Reflections on the Current Crisis

In the wee hours of the night, I tweeted out my despair at the current crisis of the Republic. My immediate impetus was a terrific series of tweets by Jasmin Mujanović.

If you think Trump firing Mueller will *cause* a constitutional crisis you haven’t been paying attention for the last six months.

— Jasmin Mujanović (@JasminMuj) July 21, 2017

Here, I want to consolidate a few thoughts about some of the deep problems that have gotten us into this state of affairs: the occupation of the Oval Office by Donald Trump, an authoritarian kleptocrat. These are non-exhaustive, but I think not always adequately appreciated.

The first is what Julia Azari calls “weak parties and strong partisanship.”

Strong partisanship with weak parties makes for a couple of fairly serious problems for a democracy. The destabilization of institutions, for one. It’s hard for institutions — elected ones like Congress, the presidency, or state governments — to have legitimacy when partisan motives are constantly suspect. This is also true for other kinds of institutions, like courts and, as we’ve seen most recently, law enforcement agencies like the FBI. Citizens view much of what these institutions do through a partisan lens.

Suspicion of institutions doesn’t just undermine courts or Congress — it also undermines party politics as a whole. Party politics is really important for democracy; most political scientists still share E.E. Schattschneider’s observation that democracy is “unthinkable” without parties to do the work of campaigning, to organize stable coalitions, and to help citizens make sense of political choices.

For now, the problem is far more acute for the Republicans than the Democrats. Whatever one thinks of the ideology of the modern GOP, it generally served its most important institutional function at the presidential level: it prevented the nomination of charlatans and nut jobs. With hindsight, we can see its ability to do so begin to atrophy after the 2008 election when we look at the nomination of, for example, Christine O’Donnell in for Delaware Senate. But, at the time, this looked more like the flukes that regularly occur at the state level.

The 2012 presidential nominating process, however, now appears something of a canary in the coal mine. We saw a succession of “bubble candidates,” including Bachman and Cain, who were manifestly unsuited for the Presidency. But Romney prevailed, giving the impression that the party could still effectively screen out the lunatics. Romney’s loss in the general—particularly given unwarranted expectations, fanned by conservative media, that Obama was a weak candidate—almost certainly twisted the knife into the ability of GOP institutional mechanisms to manage its base. Once again, The Onion proved prescient.

As Azari discusses, the weakening of political parties is a long-term phenomenon, with a number of structural causes. But I do not think we should underestimate the role of the Bush Administration in setting in motion the conditions that led us to Trump. Given the current ascendency of the GOP at the national and state level, it is sometimes hard to remember how much the Bush Administration—through the Iraq War, Katrina, and its handling of economic policy—destroyed the Republican brand. By Obama November of 2008, 26% of Americans identified as Republicans. Even including leaners—the more important number—the GOP was in terrible shape.

At this point, GOP congressional leaders made a pivotal decision for how to rebuild.

During a lengthy discussion, the senior GOP members worked out a plan to repeatedly block Obama over the coming four years to try to ensure he would not be re-elected.

Attending the dinner were House members Eric Cantor, Jeb Hensarling, Pete Hoekstra, Dan Lungren, Kevin McCarthy, Paul Ryan and Pete Sessions. From the Senate were Tom Coburn, Bob Corker, Jim DeMint, John Ensign and Jon Kyl. Others present were former House Speaker and future – and failed – presidential candidate Newt Gingrich and the Republican strategist Frank Luntz, who organised the dinner and sent out the invitations. [….]

The dinner table was set in a square at Luntz’s request so everyone could see one another and talk freely. The session lasted four hours and by the end the sombre mood had lifted: they had conceived a plan. They would take back the House in November 2010, which they did, and use it as a spear to mortally wound Obama in 2011 and take back the Senate and White House in 2012, Draper writes.

“If you act like you’re the minority, you’re going to stay in the minority,” said Keven McCarthy, quoted by Draper. “We’ve gotta challenge them on every single bill and challenge them on every single campaign.”

The complete embrace of tactics honed by Gingrich, first in the 1994 elections, and then during the Clinton presidency, required synergizing the messaging of the Republican party with the more extreme impulses of right-wing media. It received a major assist from the rise of the Tea Party, which reconstituted much of the core Republican coalition under a new label—but in the form of a movement outside of, and already antagonistic to, GOP institutions.

