to enforce or reform immigration rules, is rarely spoken of by him or his team as an economic policy. But if Mr Trump’s promises in this area are credible, it should be. He has launched a crackdown on illegal border crossings and also made it easier to deport undocumented workers without criminal records—a category that describes around half of America’s farm workers. Again, Mr Trump’s economic nationalism and his promises of redoubled growth are at odds.
Trumponomics, despite some tasty ingredients, is guilty of worse than incoherence. It also suggests a dismal lack of attention to the real causes of the economic disruption imposing itself on Mr Trump’s unhappy supporters. Automation has cost many more manufacturing jobs than competition with China. The winds of change blowing through retailing will remove far more relatively low-skilled jobs than threats aimed at Mexico could ever bring back (see article).
Mr Trump never mentions the retraining that millions of mid-career Americans will soon need. He appears to have given no thought to which new industries might replace those lost jobs. Nowhere in his programme is there consideration of the changes to welfare that a more fitfully employed workforce may require. Eyeing the past, not the future, he fetishises manufacturing jobs, which employ only 8.5% of American workers, and coal mining, though the solar industry employs two-and-a-half times as many people. Growth is good; but Trumponomics is otherwise a threadbare, retrograde and unbalanced response to America’s economic needs.
Where is this heading? The S&P500 has gained 12% since Mr Trump’s election, suggesting that investors believe his promises of growth and discount his crazier rhetoric. In recent weeks he has seemed to vindicate that confidence, preferring to moderate his views than pay a price for them. He was persuaded not to withdraw from NAFTA after his agriculture secretary, Sonny Perdue, presented him with a map showing that many of the resultant job losses would be in states that voted for him. Where once he railed against legal, as well as illegal, immigration, he appears to have been persuaded of the economic damage restricting the influx would do. Asked whether he still meant to curb legal immigration, he protested: “No, no, no, no!...I want people to come in legally...We also want farm workers to be able to come in...We like those people a lot.”
Bitter aftertaste
Yet this drift to pragmatism should not be relied on. On trade, especially, Mr Trump has deeply held views, sweeping powers, a history of intemperance and a portfolio of promises he thinks he should keep. The fact that he has not yet fired the self-styled custodian of those campaign promises, Mr Bannon, who is at war with the president’s treasured son-in-law, Mr Kushner, is emblematic of that bind.
Another reason for caution is that Mr Trump is losing control over those parts of his economic agenda, including tax reform and infrastructure spending, where he is largely reliant on Congress. Given how little of anything gets done on the Hill these days, this looks like another check on the president—one for which his own behaviour is additionally to blame. To pass ambitious tax or infrastructure bills would require support from the Democrats. Yet the president rarely misses an opportunity to insult the opposition party, including his predecessor, Barack Obama, whose health-care reform and regulatory legacy he is trying to dismantle. It is thus hard to imagine the Democrats voting for anything in Mr Trump’s agenda—and there are limits, the president concedes, to his willingness to persuade them to. Would he, for example, release his tax returns, as the Democrats have demanded, if they made that the price of their support for tax reform? He would not: “I think that would be unfair to the deal. It would be disrespectful of the importance of this deal.”
Trump is losing control over parts of his economic agenda, including tax reform and infrastructure spending
The Economist
The result looks likely to be no serious infrastructure plan and tax cuts which will be temporary and unfunded—the sort that Republicans, when in power, tend to settle for, and to which Mr Trump already appears resigned. Where once he claimed to see bubbles in the economy, he now says that a dose of stimulus is what it needs. If Mr Trump’s past brittleness under pressure is a guide, such setbacks, far from cowing him, could spur him to bolder action in fields where he sees less constraint.
The extent of his rule-cutting already looks unprecedented. If Mr Bannon has his way, it will put paid not merely to outworn regulations, but to whole arms of the federal bureaucracy, perhaps including the EPA. Whether he succeeds in that will probably be determined by the courts. How far the administration acts on Mr Trump’s trade agenda is harder to predict, though likelier to define it.
Perhaps Mr Trump will continue to restrain himself in this regard. As the pressures of office mount, so the reasons to avoid a damaging trade war will multiply. China might offer more help against North Korea; or Mexico some sort of face-saving distraction from the border-wall Mr Trump has promised but is struggling to build. Don’t bet on it, though. Mr Trump is a showman as well as a pragmatist. His hostility to trade is unfeigned. And his administration, as the sacking of Mr Comey might suggest, could yet find itself in such a hole that a trade war looks like a welcome distraction.
Next section »

Economist