Both political parties are rejecting capitalism
Which would you prefer: Economic authoritarianism? Or domineering socialism?
This might sound like an Econ 101 thought experiment, but in reality, it’s the choice being offered American voters by the nation’s two major political parties. If you thought Republicans and Democrats mainly differed on the matter of how best to distribute the spoils of free-market capitalism, you’re stuck in the 1990s. Each of these parties is now lurching toward anti-capitalist statism, with the main difference being how, exactly, the government should control the economy.
The Republican party is now prostrate to President Trump, who comes from the world of business but acts more like a despot rewarding friends and punishing enemies. Sure, his tax cuts have boosted after-tax profits, but they’ve also weakened the fiscal infrastructure that keeps capitalism humming. When the next recession hits and the economy needs help, Washington will likely do less than it has in the past, probably prolonging the recession and making it deeper.
Enemy list
Meanwhile, Trump is quite unfriendly to companies that fail his loyalty test, even when they’re making shrewd business decisions. His latest blackball target is motorcycle maker Harley-Davidson, which he is encouraging bikers to boycott, because Harley is moving export production out of the country. Harley is doing that to avoid the tariff war Trump started with Europe, but instead of fixing the bad policy forcing Harley to make a tough decision, Trump is just causing more damage. If you work for Harley and declining sales cost you your job, thank Trump.
Harley joins Amazon, Boeing, General Motors, Toyota, several drugmakers and a bunch of media companies on Trump’s enemies list. And his Justice Department is desperately trying to undo the AT&T-Time Warner merger even though a federal judge declared it fine and most antitrust experts say it won’t cause any consumer harm. The arm of government doesn’t get much longer.
Trump has pals in the steel and aluminum industries, so he imposed tariffs allowing them to raise prices. But he’s penalizing every business and consumer who must now pay more for those metals. He’s also punishing American farmers and other exporters, who are losing access to foreign markets because of retaliatory tariffs imposed by Europe and at least eight other nations. Some Republicans grouse, but nobody does anything, effectively endorsing Trump’s Ministry of Meddling.
Trump is lucky the economy is relatively strong, which is masking, for now, the markets’ disdain for his protectionist distortions. But he’s not doing what he could to make it stronger. The economy needs more workers, and the United States as a whole needs faster population growth, to maintain living standards. More legal immigration is the best way to boost labor force growth and increase the pool of people who will finance Medicare and Social Security in the future. Trump, of course, is cutting back on immigration, to appease a small bloc of anti-immigrant voters he deems crucial to his political success. Maybe when Medicare starts to run short of money in 2026, we can ask those immigrant haters to pay extra.
Where are the centrist Democrats?
Not long ago, there were centrist Democrats who might have offered a welcome antidote to this Trumpublican strong-arming. Wall Streeters like Robert Rubin in the Clinton administration kept the Treasury on sound footing, with four years of federal budget surpluses in a row in Clinton’s second term. Clinton even deregulated the banking industry – for better or worse – in 1999. Pragmatic economic policies gave Clinton cover to pursue more liberal social goals.
But centrist Democrats now seem as scarce as principled Republicans. A new Gallup poll shows that 57% of Democrats have a positive view of socialism, while only 47% have a positive view of capitalism. Look, I get it–the message here is that a lot of people feel they’re not getting ahead in the US economy, and wouldn’t mind trying something different. There’s truth to that, and rising income inequality is a legitimate problem. But socialism would be a great way to lower living standards even more, and do it in a hurry. Hardly anybody who has ever tried socialism has liked it.
There may be a definitional issue here, with supporters of Bernie Sanders-style socialism merely preferring a little more fairness, better health care and education, and a bit more help for the little guy, rather than the totalitarianism of textbook socialism. Note, however, that Alexandria Ocasio-Cortez, the celebrated 28-year-old Latina who upset an old-guard Democrat in a New York House primary and will probably be headed to Congress, belongs to the Democratic Socialists of America, which advocates government control of key industries. Imagine that your bank, grocery store, gas station and doctor’s office operated with the efficiency and cheerfulness of the postal service.
At least 42 socialists are running for office this year, according to the Associated Press, and the popularity of this particular form of oppression seems to be dragging the Democratic party leftward. Bernie Sanders’ “Medicare for all” plan, once a lonely fantasy, now has mainstream support among Congressional Democrats and will be a popular slogan in the upcoming midterm elections. It’s so expensive that income and business taxes would have to double or triple to pay for it, but the Dems seem to think that as Trump becomes more extreme, they should too.
Where are the pragmatic centrists who understand that properly regulated capitalism generates the best economic bang for the buck? Among voters, they seem to have left the two political parties. Only 26% of Americans identify themselves as Republicans, while 30% say they’re Democrats. Independents are the biggest voting bloc, with 41%. Politicians rarely run as independents, because they need the campaign infrastructure a party provides. But they do need independent votes, especially in a year when control of Congress is in play. Voters should speak up for sanity.
Confidential tip line: rickjnewman@yahoo.com. Click here to get Rick’s stories by email.
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Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman
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