This story is familiar to LGM readers, so I won’t dwell too much more on it. The key point is that the Republican party mounted a scorched-earth campaign geared toward delegitimating not only Obama and the Democrats, but the entire system of governance. In doing so, it stretched and broke many of the procedural norms that undergird American formal institutions. Nonetheless, we should still reflect on how extraordinarily dangerous, and irresponsible, this decision was given the state of the country and of the world. We were in the midst of the greatest global economic crisis since the Great Depression, fighting failing wars in Iraq and Afghanistan, and engaged in a worldwide counter-terrorism campaign. The overhang of these problems still persist today.

Second, I also think we sometimes neglect the broader effects of the Iraq War. As Daniel Deudney and John Ikenberry open their new article in Survival, “The 2003 Iraq War was one of the great disasters in the history of American foreign policy.” Sold under false pretenses, badly designed and implemented, and rolled into a Republican wedge strategy built around weaponizing 9/11 for partisan gain, the Iraq War was an unmitigated disaster in blood and treasure. The United States has spent, by some estimates, $2 trillion to, in effect, destabilize the Middle East, as well as to undermine American military power in real and perceived terms. It aided and abetted the militarization of local police departments.

The Iraq War also dealt an enormous blow to American political institutions. It damaged prominent Democrats. If Clinton had not voted for the Iraq War, she would have been elected president in 2008. I’ve already mentioned its effects on the GOP. It’s no accident that Trump points to the Iraq War when attempting to discredit the intelligence community, or that most Republican voters are indifferent to the nearly uniform condemnation of Trump by the Republican foreign-policy establishment.

Thomas Oatley argues that the decision by the Bush Administration to finance the Iraq War through borrowing, rather than raising taxes, lies at the heart of the Great Recession. At the least, it likely structured global financial flows in a way that made the world economy particularly vulnerable to the effects of the subprime crisis. It, along with the direct effects of Bush’s tax cuts, saddled the United States with enormous debt heading into the Great Recession.

This brings me to the third point: American political economy. Starting under Reagan, the United States has run pro-cyclical budget deficits. In the process, its accumulated a huge amount of debt. This has not only hamstrung progressive policies—the “starve the beast” strategy—but its had widespread effects on American political economy. Servicing this debt depends on low interest rates, low interest rates encourage private-sector borrowing and help fuel the growth of the financial sector.* That’s not a problem, per se, in the presence of robust regulation of the financial sector. But, that’s been sorely lacking. Dodd-Frank was a step in the right direction, but even its gains look precarious. This contributes to boom-and-bust cycles, and it is part of an overall story about the financialization of the American economy and the rise of the credit economy.

The combination of low taxes, lax financial regulation, and the erosion of government policies aimed at combatting inequality through transfers, has been a toxic stew. The rise in college tuition paid for by accumulating student debt provides an examples of one of the relevant dynamics. Cuts to support for higher education drive up tuition. The policy instrument used to address the rising costs? Encourage the financial sector to provide loans.The shift to financing through personal debt allows colleges and universities to raise tuition. Rinse and repeat.

More generally, people making middling incomes—and higher—compensate for wage stagnation by taking out easily available debt. This reduces labor mobility and bargaining power, because the ‘cost’ of missing a loan payment can be catastrophic—people making otherwise decent wages can no longer afford to go for periods without a paycheck. Those who don’t make enough to qualify for relatively cheap credit are forced into usurious ‘payday loan’ schemes.

All of this is part of an enormous shift of risk onto ordinary Americans. Instead of defined-pension plans, we have taxpayer subsidized individual retirement schemes. These inject money into the financial sector, while the reduction of the number of large institutional investors managing pension programs reduces effective oversight. Lax regulation has itself turned the financial sector into a monster, devising new instruments to, in effect, extract rents. None of this is necessary for the sector to perform its core productive economic functions of underwriting investment. It not only helps drive boom-and-bust cycles, but also drags down overall economic growth. Risk for large financial institutions are socialized—hence “too big to fail”—but the stew of economic policy makes individuals particularly vulnerable.

All of this creates a vicious pattern. As the economic clout of the financial industry grows, so does its political clout. The analogy here is with the entrenchment of trade liberalization. This can produce a political cycle where those pro-liberalization sectors become do better, become wealthier, and hence more powerful. The reverse happens in industries that benefit from protectionism. That does not mean that the cycle can’t be broken, but it affects the playing field.

