Source: NY Times: Business
Popularity Contest: Trump Is Offering Populism, Minus the Free Candy
The thing about populism is it usually involves doing things that are popular.
This is something that European nationalists and Latin American strongmen have long known. When they come to power, they aim to deliver concrete benefits to their supporters, even at the cost of their nations’ long-term fiscal health.
President Trump has delivered on some of the things he promised supporters on the campaign trail: He has appointed a conservative Supreme Court justice; begun more aggressive enforcement of immigration laws; and directed his appointees to slash regulations on fossil fuel and other industries. But in terms of spending, Mr. Trump has embraced the austere preferences of congressional Republicans, even when that approach has contradicted his campaign promises.
To see the tension, consider an alternate history of the Trump administration: one in which the president embraced the lessons of right-wing populists from abroad.
It’s Jan. 21, and Mr. Trump is newly sworn in. Shrugging off the snark from liberals on Twitter about the size of his inauguration crowds, he directs his staff to go to work on the Make America Great Again Act of 2017.
They dust off the policy white paper that the campaign staff issued months earlier, and spend their time on Capitol Hill trying to cobble together a coalition to pass a bill aimed at helping the people who put Mr. Trump in the White House.
The bill has lots of money to fight the opioid epidemic and to invest in communities left behind by the modern economy. There is money to prop up troubled health insurance markets, so that Mr. Trump can say he has replaced Obamacare with something better. There are a trillion dollars for public infrastructure — not some complex tax credit that favors revenue-generating projects in affluent areas, but the brute force of government dollars to build roads and bridges in every corner of the nation.
Each project, of course, will have a big sign crediting the Make America Great Again Act with a big photo of Mr. Trump flashing a thumbs up.
To help keep conservatives and business interests on board with all that spending, the bill loosens environmental laws and bank regulations, among other policy goodies that make C.E.O.s’ hearts flutter. But it wouldn’t achieve a filibuster-proof majority in the Senate unless packaged with those aforementioned goodies that appeal to Democrats. Maybe it could increase the minimum wage, but also include a tax credit for companies that hire American workers to offset the cost to businesses.
The government would pay for it all with higher deficits. Free candy for everyone! The cost — in the form of higher interest rates and perhaps inflation — would come later. It’s the kind of bill that anti-spending conservatives would complain about, and die-hard anti-Trump liberals would resist. Cobbling together a coalition to pass it may not be easy, but a savvy deal maker could plausibly attract enough bipartisan support to make it law — and in the process maybe build trust for further deal making down the road.
My MAGA Act is hypothetical, but in the weeks after the election, the idea that Mr. Trump would emulate European and Latin American populists — who are often staunch defenders of social welfare programs and enthusiasts of showy public works projects — seemed plausible.
Mr. Trump has often been compared to the right-wing Latin American populists who, like him, have used machismo, opposition to elites and personal grandiosity (“I alone can fix it,” as Mr. Trump said) to win elections. His nationalist, anti-immigration “America First” message also resembles that of European nationalists.
Juan Perón, the president of Argentina from the mid-1940s to the mid-1950s and again briefly in the 1970s, is among the most famous of the Latin American populists and one whose personality has been compared to Mr. Trump’s. But while Perón had an authoritarian approach, his policies included a universal public pension and universal access to health care. He spent lavishly on public works projects.
More recently, Rafael Correa, the president of Ecuador from 2007 until last month, who came to office on an anti-elite wave and shared with Mr. Trump a predilection for tweeting insults at his enemies, spent public funds abundantly on schools, poverty, health clinics and highways.
Right-wing parties in Europe often exhibit antagonism to immigration, but position themselves as defenders of public spending domestically. The National Front in France, for example, which recently lost the presidential election, was calling for lowering the retirement age and increasing welfare benefits to go along with its message opposing immigration and the European Union.
The “let them have candy” approach isn’t necessarily sound policy. In a 1991 economics paper, Rudiger Dornbusch of M.I.T. and Sebastian Edwards of U.C.L.A. showed how the populist movements of Latin America had often generated a disastrous boom-bust cycle.
“Again and again, and in country after country, policy makers have embraced economic programs that rely heavily on the use of expansive fiscal and credit policies and overvalued currency to accelerate growth and redistribute income,” wrote Mr. Dornbusch and Mr. Edwards in “The Macroeconomics of Populism in Latin America.” “After a short period of economic growth and recovery, bottlenecks develop provoking unsustainable macroeconomic pressures that, at the end, result in the plummeting of real wages and severe balance of payment difficulties. The final outcome of these experiments has generally been galloping inflation, crisis and the collapse of the economic system.”
Based on the early policy moves of the Trump administration, spending too much on goodies for his working-class supporters isn’t something Americans need to fear. He has chosen a very different path — even when following through would be more consistent with his campaign promises.
His first major legislative effort was a health care bill that would cause 23 million people to lose coverage, according to the Congressional Budget Office’s estimate, while cutting taxes for the affluent. It would hit older Americans, who disproportionately voted for Mr. Trump, particularly hard in the form of higher health insurance costs. The bill, which is being revised by the Senate, is deeply unpopular, according to public opinion polls.
Despite the president’s talk of a bold $1 trillion infrastructure plan, there is not yet an actual legislative proposal, and the approach the administration has described relies heavily on tax credits to encourage private investment. That tends to limit the scope of any projects to those that can generate revenue to pay off investors.
On taxes there is also no legislative proposal yet, and the bullet points the administration has released imply much bigger advantages for corporations and the highest earners than for middle-class Americans.
On opioid addiction and other problems facing some of the troubled communities that heavily favored Mr. Trump at the voting booth, the most visible thing the administration has done is appoint a task force. His budget would slash regional development funds, through the Appalachian Regional Commission and the Delta Regional Authority, for example, both of which benefit areas that voted overwhelmingly for Mr. Trump.
On top of it all, Mr. Trump has set a political tone that makes it harder to change course and find bipartisan support for something like the MAGA Act later. Instead of putting Democrats in a jam by proposing something broadly popular, the president has made it easy for them to be united in opposition.
Essentially, for all of Mr. Trump’s populist rhetoric, he has outsourced his domestic policy agenda to the austere, spending-averse congressional Republicans.
It’s hard to know how much of this reflects the president’s actual policy preferences versus the ideology of the people he has surrounded himself with, and how much of it is simply the path of least resistance. Letting House Speaker Paul Ryan and the Senate majority leader, Mitch McConnell, set the domestic policy agenda is easier than doing it yourself.
But given the choices the Trump administration has made, the president’s sub-40-percent public approval ratings are understandable. It may be a tautology to say that doing popular things will make a politician more popular, but it’s one the president may just want to remember.