The Economic Consequences of Donald Trump

By Pavlina R. Tcherneva

Cross-posted at New Economic Perspectives

Economic consequences

A lot has been said already. For me, this was the culmination of a decades-long process where the Democrats sold out their progressive agenda and happily embraced the Republican’s neoliberal economic policies. For some of the best analysis, see here, here, here and here.

My own view is that the Democrats have not had an economic policy of their own for nearly half a century, just an ‘inferior’ version of what Republicans usually champion—tax cuts on the wealthy, dismantling the public safety-net, ‘fighting’ inflation by creating unemployment, market liberalization and deregulation across the board, which among other things brought us a colossal financial sector that has cannibalized the productive economy.

Democrats need to grapple with the reality that Bill Clinton completed the Reagan revolution, and what we got from both parties is rabid financialization, extreme inequality, corporate welfare, joblessness, and economic insecurity: precisely the conditions that fan the flames of social antagonism and deep-seated racism and bigotry. There are many ways to tell this story but, just think, the real incomes of the vast majority of US households have barely moved in the last two decades. Most of us live in stagnation (at best) and many communities are mired in an ongoing recession (even depression), while the economy is ‘officially’ growing.

Neo-liberalism on steroids

As vile as Trump’s campaign was, many of his supporters have legitimate gripes about the state of the economy and about big money in politics. Of course, the notion that Trump is the ‘man of the people’ who will deliver the kind of change they (we) need is preposterous. In fact, his entire economic platform is basically the one I already described above. Nothing has changed. It is the same old plain vanilla “trickle-down economics” we know too well.

And all of us, but especially poor working folk, will hurt even more if Trump repeals Obamacare and the Dodd-Frank Act, gives more tax cuts to the ultra-rich, cuts the budgets of the Department of Education and the EPA, and continues to weaken labor bargaining, to name just a few of his to-do items. All of this is a continuation of neo-liberal policies but on steroids.

The long-term prospects for the economy are dismal. While I do not foresee the economic Armageddon many are predicting in the immediate future, what we will see is another sequel of the structural forces that have brought us the economic ills, which produced this election result–outsized corporate power, unbearable inequality, and increased financial instability. The one bright spot could be his plan for over $Trillion in infrastructure investment. That is something we surely need. But remember, if it does not translate into genuine deficit spending, and Congress tries to ‘pay’ for these expenditures by slashing other Federal programs, there will be no ‘stimulus’. What one hand gives, the other will take away. And Mitch McConnel is already on record that infrastructure is not a priority. But if the deficit expenditure is there and Trump ends up “reviving our inner cities” and restoring infrastructure so “it’s second to none” (as per his acceptance speech), that will benefit the economy and create jobs (though it might come with a giant neon TRUMP sign on every new bridge).

But no one should have any illusions. America elected someone very much from the wealthy elite, a privileged member of the establishment, who happened to be a better salesperson.

A social plague

Unfortunately, it is impossible to discuss the ‘economic consequences of Trump’ in an objective way because he has unleashed a plague on our society, from which we will suffer for many years. Trump has brought white supremacy out of the shadows and has normalized bigotry, misogyny, and hate in ways we hadn’t seen in decades. He has now given permission for the resurgence of overt racism. And while this may well have been already underway, racism and economic anxiety are deeply intertwined, and both seem to be reaching a new fever pitch.

This cancer will stay with us for years to come and must be fought every step of the way. Whatever our gripes and differences about the economy, we must together collectively stand against acts of hate. Nothing will erode the social fabric more and undermine our ability to make progress on economic matters than this poison. Fear sells.

As FDR warned us long ago:

“We have come to a clear realization that true individual freedom cannot exist without economic security and independence. People who are hungry and out of a job are the stuff of which dictatorships are made.” (FDR)

Democracy didn’t fail. It did exactly what it was supposed to do. But:

“The liberty of a democracy is not safe if the people tolerated the growth of private power to a point where it becomes stronger than the democratic state itself. That in its essence is fascism: ownership of government by an individual, by a group, or any controlling private power.” (FDR)

Looking ahead

So while the mainstream pundits are burning their batteries trying to sort out what went wrong, we need to get to work—do something useful, say something inclusive, stand up to a bully, be safe and keep advocating and working for social justice.

That’s what I intend to do. On Monday I will present at James Galbraith’s conference of the Economists for Peace and Security in Washington, D.C. (Register here). Peace and Security. Two things many of us do not feel right now. I cannot think of a better place to be, discussing more important topics, given these election results. I will be talking about youth unemployment. The election has exposed further our desperate need to design genuinely inclusive social policies.

