Seven Fixes for American Capitalism

Ideas from the Right, the Left, and across the Atlantic to mend what’s broken in our economy.

Antitrust Pivot

Many of the U.S.’s biggest economic ills—rising inequality, stagnant wages, low productivity growth—stem in large measure from corporate consolidation and monopoly power run amok. That’s the message from a new breed of policy wonk urging a return to the trustbusting days of the early 20th century.

The movement—labeled the New Brandeis School by its proponents and derided as Hipster Antitrust by its critics—is looking to ditch the Chicago School approach that’s dominated antitrust enforcement since the late 1970s. The Chicago School hews to what’s known as the consumer-welfare standard, which finds mergers anticompetitive only if they raise prices.

The new model takes its inspiration from Supreme Court Justice Louis Brandeis, who emphasized the need to restrain big companies and the concentration of economic power. Lina Khan helped galvanize the movement with a 2017 paper she wrote as a law student at Yale that made the case that Amazon.com Inc. is a threat to competition, even though it’s lowered some prices for consumers.

Any ambitious government-led project to reshape the U.S. economy usually runs into the same objection: We can’t afford it. One school of economic thought says that’s all wrong.

Modern Monetary Theory, a once-fringe set of ideas now getting some mainstream attention, says governments borrowing in their own currency have more room to spend than they think. The U.S., for example, can run deficits without having to worry about going bust, because it creates the dollars in the first place. The real constraint only kicks in when there’s too much spending relative to a limited supply of goods and services—in other words, when inflation spikes. And there’s been little sign of that in America for decades.

MMTers argue that their system isn’t so radical; it’s the way things already work, at least some of the time. Presidents, including the current one, haven’t balked at measures to boost the military or cut taxes, even when the resulting deficits run into the hundreds of billions. And emergencies, such as the 2008 financial meltdown, typically push concerns about balanced budgets deep into the background.

Now there’s a different sort of emergency on the horizon: climate change. Since the threat is arguably greater than economic depression or even war, it requires action on a suitably vast scale, argue Democrats who’ve picked up on the issue.

And MMT offers a key to unlock the financing. That’s why freshman Representative Alexandria Ocasio-Cortez, one of the first U.S. politicians to talk publicly about MMT, is also at the forefront of the drive for a Green New Deal. The maximal version of that program includes shifting the U.S. to 100 percent renewable energy within 10 years. If that wasn’t ambitious enough, the plan also calls for the government to guarantee a job for everyone who wants one—an MMT favorite that’s also a throwback to Franklin D. Roosevelt’s New Deal.

“Clearly, the environment matters more than entries on balance sheets,” says Randall Wray, a senior scholar at the Levy Economics Institute of Bard College and one of MMT’s most prominent proponents. “The environmental thing is real. It’s not financial.”

MMT’s detractors say government spending on that scale could trigger the kind of inflation that would wreck the whole economy. America’s national debt has already ballooned since the Great Recession, they warn, and adding more will erode the country’s creditworthiness and undermine the dollar’s role in global finance.

While those warnings are still frequently heard, there are signs that they’re losing their impact as the debate leans left. Several renowned economists who aren’t MMTers have recently tried to downplay the risks attached to deficits and debt. They include Olivier Blanchard, former chief economist at the International Monetary Fund, and Obama administration heavyweights Larry Summers and Jason Furman. Bank of England chief Mark Carney has made the case that action on climate change represents an economic opportunity, not a burden.

Ocasio-Cortez didn’t manage to garner enough Democratic support for her first attempt at actual legislation, a proposal to set up a Green New Deal committee. But there’s broad sympathy for the idea in principle, including among several of the party’s presidential candidates, and many of them have also endorsed a jobs guarantee. —Katia Dmitrieva

Tech to the Rescue

Amazon.com Inc. Chairman and Chief Executive Officer Jeff Bezos wishes there were a trillion human beings in the solar system. With room for that many people, there would be “a thousand Einsteins and a thousand Mozarts,” he told the Economic Club of Washington, D.C., in September. The world’s richest man is funneling $1 billion or more a year into a company, Blue Origin, that he hopes will help make extraterrestrial settlement a reality, creating places to live for all those Einsteins and Mozarts.

