The Growth Imperative

Column: An economic boom is the only way to stop the populists

Donald Trump
• October 14, 2016 5:00 am


Unprecedented. Incredible. Never seen anything like it.

These words have been uttered often about the 2016 presidential campaign. Donald Trump, it is said, is a unique figure. He’s leading a populist movement unlike any America has experienced. His scorched earth, apocalyptic campaign is one of a kind.

Except it isn’t. Trump’s signature issues—immigration, trade, isolationism, the corruption of the political system—are not new. Nor is the manner in which he describes them. "Huey Long, George Wallace, and Ross Perot were also compared to fascists and accused of being would-be dictators," writes John B. Judis. "Like them, Trump is a charismatic leader who appears to put himself above party, representing himself as the voice of the people against the elite."

The argument that the politicians and bureaucrats and CEOs are out of step with the middle class, that they are governing in their own interest, that they have dissociated themselves from the everyday experience of the people, recurs throughout American history. It explodes, it decimates, and it subsides.

Two examples. The New Right of Phyllis Schlafly, Richard Viguerie, Paul Weyrich, and Pat Buchanan flourished amid the cultural and economic turmoil of the 1970s. Crime, busing, taxes, and the Equal Rights Amendment were the issues of the moment. Urban and ethnic Democrats, along with newly energized religious activists, joined and transformed the conservative movement from a collection of professors and intellectual journals into an institutionalized, money making, majority-building force.

Two decades later, Ross Perot and Pat Buchanan seized the populist mantle. They opposed trade deals, the deficit, and ineffective government. Buchanan crusaded against immigration, against war, against the ethos of secular humanism. Perot and Buchanan badly divided the Republican Party in 1992 and 1996. Then they disappeared.

What happened? The same thing that diffused Bryan at the turn of the twentieth century and Coughlin and Long in the 1930s: Economic growth.

The oil shocks and stagflation of the 1970s and early 1980s gave way to the economic boom that started in 1982 and lasted until 1990. The fever subsided. The New Right joined the Reagan coalition. At the end of the 1970s, New Right activists were looking to begin a third party. By the end of the 1980s they were loyal Republicans.

Didn’t last. The recession midway through George H.W. Bush’s term brought the radical middle into the streets once more. Outsourcing, deindustrialization, immigration were in the headlines. The early years of Bill Clinton’s presidency did nothing to assuage the frustration. Tax increases, gun control, an expensive and convoluted health care reform—the populists wanted none of these.

Newt Gingrich profited from the discontent. But it wasn’t until the Clinton boom that Buchanan found himself on the periphery. Economic growth averaged 3 percent from 1992 to 1995, notes James Pethokoukis of the American Enterprise Institute. Between 1996 and 2000, however, growth surged to almost 4.5 percent. It was in 2000 that Buchanan won .43 percent of the national vote. This was not a coincidence.

Economic growth not only enriches societies. It reduces conflict within them. "In earlier times," wrote Irving Kristol, "democracy meant an inherently turbulent political regime, with the ‘have-nots’ and the ‘haves’ engaged in a perpetual and utterly destructive class struggle. It was only the prospect of economic growth in which everyone prospered, if not equally or simultaneously, that gave modern democracies their legitimacy and durability." No growth, no legitimacy.

Here’s the puzzle. The economy has been expanding since 2009, millions of jobs have been created, incomes rose and poverty fell in 2015, and yet the populism of the Tea Party and Occupy Wall Street, of Donald Trump and Bernie Sanders, is stronger than ever. Trump has done something no populist since Jackson has done before—win a major party nomination. What gives?

Several things. First, the recovery, while sustained, is by no means perfect. Indeed, we are living through the weakest expansion of the postwar era. President Obama has yet to preside over a single year in which the economy grew by 3 percent. Incomes may be up and poverty down, but the average American remains poorer than he was before the Great Recession began in 2007. Seven million men of working age do not even bother to participate in the labor force. And because the unemployment rate measures only those looking for work, government statistics understate the true number of jobless in the United States.

Second, growth has not been torrid enough to affect all groups positively. Most of the gains have gone to the already prosperous. Extraordinary monetary policies have boosted the worth of owners of assets. Those not invested in the stock market, those who have fallen behind, envy others whose lifestyles can be described only as decadent. Public policy has exacerbated inequality and intensified feelings of unfairness. Discontent and instability persist.Only now is the job market becoming tight enough to benefit the marginal worker. Amazing technology creates and reshapes industries but requires few employees. A boom time would heal all. But this is not a boom.

Finally, there is the question of policy. The Beltway is fascinated by the theory of secular stagnation, of permanent subpar growth. For the Democrats, stagnation makes life easier—it allows them to spend their days dividing the pie. Republicans, meanwhile, have yet to update their pro-growth principles in light of today’s realities. The result is an economy burdened by overregulation, credentialing, rent-seeking, and risk aversion.

Neither Hillary Clinton nor Donald Trump’s agenda strikes me as pro-growth. Clinton would raise taxes and spend more than President Obama. Trump’s plan has the right goal in mind, but the way he gets there is befuddling and self-defeating. Perhaps the most frustrating aspect of this maddening campaign is the knowledge that our problems are solvable. We just lack the imagination, courage, statesmanship, and resolve to do anything about them.