What we have here is a crucial moment to mobilize, to start drafting a Democratic progressive agenda from scratch, to shed the destructive neoliberal policies so wonderfully championed by Democrats and Republicans alike.

An Economic Bill of Rights

What might that look like? My preference would be to take inspiration from Franklin Delano Roosevelt and design policies around the Economic Bill of Rights – policies that create jobs for all, boost incomes, usher in a Green New Deal, transform our energy system, complete the safety-net with paid family leave, universal child allowance, strengthened social security, guarantee healthcare for all, invest in public education, provide debt relief for families, renew anti-trust policies and aggressive financial regulation, to name a few.  And save the environment.  Because if we don’t, none of the above will matter.

Never let a good crisis go to waste.

The Liberals Didn’t Listen: The Immense Cost of Ignoring Tom Frank’s Warnings

By William K. Black

Cross-posted with New Economic Perspectives

November 8, 2016     Kansas City, MO

I am writing this article late on election night in my office at the University of Missouri-Kansas City, about a mile from the home in which Tom Frank grew up just over the state line in Kansas.  Beginning with his famous book, What’s the Matter with Kansas, first published in 2004, Tom Frank has been warning the Democratic Party of the increasing cost it was paying by abandoning and even attacking the working class, particularly the white working class.  Some political scientists tried to savage his work, pointing to Bill Clinton’s electoral success and arguing that the disaffected members of the working class were also less likely to vote.  Frank returned to the theme just in time for this election with a new book – Listen, Liberal – that documents in damning, lively narrative the New Democrats’ war on the New Deal, their disdain for organized labor, and their antipathy for what they viewed as retrograde white working class attitudes.

Frank kept showing the enormous price the working class were paying as a result of the economic policies of the Republicans and the New Democrats, and the indifference to their plight by the leaders of the New Democrats.  Senator Bernie Sanders consciously took up the cause of reducing surging inequality and became a hero to a broad coalition of voters, many of them fiercely opposed to the New Democrats’ embrace of Wall Street cash, policies, and arrogance.  Sanders set records for small donor fundraising and generated enormous enthusiasm.  Sanders knew he would face the opposition of the New Democrats, but he also found that progressive congressional Democrats would rarely support him publicly in the contest for the Party’s nomination and even union leaders sided overwhelmingly with Secretary Hillary Clinton, the New Democrats’ strongly preferred candidate.

Hillary did not simply fail to reach out to the working class voters that the New Democrats had turned their backs on for decades, she infamously attacked them as “deplorables.”  This was exactly the group of potential voters that was enraged because it believed, correctly as Tom Frank keeps showing us, that the New Democrats looked down on them and adopted policies that rigged the system against the working class.  Hillary’s insult confirmed their most powerful bases for their rage against her.  Her insult was an early Christmas present to Trump.  Her attempt to walk the insult back was doomed.

Hillary Clinton handled things so miserably that she allowed a plutocrat whose career is based on rigging the system against the working class to become the hero of the working class.  That is world-class incompetence.  Had she followed Tom Frank’s advice she would today be the President-elect.  The real cost, however, of her failure will be enormous damage to our democracy, the safety of the world, and the damage that President Trump will do to the working class as he systematically betrays their interests.

The first test of whether the Wall Street-wing of the Democratic Party has learned any of the lessons Tom Frank tried to teach them is whether President Obama will continue with his threat to try to have the Trans-Pacific Partnership (TPP) approved by the lame duck session of Congress.  Obama, who was elected on the promise that he would stop TPP, should listen to Senators Sanders and Warren and honor his promise to the voters to stop TPP.  He must begin the process of the Democrats winning back the support of the working class.

The leaders of the democratic-wing of the Democratic Party need to move forward assertively to retake control of their Party.  The current head of the DNC has been exposed as part of the effort to prevent Senator Sanders from winning the nomination.  She should resign tomorrow.  The Clintons should cease acting as Party leaders.

A period of enormous corruption and elite fraud is coming soon as the Trump administration brings its signature characteristic – crony capitalism – to bear to control all three branches of government.  Trump promises to deregulate Wall Street, appoint top supervisors chosen for their unwillingness to supervise, and appoint judges who will allow CEOs to loot with impunity.  Trump promises to outdo even the savage anti-media and anti-whistleblower policies of the Obama administration.  The House and Senate committee chairs will intensify their blatantly partisan use of investigations while refusing to conduct real oversight hearings revealing the elite fraud and corruption.

The progressive Senate Democrats will have to be innovative and stalwart in these circumstances to find ways to blow the whistle repeatedly on the mounting corruption.  Their challenge will be to lead despite having no real institutional power.  Democrats should start by doing what they should have done in 2004 – take Tom Frank’s warnings deadly seriously.