Bezos and others argue that innovation is the essential ingredient in human betterment. They have a point. Life would be pretty awful without the advances made by past generations, such as indoor plumbing, vaccines, refrigeration, and telephones. Bezos even asserts that freedom itself, not just material well-being, depends on technological progress: “I don’t even think stasis is compatible with liberty,” he told the Washington audience.

In the view of the tech-to-the-rescue crowd, innovation can solve just about every problem humanity faces. Global warming can be fixed with better electric cars, solar cells, wind turbines, and batteries. Income inequality can be solved by educating or retraining workers for the high-tech jobs of the future.

The Information Technology & Innovation Foundation, a Washington think tank founded in 2006 to propagate this philosophy, argues that using antitrust law to break up or discipline the big technology companies can backfire, discouraging innovation and harming consumers. Robert Atkinson, president and founder of the ITIF, co-wrote a 2018 book with Michael Lind called Big Is Beautiful: Debunking the Myth of Small Business.

The techies welcome a prominent role for government in paying for education and conducting or supporting research and development. But the movement is split on trade. The nationalists want to keep the U.S. in the tech vanguard and are willing to resort to tariffs and subsidies to preserve its dominance. The globalists, including some heads of multinational companies that earn lots of their profits abroad, are happy to see other countries advance technologically, figuring that the benefits of breakthroughs—say, a cure for cancer—will be shared by all of humanity regardless of their origin.

The common theme is that prosperity depends on a robust tech sector. “We’re in a 10-year productivity depression” that’s hurting living standards, says Atkinson. “Tech is really the only way we’re going to raise productivity growth.” —Peter Coy

Tariff Truthers

If there’s one thing most economists around the world today can agree on, it’s that tariffs are bad. Protect one domestic industry with an import tax, and you hurt a swath of others. Tariffs reduce choices for consumers and push up prices for goods. They stifle competition and deter innovation. And they invite other countries to retaliate, leading to the sort of tit-for-tat behavior that’s left U.S. soybean farmers watching crops once destined for China rot in their fields.

Libertarianism

Devotees of small government were stirred by candidate Trump’s vow to “drain the swamp” and pull U.S. troops out of foreign quagmires. But President Trump, with his tariffs and deficits, has proved to be “the opposite of a libertarian,” the Libertarian Party declared in March.

Still, the free-market purists aren’t giving up the fight. One of their bugbears is the Federal Reserve and its cheap money—a distortion of the market’s natural efficiency, according to Austrian economist and libertarian idol Friedrich Hayek. When Ron Paul, America’s highest-profile libertarian, ran for president in 2012, he pushed for the Fed’s abolition and a return to the gold standard. “If you want to restrain government, you restrain the power to create money,” he said. “That’s what gold does.”

The Fed can probably rest easy. Americans aren’t exactly clamoring for a return to gold, while hyperinflation and other disasters predicted by libertarians in the easy-money decade since 2008 haven’t come to pass.

Some libertarian ideas are finding a larger audience. Among them are the call for stripping back zoning rules, because they limit the construction of affordable housing, and their criticism of patents that lock in profits for Big Tech or Pharma and licensing requirements that insulate professionals like doctors from competition. A common theme of such critiques—that the economy is rigged in favor of big and established actors—commands growing support among mainstream economists.

And beyond the realms of U.S. policy, the world is evolving in ways that give libertarians hope. Those who deplore the “tyranny” of central banks are rejoicing at the explosion of cryptocurrencies. (The Libertarian Party accepts donations in Bitcoin.) Recreational marijuana use is already legal in 10 states and backed by more than 6 in 10 Americans, according to a poll by the Pew Research Center.

Paul, who outperformed most expectations during his own tilt at the presidency, says a popular Libertarian candidate could well emerge in 2020. It’s a stretch to say he’s cheerful about the wider outlook, though. “It’s a bubble economy in many, many different ways, and it’s going to come unglued,” he told the Washington Examiner. —Andrew Mayeda

Trump the Vulnerable

A close look at the 2018 midterm results shows why he is so weak.

Now that a new Congress has taken office, the vote count from the 2018 midterms is all but final. It shows that Democrats won the national popular vote in the House races by almost nine percentage points. That margin is smashing — larger, by comparison, than in any presidential race since Ronald Reagan’s 1984 re-election landslide.

