Mises Wire

Trump Might Be the End of the Bush-Obama Consensus

Say what you want about the Obama economy, but one aspect of it must be stated up front:  It was the “Happy Time” of crony capitalism. I know this statement departs from the glowing narrative being promoted by mainstream sources, but facts are facts. Maybe Obama’s was left-cronyism, whereas Bush pushed a right one, but no matter. Crony capitalism has done well since 2009.

It’s not hard to understand why. When an era’s political milieu is defined by Dodd-Frank, the Affordable Care Act, feeding the national security monster, climate-change-inspired central planning, Elizabeth Warren, and Bernie Sanders, then you are going to increase costs of doing business. Large, well-connected firms will benefit, as a result if only because large, well-connected firms can afford to comply. Everyone else will go out of business, become an entrepreneur, do consulting, join the gig economy, or whatever else is necessary to just get by.

Such is the conclusion of regulatory capture, and it’s no surprise. The sainted Franklin Roosevelt embarked on a similar round of unprecedented regulation during the so-called First New Deal. The large corporations of his day did very well — from 1933 to 1937 — and worked hard for his reelection. If you worked for one of these lucky organizations, you wouldn’t even know there was a Depression going on. FDR’S economy was one in which real incomes rose — a glorious thing to anyone earning an income in those days. 

So the early framing of Obama as a new FDR should have provided a clue of what was to come. Remember Cash for Clunkers? That and the bailouts of GM and Chrysler stopped the flow of capital and labor from Detroit to more capable hands. Remember passing Obamacare following Nancy Pelosi’s reassurances that skeptical lawmakers could read the legislation after it passed? One assumes they had the opportunity after being voted out of office in the next election and Obama’s party lost majority status. Remember how the Washington-Arlington-Alexandria Metropolitan Statistical Area led the country with 3.3 percent economic growth in 2010, thanks to the influx of lobbyists to the region? These really were happy times, at least for the cronies.    

But this is not an article about the Obama economy. It is one about my concerns regarding the upcoming Trump one. As I write this, I have nearby Time magazine’s Person of the Year issue, filled with dark pictures of Trump and encomia for Clinton and other establishmentarians. It’s as if Time took its 1979 Man of the Year issue and autocorrected Ayatollah Khomeini with Donald Trump and earnest references to Jimmy Carter with Barack Obama.    

Time blames Trump for the deep-seated divisions that surfaced and was stoked over the last year, but Trump didn’t create the divisions. If George W. Bush was an extremely divisive figure by 2008, then so became Barack H. Obama by 2016 since, after all, he simply rebranded, and then expanded, the very growth of government that causes division. In this sense, Obama simply served Bush’s third and fourth terms. He was all hope, but no change.

This became more obvious to me this past June when I was presenting to a group of small business people in Bonita Springs, Florida, and there was desperation in the air. Their businesses were not going to survive another four years. Trump had to win. Obama had to go. One of Fidel Castro’s mottos, “Socialism or Death!,” came to mind here. Only now, we have an American version in which the death would have been the family business that was being regulated into the grave.

So division is real, and deep. Trump himself tried to communicate as much when he said (just prior to last year’s New York primary) that he “could stand in the middle of 5th Avenue and shoot somebody and I wouldn’t lose voters.” Far from a sick boast, it was a reference to the division our political classes had created and made them hated, proclaiming to anyone with ears that his side of the division was bigger, more motivated to vote, angry, and was going to win.

It’s a division Rothbard wrote about in his important, Bastiat-like essay, “Anatomy of the State,” where he discussed John C. Calhoun’s analysis of net taxpayers and net tax consumers resulting from any system of coercive redistribution. This is nothing new. US economic history records crony influences from the beginning, but some years have served as inflection points for their ratcheting up. These include 1791 (when the first bank of the US was chartered), 1861, 1913, 1933, 1971, and now 2008.

But there has also been years when crony influence has been resisted, be they the Jacksonian Era of the 1830s, the Return to Normalcy in the 1920s, and the late 20th century when a population weary of the Cold War and Great Society forced a sitting president to say that the era of big government was over. They always come about when the net taxpayers reassert themselves. Main Street’s needs are considered as seriously as Wall Street’s, and the power elite is shamed. 

It is happening again. What makes our period different is that, during previous eras of normalcy reasserted, the political class usually serves up a president to pacify and unify an angry nation. This is Reagan’s real legacy in leading a country fed up with wars, wealth redistributions, and stagflation of the 1960s and 1970s. In this respect, Trump, who ran against a bankrupt political class and often mocked it, is no Reagan. 

What also makes our era different is that Trump will be a wealthy man entering the presidency, making him the first president since JFK to have little incentive to use the presidency to contribute to his personal wealth after leaving it. Like JFK, he will be harder to buy and therefore harder to control. Thus you can sense the shock and angst being expressed about how he might approach the empire. Why, what will become of Obama’s secret “kill list”? Will he make friends with Russia, de-escalate the Middle East, and let trade — and the peace it foments — take root? 

If you are a crony, fear not. Trump’s ridiculous intentions to increase infrastructure spending (when public spending on infrastructure in 2015 equaled $32 billion a month) and to rebuild the military have crony capitalism written all over them. Such plans garner support from representatives whose re-election depends on maintaining existing public spending levels in their districts, but they don’t exactly drain the swamp.      

My concern is that the Fed might decide to shut Trump down by raising rates drastically, bringing in a much needed correction, and normalizing monetary policy — a trifecta that could make any president a one-termer.  Don’t think this hasn’t been discussed at length by the monetary Keynesians at the Fed who would like nothing more than to bring that about.  

Still, if the powers-that-be who have been running the country are panicking about Trump, then this must be a good thing. It’s even, I’d say, a Happy Time, only now for the productive and wannabe productive who suffered the most from the cartelizing economy foisted on the country following 9/11. 

Their peace dividend was stolen from them on that day, and they want it back, as do many millions of people around the globe. Because one important lesson of economics is that there are better outcomes than socialism or death.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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