My hardly original contention is not just that Bernie is right in his general diagnoses—we need robust social democratic policies. It is also that economic anxiety, loss of faith in governance as something that serves ordinary people, and other conditions that render democracies vulnerable to soft-authoritarianism, are quite possibly rooted in the configuration of low taxes and financialization that Obama only managed to dent. Trade is something of a scapegoat, because with a different political economy we could capture more of the surpluses generated by open trade and reinvest them.

What does this all mean? It means that the crisis of American institutions is grave indeed. It’s been here for some time, and it came to an immediate head with the election of a demagogue. Trump is weaponizing partisanship—and the underlying loss of faith in democratic institutions—in the service of his narrow interests: status, wealth, and, it seems increasingly clear, avoiding criminal and civil culpability for his business practices. I say “weaponizing” because the right-wing feedback loop ensures that each norm he breaks and each line his crosses is instantly rendered legitimate to 30-40% of the American electorate. It becomes evidence that he’s a fighter, that he doesn’t pull his punches, that the establishment is out to get him. The GOP, whose interest in voter disenfranchisement as a partisan power play dates way back, is, as Damon Linker notes, at risk of going full authoritarian.

I don’t know how this ends. The structural conditions—which extend far beyond political economy—are deeply embedded. While it should be clear that my policy sympathies, at least on economics, broadly align with the democratic left, it seems like we’re doomed to repeat the time-honored pathology of ripping the anti-Trump coalition apart over policy disagreements. Meanwhile, the Democratic position bears some eery resemblances to the GOP after 2008. The Republicans are dominant. While the primaries were in no way “rigged” in the way that the far left and RT assert, the party did take steps to ‘clear the field’ for Clinton. As a result of these, and other missteps, the party is at risk of becoming similarly unmoored from its base.

It’s also not clear where even a Democratic sweep leads. How do we rebuild norms? If we leave Republican violations ‘unpunished,’ those norms are gone. But if we retaliate, we risk making the crisis worse. The treatment of Garland provides a nice illustration. With the Court profoundly politicized, the only norm we had was that the President got to appoint—and the Senate consider—nominees in the event of a vacancy. McConnell ripped that up. The only way recourse would be to pack the Court. But that’s extremely risky—not only in terms of the politics, but in terms of the downstream institutional implications for judicial independence.

Thus, we have multiple pathways forward, none of them look good. For example:

• Tump stays on, doing enormous damage. In the worst-case scenario, he combines the powers of the Presidency with his soft-authoritarian dispositions to destroy opponents in civil society and the anchors of professionalism in the civil service. This enables him to secure a second term, and in doing so completely transforms the GOP.
• Congressional Republicans finally move to impeach him. This could itself provoke a devastating political crisis as Trump deploys every tool in this arsenal to protect himself. Democrats may relish a Republican civil war, but we could be looking at civil violence and domestic terrorism not seen in some time. If the GOP base stays with Trump, the remnants of the democratically-minded GOP could be swept away. And recall that Trump isn’t going to go quietly into the night even if removed from office.
• Trump’s incompetence and institutional restraints work well enough that Democrats retake the Congress. If they move to impeach, it could be the first scenario but with the GOP rallying around Trump. Game that one out yourselves.
• Democrats recapture the legislative and executive branches by 2020. That opens up the problem I raised earlier. How do we put things back together again? Can we?

I fear we need a new institutional compact, as we saw after the Civil War or after the Great Depression. How do we get such a compact in today’s political conditions?

All of this assumes that the Democrats don’t themselves succumb. One advantage we have: the partisan politics of opposing Trump position the party on the small-d democratic side when it comes to the struggle over the institutions of the Republic. And what if another collapse hits? Our institutions are already failing in the wake of the Great Recession.

In the short term, though, Trumpism must be defeated. It must be discredited. But on its own terms. This is a fight, first and foremost, to preserve the core of democratic institutions, not to destroy them.

[Shout outs to Paul Musgrave and Andreas Kern for discussions on these issues; image from the Fallout Wiki, intended as metaphor]

*As Yestobesure points out in comments, this reads an awful lot like a causal claim. I do not mean to imply that deficits lower rates, but was thinking about the degree that the political economy of debt and credit depends on low rates. This was a long post, composed with too great rapidity, and I’m sure there are other places where it doesn’t really hold together. However, there’s an interesting dynamic here associated with the US floating lots of debt and the willingness of overseas governments and investors to purchase it.