FILE - In this Oct. 7, 2016 file photo, Sen. Jeff Sessions, R-Ala. listens at left as then-Republican presidential candidate Donald Trump speaks during a national security meeting with advisers at Trump Tower in New York. (AP)

3 Reasons the Trump coalition will crumble — and Democrats will need to pick up the pieces

When Trump's policies fail because of political realities, Democrats could regain their strength in the House


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Simon Johnson
November 18, 2016 2:58PM (UTC)

This post first appeared on BillMoyers.com.

The Democrats should focus now on winning a majority of seats in the House of Representatives in November 2018. The gerrymandering of districts means that a change of control in the House is hard, but all representatives are elected every two years for a reason: This legislative body is designed to swing with popular opinion. And public opinion is about to move in a big way. Here’s why.

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Future historians will trace the unwinding of Trump’s presidency back to a speech at Gettysburg on Oct. 22, in which the candidate made some very specific commitments (watch from the 16-minute mark in this video). Specifically, President-elect Trump faces three serious problems rooted in the way political realities — Republican control of Congress — will force him to govern.

First, Trump will not deliver on what he has promised because he can’t.

His first Gettysburg promise was to “propose a constitutional amendment to impose term limits on all members of Congress” — and there were great cheers in the crowd when he said this. Last Wednesday, Senate Majority Leader Mitch McConnell said term limits will not happen (“We have term limits now; they’re called elections”). There is no way the president can force the Senate Majority Leader (or the Speaker of the House) to bring legislation to the floor. Check the Constitution on that.

Trump’s broader commitment is to create jobs, particularly in manufacturing, and raise middle-class incomes. The main policy push in this direction will be a cut in both personal and corporate taxes, and this will be skewed strongly toward higher-income Americans. Senate and House Republicans have long been quite specific about this.

The firmly held belief among the Republican political elite is that such tax cuts will boost growth — and they will mandate official economic forecasts supporting this idea. But the reality will be just the same as it was under Ronald Reagan and George W. Bush: Tax cuts for the rich primarily benefit the rich. The deficit and national debt will balloon, just like it did in previous tax-cutting episodes and in direct contradiction to what Trump has promised. James Kwak and I wrote a book that details the consequences of Republicans undermining federal public finances; the title seems more apt than ever: "White House burning."

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There might be some infrastructure spending in Trump’s fiscal package, but do not hold your breath. Infrastructure does not appear high on Mitch McConnell’s priorities — and a significant number of House Republicans will only support infrastructure spending if it is “paid for” by reductions in social spending (i.e., reducing transfers to less prosperous people, for example by cutting Medicaid and Medicare). If Trump takes that deal, he betrays people who supported him — and he looks weak. If he turns it down, expect no real change on infrastructure.

Trump has also promised to rule in some broad sense against what the global financial elite wants; this was a major theme toward the end of his campaign. But look at who reportedly is under consideration for potential treasury secretary: Jamie Dimon (CEO of JP Morgan Chase); Jeb Hensarling (chair of the House Financial Services Committee); and Steven Mnuchin (a former Goldman Sachs banker). Any of these men (or anyone else from Trump’s the inner financial advice circle) would create the lasting and accurate impression that the elite are more in charge than ever.

Second, Trump will enact policies that are actually the exact opposite of what he said on the campaign trail.

The leading example is financial reform. On the campaign trail, he said very little about this — although he dropped some hints that he would support the reinstatement of Glass-Steagall (the Depression-era separation of investment and commercial banking). Now we see this was pure misdirection; the actual intention is to gut the Dodd-Frank financial reforms and return Wall Street to the unfettered status that it had before the crisis of 2008.

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Paul Atkins — a consistent voice against Dodd-Frank — is in charge of the transition team looking at financial regulators. And Trump’s transition website has suddenly adopted almost the exact same language as Jeb Hensarling on these issues — not surprising given that Brian Johnson, a lawyer for the House Financial Services Committee, heads the financial services part of policy implementation for the transition team.

The entire Federal Reserve Board of Governors is likely to be replaced within 18 months – with both the chair and vice chair being forced out in early 2018. The new governors will not favor meaningful regulation. All the post-crisis safeguards against a repeat of the 2008 crisis will be stripped out — and in short order.

Big banks supported Hillary Clinton far more than they favored Trump during the campaign. In a great historical irony, Trump wins — and the banks get exactly what they want: a full return to unambiguous "too big to fail" status. The result will be exactly what happens every time the politicians do exactly what big banks want; finance goes mad and the rest of us end up with a serious crisis.

