Twenty-three Nobel laureates warned last month that Donald Trump’s agenda would “lead to higher prices, larger deficits and greater inequality.” I think they were right. But voters utterly ignored them.
This week’s election was a defeat not just for Vice President Kamala Harris and the Democratic Party, but also for the mainstream of the economics profession. On one issue after another — tariffs, taxes and immigration — Trump delighted in taking positions that would earn him an F in most economics courses. He also slammed the Federal Reserve, which is quite likely the nation’s biggest employer of economists (and maybe the world’s).
And voters ate it up. Economists were perceived as spokespeople for the power structure — if not outright harmful, then at least ignorable.
“The elites cannot come to grips with how alienated they are from the country,” Newt Gingrich, the former House speaker, who is an informal adviser to Trump, told The Times this week.
The agony for the Harris campaign is that Harris’s platform would actually have done a lot more for the working class than Trump’s ever will. It included measures to lower costs by increasing competition and to promote economic growth and prosperity through targeted investment. Trump touted populist measures like ending taxes on tips and Social Security, but also has less-discussed and not-so-populist plans for cutting taxes on corporations and easing up on antitrust enforcement.
President Biden made a big bet on what the commentator Matt Stoller called “deliverism” — the principle that if you run the economy right and deliver the things people need, particularly good jobs, the votes will follow. It didn’t happen: Voters turned Democrats out of the White House despite strong job growth and the defeat of the Covid-related inflationary surge that marred the beginning of Biden’s term.
For the Democratic Party, this is a moment of reckoning. Should Democrats stick to the economic platform of 2024, which on the whole is based on standard economic principles, with a few concessions to electoral politics such as promises of mortgage down payment assistance and fulminations against “nefarious price gouging”? Or should they go full-on populist to compete with Trump?
American history and the experience of other countries provide some useful reference points for today’s Democrats. During the Depression, President Franklin Roosevelt started his first term as a doctrinaire budget-balancer but soon went populist to fight off threats from Communists on one side and right-wing populists such as Huey Long and Father Charles Coughlin on the other. He inveighed against “economic royalists” while calling for higher taxes on the rich, a federal minimum wage and Social Security.
“There are times when some economic populism may in fact be the only way to forestall its much more dangerous cousin, political populism,” Dani Rodrik, an economist at Harvard’s Kennedy School of Government, wrote in 2018.
In Rodrik’s telling, both economic and political populists reject constraints on political power in service of “the people” whom they claim to represent. For political populists, those constraints include the separation of powers, an independent judiciary and a free press. For economic populists, the constraints on the person in power may, for example, be global trade rules, autonomous federal agencies and independent central banks.
The Democrats may indeed become more economically populist. “The Democratic Party, sick of losing elections, will become more populist,” Gad Levanon, the chief economist of the Burning Glass Institute, flatly predicted in a LinkedIn post the day after the election. He argued that Democrats would support more restrictions on immigration and higher tariffs while employing “stronger rhetoric against economic elites to emphasize benefits for the ‘common people.’”
If Levanon is right, the two major parties could wind up one-upping each other with increasingly populist measures. That would be unfortunate. Higher tariffs would slow economic growth and raise prices, no matter how many times Trump denies it. As for immigration, effective border controls make sense, but sharp restrictions on new arrivals and expulsion of people who are already in the country would leave millions of jobs unfilled and possibly unfillable.
But copying the Republican playbook isn’t the Democrats’ only option. Larry Diamond, a senior fellow at the Hoover Institution, wrote in 2020 that established democracies such as the United States can learn from younger ones how to fend off populism.
“People who are angry, frustrated or afraid will rationalize a lot of bad behavior from a leader who they believe has their back,” Diamond wrote. But he cited the results of what at the time were recent municipal elections in Istanbul, Budapest and Prague and of national elections in Slovakia and Greece to make the case that “liberal democrats can defeat populist parties and leaders if they have the right strategy.”
In both politics and economics, Democrats can win while holding fast to their values. The multipart strategy, according to Diamond: Don’t try to “out-polarize the charismatic ‘polarizer in chief.’” Be inclusive. Show humility. Offer nonideological solutions. “Don’t let the populist hijack nationalism.” “Offer hope.” And — this one is kind of funny — “don’t be boring.”
Andrea Kendall-Taylor and Carisa Nietsche of the Center for a New American Security in Washington offered similar advice that year. Don’t “overly rely on ‘educating’ the other side,” they wrote. Doing so “can accentuate polarization.”
“Create unifying and aspirational narratives, use blame attributions sparingly, be intentional about myth-busting, highlight solutions and emphasize their efficacy and avoid adopting the language of right-wing populists,” the authors wrote.
One other essential element, of course, is to deliver the goods. A lot of voters clearly believed that Biden and Harris didn’t do that. I get the anger about the high cost of housing, child care and other essentials. The U.S. economy is still far from perfect. On the other hand, the fiscal and monetary authorities adroitly avoided what could have been a protracted economic slump after Covid hit. That’s not a record to run away from.
When your balloon is sinking, there’s an understandable instinct to throw overboard everything that seems to be weighing you down. But even though voters clearly gave Biden (and hence Harris) low marks on the economy, I don’t think bad policies were what dragged them down. What dragged them down more than anything, I think, was the surge of inflation, which was an unfortunate but hard-to-avoid result of Covid, as I and others have written.
Maybe I’ve spent too much time around economists, but I do think the prescriptions of mainstream economics still make sense. Trade should be free, within reason. Monetary policy should be insulated from politics. And so on.
Trump got a lot of political mileage out of defying these and other norms. But reality bites. In the long run, Democrats will be better off sticking to their economic principles while Trump and the party he controls founder. Unfortunately, the American people will pay a heavier price.
The Readers Write
You wrote about tariffs in the Gilded Age. The high cost of transportation in the 19th century made imports expensive and gave the economy geographic protection, particularly for building-block items like iron and later steel. Today, tens of giant vessels carrying 20,000 truck containers are unloaded and loaded every day with finished goods on both coasts.
Vincent Arguimbau
Darien, Conn.
My non-economist’s perspective is that tariffs are effective. First, as a way to level the playing field with markets that are not open to U.S. imports. Second, as a geopolitical weapon against certain countries. The economists’ view is that global trade is a net positive. It can be but is not always. Kumbaya is not how we live, although I wish it were.
Ted Stenger
Birmingham, Mich.
Quote of the Day
“There’s an adage a historian once called a law of history, true of every society across the ages. The adage is, only when it is dark enough can you see the stars.”
— Vice President Kamala Harris, concession speech (Nov. 6)
The post The Election’s Other Biggest Losers? Economists. appeared first on New York Times.
