Rising Incomes Render Republican Strategy Obsolete

To listen to Republican politicians, you’d think it was still 2016. Many of them, especially the presidential aspirants, are parroting the same grievance-based, stick-it-to-the-man rhetoric that Donald Trump reveled in.

But that approach is not likely to work with the general electorate in the 2024 presidential election or in many state races. Why not? The economic experience of voters looks likely to be much more positive over the next few years than it was in the run-up to Trump’s 2016 victory.

Nevertheless, the strongman aesthetic prevails among Republicans. Take the reaction last week to Major League Baseball’s decision to move the All-Star Game out of Georgia to protest the state’s voting restrictions. Senators Ted Cruz, Josh Hawley and Mike Lee outlined legislation to end the league’s exemption from antitrust enforcement.

And when a large number of corporate leaders joined a conference call to discuss how to respond to proposed changes in voting laws, J.D. Vance, author of the memoir “Hillbilly Elegy” and an aspiring politician, suggested a response: “Raise their taxes and do whatever else is necessary to fight these goons.”

There you have it: Fighting “the corporate elites,” ostensibly in support of “the people.” Using government power to do something on behalf of a supposedly aggrieved silent majority.

Before Trump’s rise, GOP politicians would have been appalled by this anti-business posture and recoiled at using the power of the state — taxation, antitrust — to punish perceived political adversaries in the private sector. No longer, apparently.

This style of politics became popular after the 2008 global financial crisis and Great Recession, which seeded the ground for a populist strongman to be successful.

The 2008 recession was particularly traumatic. In a new paper, the economist Jay Shambaugh and I document how the recovery from the Great Recession unfolded. It took 77 months for employment to reach its pre-recession level, much longer than the 47 months needed to recover from the 2001 recession.

The rate of employment among prime-age people fell by 3.8 percentage points — a drop more than twice as large as experienced in the 2001 recession. Real GDP fell by 4% in the Great Recession. In the 2001 recession, it fell by 0.4%.

The benefits of the eventual recovery took a long time to reach the bottom half of workers. Inflation-adjusted wages were above their 2007 level over the entire period from 2008 to 2019 for workers in the top 20%. But as late as 2014 — five years after the recession officially ended — wages for the bottom half of workers were lower than in 2007. Wages for the bottom 20% were lower in 2015 than in 2007.

In 2015 and 2016, the country was in the right mood to buy what Trump was selling. (And GOP politicians should note that he was a uniquely good salesman for this brand of politics.)

What happened in the U.S. is consistent with the history of financial crises. In a 2016 paper, economists Manuel Funke, Moritz Schularick and Christoph Trebesch studied 800 elections in 20 advanced economies from 1870 to 2014. They found a common pattern. After financial crises and the deep recessions they cause, populism surges.

“After a crisis,” they write, “voters seem to be particularly attracted to the political rhetoric of the extreme right.” They did not observe this pattern in normal recessions or in severe non-financial recessions. It takes about 10 years for politics to normalize, they found.

Indeed, a decade after the 2008 crisis, U.S. politics was turning away from populism. Joe Biden defeated Elizabeth Warren and Bernie Sanders on his left for the Democratic Party’s presidential nomination, before he went on to defeat Trump. Biden is popular, with a 54% approval rating in Gallup’s latest survey — much more so than Trump ever was.

Hawley, Cruz and other GOP politicians will likely find that their Trumpian style appeals to their party’s base, which remains enamored of the former president. But this style likely won’t appeal far outside it. These politicians seem to think they have the numbers on their side, representing “the people” against a much smaller number of “elites.” They don’t. There is no silent majority.

And the politics they are practicing is going to be less successful after years of rising wages than it was in 2016. The unemployment rate is currently 6%, and 2021 is going to see record-setting employment growth. True, the economy may experience another recession before the 2024 election. But it won’t be nearly as severe as the 2008 recession.

Populism peters out as incomes grow. The sooner Republicans realize this, the better.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute. He is the author of “The American Dream Is Not Dead: (But Populism Could Kill It).”

©2021 Bloomberg L.P.

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