Login | October 19, 2017

Will Trump abandon the free market?

SCOTT PIEPHO
Cases and Controversies

Published: October 13, 2017

Last weekend’s social media/Sunday show donnybrook between Tennessee Sen. Bob Corker and President Donald Trump rekindled interest in a favorite sport among politics nerds: Looking for the fail point in the current Republican power structure. Simply put, the question is at what point will congressional Republicans abandon the president en masse?

That question should be of primary concern to this president. His already-shaky support is responsible for a largely stalled legislative agenda. But at the same time, Congress has held off from investigating this administration.

Setting aside Trump’s Russian problems, each week has brought some revelation that, if they happened to a Democratic administration, would have filled another six months in Darrell Issa’s hearings calendar. For example, Republicans would have been quite interested in hearing why a Democratic chief of staff’s cell phone was compromised for months.

It currently looks like Congress may even be declining to investigate to avoid further damaging an already weak administration. At some point, the general discontent evinced by Corker’s brutal frankness could change that, which in turn could bring the administration to a premature end. The question is what it will take.

One possibility is a return to the muscular Trumpism of the campaign—a worker-friendly populism that breaks with Republican economic orthodoxy. As a candidate, Trump ran as an anti-trade populist, skeptical of the free market and promising the return of high-paying manufacturing jobs.

In doing so, he turned the Republican coalition upside-down. Since Ronald Reagan, Republican economic policy has been based on an unwavering commitment to free markets. That commitment has formed the foundation of the major elements of the Republican economic project since Reagan including free trade, deregulation, shrinking the public sector and weakening labor unions.

Ironically, these policies did much to hollow out the country’s industrial sector, even as white blue-collar workers increasingly supported the Republican party. Republicanism represented a coalition of the strongest acolytes of free market orthodoxy elected by some of the market’s biggest losers.

With Trump in the White House, the free marketeers for now support a champion of those to whom the market has been less than kind.

In contrast to his campaign rhetoric, as president, his economic policy has looked like standard issue Republicanism. The various Obamacare repeal schemes revolved around reducing the government’s role in health care markets. Thus far he has abandoned the promise of a middle-class tax cut for one whose benefits overwhelmingly inure to the wealthiest.

But in so doing, he has reached the end of what free market policies can do toward helping his base of disaffected blue-collar voters. A 20 percent corporate tax rate is not going to yield an explosion of high-paying factory jobs. The president will no doubt tweet that it will, but he may also be smart enough to know that at some point people will notice when it doesn’t.

A possible preview of the economic policy that might define a Trump 2.0 came last week as the administration announced a plan to save the coal industry.

Jordan Weissman in Slate reports that the plan would include a Federal Energy Regulatory Commission rule requiring that utilities “purchase electricity from coal and nuclear plants at prices guaranteeing them a profit.”

In the current market, natural gas-fueled power plants can run cheaper than coal, and often cheaply enough that coal-fired plants can’t clear a profit charging the same price. For the sake of benefiting workers in a few coal states—which happen to include electorally crucial Ohio and Pennsylvania—the rule will increase prices for residential ratepayers.

Trump’s coal rescue plan carries every vice of the worst market-defying policies: It benefits a small group at the expense of citizens generally, it lets principles hide their environmental costs and it probably won’t even accomplish its intended purpose.

One terrible piece of industrial policy won’t end the current détente between the two ends of Pennsylvania Avenue. But this could be the beginning of a new Trumpism that forswears fealty to markets in favor of guaranteeing jobs to the new base. At various times Trump has advocated for protectionism, increased public works spending and regulations that tilt the field in favor of certain favored industries.

If this administration’s next phase reflects the unorthodox economic thinking that marked the campaign, it could spur the more ideological members of the caucus to find ways to push back.

Congressional Republicans have remained largely unstirred by concerns about the president’s contempt for democratic norms or his bellicose temperament. Time will tell whether they will rise to defend a decades-long lynchpin of Republicanism.


[Back]