On Monday (March 27), the White House unveiled a new initiative to bring business ideas from the "real world" to overhaul federal bureaucracy in the form of a new agency.
It'll be called the White House Office of American Innovation (OAI), and it will be spearheaded by Trump's top advisor and son-in-law, real estate mogul Jared Kushner.
The innovation office will be "an offensive team" - an aggressive, business-focused ideas factory -- according to Kushner, who spoke about the OAI with The Washington Post on March 26.
"We should have excellence in government," Kushner said. "The government should be run like a great American company. Our hope is that we can achieve successes and efficiencies for our customers, who are the citizens."
The media quickly praised the decision:
"Trump taps Kushner to lead a SWAT team to fix government with business ideas," wrote The Washington Post.
"Critics shouldn't look at the Kushner project as a reason to protest," said Brian Womack, an enterprise tech reporter for Bloomberg.
But while the media is putting a positive spin on the OAI's agenda, they seem to be ignoring a few key concerns...
The U.S. Is Not Russia
Money Morning Capital Wave Strategist Shah Gilani believes this new office is going to encounter the same problems that previous administrations have dealt with.
According to The Post, the OAI will hold extensive powers to potentially privatize certain government responsibilities by culling ideas from the business community.
However, this idea is not unique or revolutionary. Governments have been sending public services to the private sector - the exact agenda that the innovation office is pushing for - for decades. This trend stems from the common belief that private companies can help governments save or make money by doing jobs faster and cheaper.
"They've been trying to do this since the 80s," Gilani said yesterday (March 28). "The joke is that the government doesn't really help. They never have. They just continue to get in the way!"
You see, Gilani has been closely following the actions of this new administration in order to spot key trends that may disrupt the markets - and investors' money.
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He's concerned about what privatization - the transfer of a business, industry, or service from public to private ownership and control - could do to the markets. That's because this same thing occurred in Russia almost 30 years ago...
And it failed.
Yes, privatization enabled Russia to shift from a deteriorating economy towards an up-and-coming market economy. But it also shifted a significant amount of wealth to a relatively small group of business oligarchs and oil executives - something that could easily occur on American soil.
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"You know, I'm all for a little bit of privatization. But you have to remember, this is not Russia. We are not Russia, and we need to be careful," Gilani said.
"Back when Russia did this same thing, it was a disaster! The stakeholders demanded huge payoffs when they did this. If the government is going to be full of billionaires and entrepreneurs, they aren't going to do this without large fees. Think of all of the private interests here... I'm concerned," he warned.
Indeed, the new office will be working closely with industry titans - all of which bring their own set of interests to the office...
How Much Do You Trust the Government?
Kushner told The Washington Post that one of his first priorities would be "reimagining" Veterans Affairs, a department that the incoming administration had proposed privatizing before it even took office.
In addition to the VA, Kushner also told The Post that the office will strive to focus on technology and data by working with leaders like Apple Inc. (Nasdaq: AAPL) CEO Tim Cook and Microsoft Corp. (Nasdaq: MSFT) founder Bill Gates. In fact, Kushner told The Post the office will aim to provide "broadband Internet access to every American."
That sounds great...
But Gilani pointed out a very big flaw with that goal. Do you really want the government partnering with the people who have direct access to all of your information? Unlikely.
Even worse, do you want to pay for the government to have this access?
"If the government thinks it's so important that everyone has broadband, fine. But who is going to pay for it? Someone has to build the infrastructure! Someone has to pay!" said Gilani.
"Basically, they are saying that broadband is so important that they're going to make it a utility. Now, you're taking profitability away from private companies," according to Gilani.
"Certainly, I would like to have some clarity from Kushner and this new office. I think they need to keep what matters in sight. You work for the American people. And if you work for them, you don't impede them."
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