.. Without a significant improvement in Trump’s standing, he would be a big underdog in 2020. Remember, presidential elections have higher turnout than midterms, and the larger electorate helps Democrats. At least 10 million more people — and maybe many more — are likely to vote in the next presidential election than voted in the 2018 midterms. Those extra votes, many from younger or nonwhite Americans, would make Trump’s re-election all the more difficult.

It’s not just Trump, either. If his approval rating doesn’t rise over the next two years,multiple Senate Republicans will be in trouble. I’ve long assumed that Susan Collins of Maine could win re-election for as long as she wanted. But she may not be able to do so if Trump loses Maine by 15 percentage points — which was the combined Republican deficit in Maine’s two midterm congressional races.

Then there is Cory Gardner of Colorado (where Republicans lost the 2018 popular vote deficit by more than 10 percentage points), Joni Ernst of Iowa (where the Republican deficit was four points) and Martha McSally of Arizona (where it was two points).

If Trump’s popularity were to drop at all, another batch of senators — from North Carolina, Texas and Georgia, three states where Republicans only narrowly won the 2018 popular vote — would become more endangered. Even Kansas elected a Democratic governor last year, and it will have an open Senate seat in 2020. On Friday, Pat Roberts, the Republican incumbent, announced he would not run again.

.. I know that many people, from across the ideological spectrum, believe that Trump’s standing with Republicans remains secure.

I think he is more vulnerable than many people realize.

First, there are the political risks that his current standing creates for other Republicans. It’s true that his approval rating has been notably stable, around 40 percent. It’s also notably weak. Thus the Republican whupping in the midterms.

Third, Republican support for Trump may remain broad, but it’s shallow. Trump has already faced far more intra-party criticism than most presidents. Since the midterms, it seems to be growing. Jim Mattis, the defense secretary, resigned and criticized Trump while doing so. Mitt Romney entered the Senate by once again turning against Trump. Collins and Gardner have started grumbling about the shutdown.

As Republicans begin looking nervously to 2020, their willingness to break with Trump may increase. For some of them, their political survival may depend on breaking with him. If that happens, it’s quite possible that his approval rating will begin to drift below 40 percent — and the bad news will then feed on itself.

No, none of this is guaranteed. Democrats could overreach, by quickly impeaching Trump and thereby uniting Republicans. Or Trump could end up navigating the next few months surprisingly well. But that’s not the mostly likely scenario.

The normal rules of politics really do apply to Trump. He won a shocking victory in 2016, and his opponents have lacked confidence ever since. They should no longer lack it.

Donald Trump still has great power as the president of the United States. But as presidents go, he is very weak. His opponents — Democrats, independents and Republicans who understand the damage he is doing to the country — should be feeling energized.

The People vs. Donald J. Trump

He is demonstrably unfit for office. What are we waiting for?

The presidential oath of office contains 35 words and one core promise: to “preserve, protect and defend the Constitution of the United States.” Since virtually the moment Donald J. Trump took that oath two years ago, he has been violating it. He has

  • repeatedly put his own interests above those of the country. He has
  • used the presidency to promote his businesses. He has accepted financial gifts from foreign countries. He has
  • lied to the American people about his relationship with a hostile foreign government. He has
  • tolerated cabinet officials who use their position to enrich themselves.

To shield himself from accountability for all of this — and for his unscrupulous presidential campaign — he has

  • set out to undermine the American system of checks and balances. He has
  • called for the prosecution of his political enemies and the protection of his allies. He has
  • attempted to obstruct justice. He has
  • tried to shake the public’s confidence in one democratic institution after another, including
    • the press,
    • federal law enforcement and the
    • federal judiciary.

The unrelenting chaos that Trump creates can sometimes obscure the big picture. But the big picture is simple: The United States has never had a president as demonstrably unfit for the office as Trump. And it’s becoming clear that 2019 is likely to be dominated by a single question: What are we going to do about it?

The easy answer is to wait — to allow the various investigations of Trump to run their course and ask voters to deliver a verdict in 2020. That answer has one great advantage. It would avoid the national trauma of overturning an election result. Ultimately, however, waiting is too dangerous. The cost of removing a president from office is smaller than the cost of allowing this president to remain.