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More broadly, Trump said he would “clean up the corruption and special interest collusion in Washington, D.C.” But lobbyists have already taken up key positions in the transition team — and they see great opportunity in the fact that Trump brings with him relatively few people who have serious experience in government. The agenda is “pro-growth,” but what exactly does that mean? It means that Washington insiders will write legislative language (e.g., on taxes) that will be supported by Republicans on Capitol Hill, and this will be the basis for what Trump signs. Special interests have never had it so good.

Third, Trump is likely to behave in a destabilizing, disruptive and downright nasty manner.

Trump has said he intends to change longstanding US policies on trade (tariffs, higher prices in the stores, disruption to supply chains and a loss of American jobs), deporting people (this will be truly horrible and in the news every day), and civil liberties (To deport more than 2 million people, how many do you need to stop and frisk? Does everyone need to carry their passport now?).

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And that’s just what he has promised to do in the first 100 days. If he doesn’t do these things, that’s more broken promises for his supporters to reflect on.

Trump thinks he embodies economic competence — and that he can run the country like a corporation, surrounded by high net worth individuals. In practice, his initiatives will help himself, his family, his Cabinet and his friends to great wealth, through the structure of tax cuts and in many other ways. All of this will now be completely transparent — the Trumps’ activities will no longer be concealed behind commercial secrecy and privately held companies.

The rules — including for blind trusts — apparently are for other people. Three of his children, as well as his son-in-law, are helping to direct the transition. This is already skating on thin ice: having them helping pick the regulators who will have impact on their companies. When the politics fail, to whom will Trump turn? His relatives will become household names and not in a good way.

A lot of effort will go into spinning some version of “Trump will be Trump.” But there are no more excuses for the Republicans; they own all the policies and actions of the federal government.

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Leading Republicans claim we have had weak growth because of “overregulation.” But this claim is greatly exaggerated. So fine — remove whatever regulations Trump chooses (or special interests lobby for) and let’s see what happens. The real reason we’ve had weak growth since 2008 is because we had a huge crisis, caused directly by financial deregulation. This time will be different, but only in the sense that the Republicans will be held more fully accountable as credit expands and systemic risks mount.

What exactly Trump, McConnell and House Speaker Paul Ryan do with health care remains to be seen. Congressional Republicans will press for a full repeal of Obamacare — including removing health insurance coverage from some people. One would imagine Trump’s supporters will be angry when this happens to them.

And then there is the Supreme Court. Despite winning just 47.3 percent of the popular vote (compared to Hillary Clinton’s 47.8 percent), President Trump will almost certainly nominate someone with extreme views to fill the open vacancy. There is a mandate implied by winning over 60 million votes. But there are nearly 325 million people alive today in the United States, all of whom are affected by Supreme Court decisions. Trump will get his nominee through, but how many will be deeply antagonized in the process?

Americans like divided government, particularly when the people in charge behave in a heavy-handed and capricious manner. The House is designed to reflect public opinion, and this can shift quickly — as we have seen throughout the past two centuries, and under Presidents Clinton, George W. Bush and Obama.

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Quite soon, many people will want to vote for effective constraints on Trump’s power. With the Democrats controlling the House, Trump would be pulled toward the center — and more reasonable policies.

But as Trump’s coalition begins to crumble and opposition grows, the real question is: Will the Democrats propose a more credible (and more widely believed) alternative than what they just put forward?

Democratic Sen. Elizabeth Warren of Massachusetts struck exactly the right tone in a speech on Thursday. Trump’s victory was based on a real issue: “Americans are angry about a federal government that works for the rich and powerful and that leaves everyone else in the dirt.”

If Trump works to increase economic security and opportunities for middle-class families, Democrats should help him — and Sen. Warren said this. And if he truly takes money and special interests out of politics, he should be commended.

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But Trump will do none of those things — and this will become quickly apparent. Trump will give the Wall Street banks what they want, deport people in a gut-wrenching fashion, effectively reduce access to health care — and greatly lower taxes for rich people.

If, in contrast, the Democrats speak directly and credibly to what most Americans want, they will retake the House.

Simon Johnson is a professor at MIT, a senior fellow at the Peterson Institute for International Economics and a former chief economist at the International Monetary Fund. He was recently named a Main Street Hero by the Independent Community Bankers of America (ICBA). Follow him on Twitter: @baselinescene.


Simon Johnson

Simon Johnson is the former chief economist of the IMF and is the cofounder of BaselineScenario.com, which reports daily on the ongoing financial crisis.

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