When populism trumps principles

A short note on the troubling decline of the US Republican Party’s social and economic positions.

They give me only bad publicity [and] press. I mean, they’re getting a license. I would think maybe their license should be taken away.

 

Donald J. Trump

I

Although the Democratic Party (Democrats) was founded almost a full generation earlier, Donald Trump’s Republican Party is known as the “Grand Old Party” or GOP for short. Instituted in 1854 by Abraham Lincoln (1809-1865) and a few other opponents of slavery, the Republicans championed classic liberal values and positions. They were quite successful in the northern United States at its inception, but had virtually no presence in the southern states. However, with the election of Lincoln as its first president in 1860, the party’s achievements in guiding the Union to victory in the brutal Civil War (1861-1865), its decisive role in the abolition of slavery and the protection of the so-called freedmen, the Republican Party began to dominate national politics. True to its founding motto ​​”free soil, free labor, free speech, free men”, for its first 60+ years the party stood for individual liberty, self-responsibility, for freedom of speech and religion, for the Rule of Law and the independence of the judiciary. After all, life, liberty, and the pursuit of happiness is a core tenet of the US Declaration of Independence.

Mostly due to European immigrants, who brought the necessary know-how for the industrialization during the first half of the 19th century and after the war, Republicans began to shift their focus toward laissez-faire economic policies and industrial expansion, however they also strongly promoted protective tariffs. It should be noted here that from its beginning the USA did not develop a free trade tradition and their trade policy remained more or less throughout the 19th century and well into the 1930s, persistently protectionist. Almost as an early forerunner of Donald Trump’s unfortunate tariff policies, President Benjamin Harrison (1833-1901) even raised the import taxes to nearly 50% in 1890.

II

However in varying degrees and in spite of the refusal to modify its position on free trade, the GOP remained essentially committed to its liberal values until the election victory of the Democrat Woodrow Wilson (1856-1924) in 1912. The Republicans found themselves in an opposition role during WW I and were politically pressed to mitigate some of their core principles in the years after. When Democrat Franklin D. Roosevelt (1882-1945) was elected in 1933 and governed through the Great Depression and WWII, he focused on the so-called ‘Three Rs’, i.e. on Relief, Recovery and Reform. With the introduction of a sweeping series of wide-ranging economic, social and political government programs and laws he initiated the New Deal by radically expanding the government’s role in collective welfare and economic regulations. To combat the crisis, Roosevelt passed among several other support programs, the Federal Deposit Insurance Corp. Act, FDIC) to stabilize the financial market, signed into law the Reciprocal Trade Agreement Act, RTAA), which marked a significant turn away from US protectionism (RTAA eventually paved the way for the founding of GATT after WWII, and also of NAFTA and the WTO in the 1990s). In 1935 Roosevelt laid the foundation for the American welfare state with the most consequential Social Security Act (SSA). The Social Security system with its Medicare and Medicaid programs not only fundamentally transformed the collective perception of the state. Although amended several times, taken as a whole the SSA also led to a nearly universal acceptance of social policy interventions and is popular across the US society. However, it came at a huge cost for the US taxpayer and the leading Republican politicians regretfully failed to counter these social-democratic ideas with attractive free market alternatives, such as the Chilean Pension model or IRAs for example. Thus, over time the Republican Party was forced to adapt some of their positions and to adopt certain measures.

Even though Dwight D. Eisenhower (1890-1969) as a Republican, attempted to reinstate the party’s traditional values ​​in his two presidencies of 1952 and 1956, he largely left the policies of the New Deal in place with most of its interventionist programs. The Democrats John F. Kennedy (1917-1963) and Lyndon B. Johnson (1908-1973) therefore successfully expanded the US welfare state with costly government measures. However, as an unintended political consequence their agendas increasingly attracted Christian conservative voters in the southern states to register with the Republican Party. Under the influence of Christian fundamentalism, which has also been politically organized in the rural South and Midwest since the 1960s, the Republicans gradually began to weaken its economically and socially liberal core values ​​and moved toward a new and vaguely defined American Conservatism as its guiding ideology.