He has already shown, repeatedly, that

  • he will hurt the country in order to help himself. He will damage American interests around the world and
  • damage vital parts of our constitutional system at home.

The risks that he will cause much more harm are growing.

Some of the biggest moderating influences have recently left the administration. The

  • defense secretary who defended our alliances with NATO and South Korea is gone. So is
  • the attorney general who refused to let Trump subvert a federal investigation into himself. The administration is increasingly filled with lackeys and enablers. Trump has become freer to turn his whims into policy — like, say, shutting down the government on the advice of Fox News hosts or pulling troops from Syria on the advice of a Turkish autocrat.

The biggest risk may be that an external emergency — a war, a terrorist attack, a financial crisis, an immense natural disaster — will arise. By then, it will be too late to pretend that he is anything other than manifestly unfit to lead.

For the country’s sake, there is only one acceptable outcome, just as there was after Americans realized in 1974 that a criminal was occupying the Oval Office. The president must go.

Since the midterm election showed the political costs that Trump inflicts on Republicans, this criticism seems to be growing. They have broken with him on foreign policy (in Saudi Arabia, Yemen and Syria) and are anxious about the government shutdown. Trump is vulnerable to any erosion in his already weak approval rating, be it from an economic downturn, more Russia revelations or simply the defection of a few key allies. When support for an unpopular leader starts to crack, it can crumble.

Before we get to the how of Trump’s removal, though, I want to spend a little more time on the why — because even talking about the ouster of an elected president should happen only under extreme circumstances. Unfortunately, the country is now so polarized that such talk instead occurs with every president. Both George W. Bush and Barack Obama were subjected to reckless calls for their impeachment, from members of Congress no less.

So let’s be clear. Trump’s ideology is not an impeachable offense. However much you may disagree with Trump’s tax policy — and I disagree vehemently — it is not a reason to remove him from office. Nor are his efforts to cut government health insurance or to deport undocumented immigrants. Such issues, among others, are legitimate matters of democratic struggle, to be decided by elections, legislative debates, protests and the other normal tools of democracy. These issues are not the “treason, bribery or other high crimes and misdemeanors” that the founders intended impeachment to address.

Yet the founders also did not intend for the removal of a president to be impossible. They insisted on including an impeachment clause in the Constitution because they understood that an incompetent or corrupt person was nonetheless likely to attain high office every so often. And they understood how much harm such a person could do. The country needed a way to address what Alexander Hamilton called “the abuse or violation of some public trust” and James Madison called the “incapacity, negligence or perfidy” of a president.

The negligence and perfidy of President Trump — his high crimes and misdemeanors — can be separated into four categories. This list is conservative. It does not include the possibility that his campaign coordinated strategy with Russia, which remains uncertain. It also does not include his lazy approach to the job, like his refusal to read briefing books or the many empty hours on his schedule. It instead focuses on demonstrable ways that he has broken the law or violated his constitutional oath.

Regardless of party, Trump’s predecessors took elaborate steps to separate their personal financial interests from their governing responsibilities. They released their tax returns, so that any potential conflicts would be public. They placed their assets in a blind trust, to avoid knowing how their policies might affect their own investments.

Trump has instead treated the presidency as a branding opportunity. He has continued to own and promote the Trump Organization. He has spent more than 200 days at one of his properties and billed taxpayers for hundreds of thousands of dollars.

If this pattern were merely petty corruption, without damage to the national interest, it might not warrant removal from office. But Trump’s focus on personal profit certainly appears to be affecting policy. Most worrisome, foreign officials and others have realized they can curry favor with the president by spending money at one of his properties.

Then, of course, there is Russia. Even before Robert Mueller, the special counsel, completes his investigation, the known facts are damning enough in at least one way. Trump lied to the American people during the 2016 campaign about business negotiations between his company and Vladimir Putin’s government. As president, Trump has taken steps — in Europe and Syria — that benefit Putin. To put it succinctly:

The president of the United States lied to the country about his commercial relationship with a hostile foreign government toward which he has a strangely accommodating policy.

Combine Trump’s actions with his tolerance for unethical cabinet officials — including ones who have made shady stock trades, accepted lavish perks or used government to promote their own companies or those of their friends — and the Trump administration is almost certainly the most corrupt in American history. It makes Warren G. Harding’s Teapot Dome scandal look like, well, a tempest in a teapot.

