The Atlantic magazine has just released a remarkable essay written by the political commentator, David Frum, entitled, “How to Build an Autocracy.” Says Mr. Frum, “Donald Trump will not set out to build an authoritarian state. His immediate priority seems likely to be to use the presidency to enrich himself. But as he does so, he will need to protect himself from legal risk. Being Trump, he will also inevitably wish to inflict payback on his critics. Construction of an apparatus of impunity and revenge will begin haphazardly and opportunistically. But it will accelerate. It will have to.”
Let’s assume that Mr. Frum is correct that Trump’s top priority is to enrich himself. What will stop him from doing this? A recent column in the New York Times points out that:
54% of registered voters in congressional districts represented by Republicans view Mr. Trump favorably compared with only 42% who view him unfavorably.
In these same districts, 87% of registered Republicans view Mr. Trump favorably.
In other words, the Republican dominated Congress is unlikely to strongly oppose his sleazy and self-enriching behavior.
But there are other constraints on what he does in office:
As I said in a recent post in order for Mr. Trump to be reelected in 2020, he will need to substantially speed up economic growth in order to increase the wages of his key blue-collar supporters. He clearly wants to accomplish this.
On the other hand, the conservative Republican base, including its representatives in the House such as the Freedom Caucus, will simply not support huge increases in deficit spending for anything (except an emergency) including infrastructure, the military or unfunded tax cuts.
In fact, Rep Mick Mulvaney (R, SC), a deficit hawk, has been nominated to become the Trump Administration’s Budget Director. In March the debt ceiling will have to be raised. I expect the many fiscal conservatives in Congress to insist on significant fiscal restraint (e.g. a ten year plan to balance the budget) as a tradeoff for raising the debt ceiling.
Conclusion. Just because Republicans are tolerant of Mr. Trump’s personal behavior does not mean he can successfully ignore the strong Republican desire for fiscal restraint.
Globalization is having a dramatic effect on income distribution around the world as I discussed in a previous post. Middle incomes in the developed world are stagnating while at the same time they are growing rapidly throughout much of the rest of the world.
At the same time as western world economies are stagnating, turmoil and instability are breaking out elsewhere, especially in eastern Europe, the Middle East and northern Africa. Fortunately the U.S. and its allies are stepping in with military force to help maintain local order in many parts of the world where it is breaking down.
In short, at the same time, whether connected or not, the postwar geopolitical system is breaking down and the economic stability of the Great Moderation has given way to the Great Recession and its aftermath of macroeconomic volatility.
An interesting article by Chrystia Freeland in the latest issue of The Atlantic, “Globalization Bites Back” addresses both of these issues together. She says “I believe that capitalist democracy has proved itself to be the only compelling, universalist vision of how to live the good life. But the stable world order many of us assumed this thesis foretold has not come to pass.” As the above chart shows, one very positive result of this messy process is likely to occur. The middle class worldwide is predicted to grow from 1.8 billion in 2009 to 4.9 billion in 2030. All of this enormous growth in the size of the middle class will occur outside of North America and Europe.
The implications for the continued prosperity and world leadership of the U.S. are clear. We need to get our own economy back on track, growing at a faster rate. We also need to get our fiscal house in order so that the dollar will continue to be the international currency of choice.
Our dominant role in world affairs is beneficial to all but it is by no means assured without much effort on our part.
The July/August 2013 issue of the Atlantic Magazine has an article “Can Government Play Moneyball?”, by two former budget officials, Peter Orszag (under President Obama) and John Bridgeland (under President Bush), which describes the very careless spending atmosphere in the federal government in recent years. “Based on our rough calculations”, they write, “less than $1 out of every $100 of government spending is backed by even the most basic evidence that the money is being spent wisely.” They describe in great detail their efforts to introduce mechanisms to evaluate the performance of social service programs of various types and how difficult this has been to accomplish.
“Since 1990, the federal government has put 11 large social programs, collectively costing taxpayers more than $10 billion a year, through randomized controlled trials, the gold standard of evaluation. Ten out of the eleven – including Upward Bound and Job Corps – showed “weak or no positive effects on their participants.” Here’s another example. “The federal government’s long running after school program, 21st Century Community Learning Centers, has shown no effect on academic outcomes on elementary-school students – and significant increases in school suspensions and incidents requiring other forms of discipline. The Bush administration tried to reduce funding for the program” but was overruled by Congress. “Today the program still gets more than $1 billion a year in federal funds.”
Lots of people complain that the sequester is a “dumb” way to cut federal spending. Of course, it would make far more sense to cut back spending in a rational way by evaluating all programs, keeping the effective ones and eliminating the ineffective ones. As the sequester takes bigger and bigger across-the-board spending cuts each year for nine more years (it’s a program to cut $1 trillion over ten years), the big spenders in Congress are going to start crying “Uncle”! because their own favorite programs will be effected more and more deeply each year. Maybe then, hopefully sooner than later, Congress will gain some collective common sense and accept the fact that there is a better way to make the significant budget cuts that are necessary.
Let’s hope so!