III

Although the election victory of Ronald Reagan (1911-2004) slowed down the rise of the new right and the powerful conservative wing of the Republican Party and ushered in a new era of governing, he was arguably the first Republican president, who at least attempted to stick to the party’s principles after about 50 years. ​​Under Reagan the GOP’s domestic policies prominently featured a lessening of federal government involvement in settling social problems, a stimulation of self-responsibility, the distinct deregulation of businesses and overall lower taxes. Internationally, Reagan demonstrated a fierce opposition to the spread of Socialism of all stripes throughout the world and a strong distrust of the Soviet Union. His economically successful approach became known as “Reaganomics”. Regretfully ,however it came at a cost of an increased annual deficit and a swelling national debt.

During the fall of 2006 the fiscally conservative and essentially libertarian minded Tea Party movement emerged within the Republican Party and gained ground under the leadership of Congressman Ron Paul of Texas. An accomplished advocate of Austrian Economics, Paul was an attractive and resourceful politician until his retirement from Congress in 2013. With its rallying cry Taxed Enough Already (TEA) and styled after the famous Boston Tea Party Protest of 1773, the new movement noisily demanded fiscal discipline, less government and more personal responsibility. The Tea Party gained significant influence, regretfully however only for a few years. Its populist approach and anti-establishment current in a certain sense laid the foundation for the rise of Donald Trump in 2016.

For all of the extraordinary personalities the GOP has produced throughout its history of over 170 years, mainly for political gains most of its presidents, step by step not only abandoned the GOP’s upheld principles of free markets and of a liberal social order. Especially during the past century most presidents have also sought to amass more power by undercutting the Rule of Law and the legislative branch and succeeded in chipping away at congressional influence. Regrettably President Trump is no exception. Among several other things, he not only interferes with the free market price system and is about to restrict the independence of the FED (the US Central Bank can set interest rates without interference from Congress or the president). He challenges the Rule of Law and ominously also keeps shattering the ideal of free trade as a corner stone of liberal politics.

IV

In his The Road to Serfdom (1944), F.A. von Hayek (1899-1992) famously has forewarned us that whenever politicians refer to our national industries or bring up the topic of our national resources, they inevitably move down a slippery slope toward authoritarian control. They soon may take possession, manage or even use these national assets in the pretense of knowing better or being in the Public Interest.

In total disregard of the traditional Republican demand for less government interferences and largely unhindered by his fellow party members, President Trump initiated exactly this step by intervening in the supervisory boards of strategically important companies. By reaching into the outdated socialist playbook, he revived the idea of ​​a partial or total nationalization of industries or resources. The president demanded (and the federal government received) a so-called golden share in U.S. Steel Corp., which effectively grants the government veto power over large parts of the company’s future management. Moreover the administration acquired a 10 % stake in INTEL Corp., which Trump sold as an investment and a very good deal. However it is nothing but a well-worded, hidden subsidy for a struggling company. Similar stakes in at least four other companies followed, including those that produce nuclear energy or mine metals like lithium and copper, essential for manufacturing high-tech chips and advanced batteries. To make these moves even more disturbing is the fact that Bernie Sanders a US Senator from Vermont and self-proclaimed Democratic Socialist, introduced this very idea in the US Senate to the loud cheers of young, widely ignorant Democratic representatives. Although these acquisition programs defy all economic reason and contradict the GOP’s liberal economic credo, almost verbatim Trump put the socialist senator’s wish into action – albeit without congressional approval. These actions further undermine the idea of ​​a free market and social order as a core principle of the Republican Party. Giving any president the power to pick winners and losers in a free market system is an open invitation to company-specific cronyism and exceeds their presidential authority.

Trump’s polarizing political style, his break with the party’s traditional values, and his verbal attacks on freedom of speech make the venerable GOP appear almost like an increasingly authoritarian party. The fact that freedom of speech is being attacked by the government itself in the very country where it is firmly enshrined in the First Amendment of its constitution bodes ill, especially when the president regards negative reporting about himself as illegal. Those who wish to rule undisturbed subjugate public discourse.

For a party that once championed individual liberty, self-determination, freedom of speech and faith, personal responsibility, the Rule of Law, and a limited role for the state, its modern record in fulfilling these promises is inconsistent at best. The complete disregard for rampant spending and the staggering national debt is dangerous and appalling.