A Watergate grand jury famously described Richard Nixon as “an unindicted co-conspirator.” Trump now has his own indictment tag: “Individual-1.”

Federal prosecutors in New York filed papers last month alleging that Trump — identified as Individual-1 — directed a criminal plan to evade campaign finance laws. It happened during the final weeks of the 2016 campaign, when he instructed his lawyer, Michael Cohen, to pay a combined $280,000 in hush money to two women with whom Trump evidently had affairs. Trump and his campaign did not disclose these payments, as required by law. In the two years since, Trump has lied publicly about them — initially saying he did not know about the payments, only to change his story later.

It’s worth acknowledging that most campaign finance violations do not warrant removal from office. But these payments were not most campaign finance violations. They involved large, secret payoffs in the final weeks of a presidential campaign that, prosecutors said, “deceived the voting public.” The seriousness of the deception is presumably the reason that the prosecutors filed criminal charges against Cohen, rather than the more common penalty of civil fines for campaign finance violations.

What should happen to a president who won office with help from criminal behavior? The founders specifically considered this possibility during their debates at the Constitutional Convention. The most direct answer came from George Mason: A president who “practiced corruption and by that means procured his appointment in the first instance” should be subject to impeachment.

Whatever Mueller ultimately reveals about the relationship between the Trump campaign and Russia, Trump has obstructed justice to keep Mueller — and others — from getting to the truth.

Again and again, Trump has interfered with the investigation in ways that may violate the law and clearly do violate decades-old standards of presidential conduct. He

  •  pressured James Comey, then the F.B.I. director, to let up on the Russia investigation, as a political favor. When Comey refused, Trump fired him. Trump also repeatedly
  • pressured Jeff Sessions, the attorney general, to halt the investigation and ultimately forced Sessions to resign for not doing so. Trump has also
  • publicly hounded several of the government’s top experts on Russian organized crime, including Andrew McCabe and Bruce Orr.

And Trump has repeatedly lied to the American people.

  • He has claimed, outrageously, that the Justice Department tells witnesses to lie in exchange for leniency. He has
  • rejected, with no factual basis, the findings of multiple intelligence agencies about Russia’s role in the 2016 campaign. He reportedly
  • helped his son Donald Trump Jr. draft a false statement about a 2016 meeting with a Russian lawyer.

Obstruction of justice is certainly grounds for the removal of a president. It was the subject of the first Nixon article of impeachment passed by the House Judiciary Committee. Among other things, that article accused him of making “false or misleading public statements for the purpose of deceiving the people of the United States.”

The Constitution that Trump swore to uphold revolves around checks and balances. It depends on the idea that the president is not a monarch. He is a citizen to whom, like all other citizens, the country’s laws apply. Trump rejects this principle. He has instead tried to undermine the credibility of any independent source of power or information that does not serve his interests.

It’s much more than just the Russia investigation. He has

  • tried to delegitimize federal judges based on their ethnicity or on the president who appointed them, drawing a rare rebuke from Chief Justice John Roberts. Trump has
  •  criticized the Justice Department for indicting Republican politicians during an election year. He has
  • called for Comey, Hillary Clinton and other political opponents of his to be jailed. Trump has .
  • described journalists as “the enemy of the people” — an insult usually leveled by autocrats. He has
  • rejected basic factual findings from the
    • C.I.A., the
    • Congressional Budget Office,
    • research scientists and
    • others.
  • He has told bald lies about election fraud.

Individually, these sins may not seem to deserve removal from office. Collectively, though, they exact a terrible toll on American society. They cause people to lose the faith on which a democracy depends — faith in elections, in the justice system, in the basic notion of truth.

No other president since Nixon has engaged in behavior remotely like Trump’s. To accept it without sanction is ultimately to endorse it. Unpleasant though it is to remove a president, the costs and the risks of a continued Trump presidency are worse.

The most relevant precedent for the removal of Trump is Nixon, the only American president to be forced from office because of his conduct. And two aspects of Nixon’s departure tend to get overlooked today. One, he was never impeached. Two, most Republicans — both voters and elites — stuck by him until almost the very end. His approval rating among Republicans was still about 50 percent when, realizing in the summer of 1974 that he was doomed, he resigned.

The current political dynamics have some similarities. Whether the House of Representatives, under Democratic control, impeaches Trump is not the big question. The question is whether he loses the support of a meaningful slice of Republicans.

I know that many of Trump’s critics have given up hoping that he ever will. They assume that Republican senators will go on occasionally criticizing him without confronting him. But it is a mistake to give up. The stakes are too large — and the chances of success are too real.

Consider the following descriptions of Trump:

Every one of these descriptions comes from a Republican member of Congress or of Trump’s own administration.

They know. They know he is unfit for office. They do not need to be persuaded of the truth. They need to be persuaded to act on it.

.. Democrats won’t persuade them by impeaching Trump. Doing so would probably rally the president’s supporters. It would shift the focus from Trump’s behavior toward a group of Democratic leaders whom Republicans are never going to like. A smarter approach is a series of sober-minded hearings to highlight Trump’s misconduct.

Democrats should focus on easily understandable issues most likely to bother Trump’s supporters, like corruption.

If this approach works at all — or if Mueller’s findings shift opinion, or if a separate problem arises, like the economy — Trump’s Republican allies will find themselves in a very difficult spot. At his current approval rating of about 40 percent, Republicans were thumped in the midterms. Were his rating to fall further, a significant number of congressional Republicans would be facing long re-election odds in 2020.

Two examples are Cory Gardner of Colorado and Susan Collins of Maine, senators who, not coincidentally, have shown tentative signs of breaking with Trump on the government shutdown. The recent criticism from Mitt Romney — who alternates between critical and sycophantic, depending on his own political interests — is another sign of Trump’s weakness.

For now, most Republicans worry that a full break with Trump will cause them to lose a primary, and it might. But sticking by him is no free lunch. Just ask the 27 Republican incumbents who were defeated last year and are now former members of Congress. By wide margins, suburban voters and younger voters find Trump abhorrent. The Republican Party needs to hold its own among these voters, starting in 2020.

It’s not only that Trump is unfit to be president and that Republicans know it. It also may be the case that they will soon have a political self-interest in abandoning him. If they did, the end could come swiftly. The House could then impeach Trump, knowing the Senate might act to convict. Or negotiations could begin over whether Trump deserves to trade resignation for some version of immunity.

Finally, there is the hope — naïve though it may seem — that some Republicans will choose to act on principle. There now exists a small club of former Trump administration officials who were widely respected before joining the administration and whom Trump has sullied, to greater or lesser degrees. It includes

  • Rex Tillerson,
  • Gary Cohn,
  • H.R. McMaster and
  • Jim Mattis.

Imagine if one of them gave a television interview and told the truth about Trump. Doing so would be a service to their country at a time of national need. It would be an illustration of duty.

Throughout his career, Trump has worked hard to invent his own reality, and largely succeeded. It has made him very rich and, against all odds, elected him president. But whatever happens in 2019, his false version of reality will not survive history, just as Nixon’s did not. Which side of that history do today’s Republicans want to be on?

The trade war is already over

The Chinese and U.S. economies are likely to slow in 2019, giving President Donald Trump and Chinese President Xi Jinping no choice but to declare a truce in their ferocious trade battle, according to a top Wall Street strategist.

“I think personally that the trade war is coming to an end and there is really nothing Trump can do about it,” Jim Paulsen, chief investment strategist at The Leuthold Group, said in the latest edition of the POLITICO Money podcast. “If you have the United States and China both with very weak economies, the negotiation around trade just evaporates. Neither party has any negotiating power left. They both have to stop what they are doing.”

.. Paulsen said he doesn’t believe that Trump, who loves to extol a rising market, will want to risk the kind of crash that could occur if talks fall apart. “I think fairly soon we are going to see an announcement between China and Trump,” he said. “I think it will amount, basically, to a hill of beans. But it will be a face-saving announcement of something being done.”

More broadly, Paulsen said he thought recent market volatility and sharp declines were actually a good thing. He said he believes investors are panicking about a global recession that isn’t actually coming: “One of the good things we’ve got going on, I would say, as an investor, is we’ve got people freaking out. I think that’s a good thing.”