In the coming 2018 midterm elections,  we will have an opportunity to see if the same old dysfunctional political patterns observed in recent decades continue. With a cold civil war raging between Americans of different political persuasions, the coming midterm elections promise to be among the most significant of modern times.

The Usual Dysfunctional Midterm Election Patterns

The American people  as a whole are rather fickle in their political choices. The elevation of one political party to power in one election is often followed by a reversal to the opposing political party in the next one or two election cycles. Then, whatever policies the previous party in power put in place are most often reversed, and replaced with antithetical policies. The policies of the two major ideological antagonists, the progressives of the Democratic Party and the neoliberals of the Republican Party, never have a chance to show their worth for an extended period of time.

A neoliberal might say the bad results of Obama’s two administrations and the good results of Trump’s first two years are dispositive evidence. However, a progressive could easily rejoin that it was Obama’s policies that finally reversed the economic decay. That decay, they would quickly note, was started by the Great Recession during President George W. Bush’s regime. Now, I have offered evidence in several posts of the falseness of the progressive rejoinder. See, for example the posts Causes of the 2007-2008 U.S. Financial Crisis,  Is the US Economic Boom Sustainable? and U.S. Economy and Stock Markets, July 2018. However, most people do not go to the trouble of digging out the relevant data from the Federal Reserve or other sources. Instead, they obtain their received opinions from the news media or social media such as Twitter, Facebook, Reddit, etc., etc. As a result many find their viewpoints whipsawed from one ideological side to another.

To be sure, two administrations’ worth of bad results under Obama (among other things)  was enough to sink Hillary Clinton’s bid for the presidency. Yet, two years’ of total resistance to Trump by progressives and their media allies might now inspire the majority of the electorate to reverse course.

We can not make up our national mind about what governing philosophy is best. The reason for this is the even distribution of the electorate into three groups. Two of those groups, the Democrats and the Republicans, have definite ideological proclivities. The dysfunction of our politics has been created by an increasing polarization in their antagonistic views of the world. Over time, they tend to cancel each other in influence. The results of any one election usually depends on the judgements of the third group, the Independents not sworn to either major party.

As you can see in the plot above, the fractions of the electorate belonging to each group have remained remarkably constant. Moreover, they have been close to each other for a very long period of time. In 2017, Democrats claimed the allegiance of 33 percent of the electorate, while Republicans had 26 percent. However, independents counted 37 percent of the electorate in their ranks. Whichever side can persuade a larger fraction of independents to side with them will win the coming midterm elections. Will the American electorate follow their usual dysfunctional practice by returning control of Congress to the Democrats?

What Is At Stake for Both Sides in the 2018 Midterm Elections

A great deal  is at stake for both the major parties. The issues being contended are over policies of how best to insure the nation’s economic progress; of how we should handle illegal immigration; and thirdly, of how we can avoid an authoritarian government. Both sides have something to say about each or these issues. Nevertheless, other than totally resisting the Republican positions, the progressive voice addressed to economic issues has been largely mute.

1. Economic Progress

Since progressives have so little to say about how to keep our sizzling economy going, let us begin with the issues involving the economy. Two major changes in economic policy instituted by Trump and the Republican Congress are responsible for its robust health. Those are Trump’s rapid deconstruction of the regulatory state and the Tax Cuts and Jobs Act of December, 2017.

Usually, there is a time lag of between six months and a year before a change in policy registers as a change in the economy. The exception to this rule is when anticipated policy changes alter the expectations of companies and consumers. Then the economy might adjust to the expectations far in advance of the policy changes themselves. This happens particularly to leading indicators such as corporate investment. Almost from the moment of Trump’s election, corporate investments in capital goods and equipment began to increase. This can be seen in the year-over-year rate of growth for new orders of non-defense capital goods shown in the plot below.

If you have trouble making out the details of the plot, just click on it and you should see a magnified version. This plot has several informative aspects. First, note the two big dips corresponding to the early 2000’s recession and the Great Recession of 2008-2009. Focusing on the red linear trend line, you can see secular capital investment growth rates have been declining for at least a couple of decades. This points out our economic travails have a much longer ancestry than Barack Obama’s ill-fated programs.

Now focus on the Obama years. As is usually the case after a major recession, economic activity and capital goods investments sharply rebounded with the end of the Great Recession. However, after two years of recovery, capital goods investment was predominantly contracting with its secular growth rate negative.

Progressive Keynesian economists led by Lawrence Summers attribute all this to their version of secular stagnation. They ascribe the secular decline in economic activity to a growing maturity of capitalist economies in which various market failures freeze activity. They prescribe (of course) increased government economic stimulation to get us out of the rut.

Neoliberals of the Republican Party see something far different at work. They see the effects of decade after decade of increasing government economic regulations together with high taxes, particularly on companies. The last little section of the plot above, from 2017 to 2018, gives the lie to Keynesian secular stagnation. With his policies of greatly reduced regulations on companies together with greatly reduced corporate taxes, Trump has been able to inspire a large increase in corporate investment within the United States. The policies that accomplished this are among the issues at stake in the midterm elections.

And it is not just corporate investment that shows the good effects of neoliberal economic policies. One can see those effects in the change from Obama  to Trump of the secular GDP growth rates.

We can also see them in the St. Louis Federal Reserve District Bank’s Leading Index of the U.S.

Or in the more rapid decline under Trump of the headline U3 civilian unemployment rate.

Clearly, the unemployment rate has fallen considerably faster in the first year and a half of Trump’s administration than in the last year of Obama’s. Then there is the sharp increase in real personal income less current transfer payments.

All of these economic improvements are at risk in the midterm elections. Democrats have little to say about how economic progress can continue, other than they are opposed to Trump’s tax reforms and cuts, and they are for more economic regulation rather than less.

Other than Democratic opposition and obstruction, the greatest threat to our economy comes from the trade wars Trump is waging. Oddly enough, Trump might have more support from the Democratic Party than from his own in these trade wars. To a great many (including myself) it seemed Trump was partial to mercantilism and was seeking U.S. autarky. However, in the last year Trump has made clear that what he was attempting was the forcing of actual, real free-trade down the throats of the international community. On July 25, President Trump met with European Commission President Jean-Claude Juncker to discuss trade problems. At that meeting they agreed to postpone any trade war between the EU and the United States. Encouragingly, they also agreed what they should work toward was a trade environment with tariffs set to zero, no non-tariff trade barriers, and no government subsidies for private companies. It seems this is the ideal trade environment Trump is trying to persuade the international community to adopt. Currently, there is a truce between the EU and the U.S., and an agreement in principle has been reached with our NAFTA partners Canada and Mexico. That leaves China as the biggest problem. Given their past proclivities to appeasement, it is hard to believe Democrats would be any better at facing down China than Trump and the Republicans

2. Illegal Immigration

A more bitter confrontation between the Democrats and Republicans is over how to deal with illegal immigrants. Democratic politicians are supporting open borders through a “catch and release” policy. This is almost certainly because they view the influx of illegal immigrants as a gold mine for new prospective Democratic voters, as well as an issue with which they can curry favor with their hispanic base.

Yet, “catch and release” is very unpopular even among the Democratic rank and file. A YouGov opinion poll in late June of this year over a very wide array of subjects showed this.  Just 30 percent of registered Democrats considered “catch and release” to be their preferred policy for handling illegals. Among the population as a whole, only 19 percent preferred this policy. Only 17 percent of independents and seven percent of Republicans favored it. The most favored policy was to “Hold families together in family detention centers until an immigration hearing at a later date.” Pluralities of 44 percent of the total, 49 percent of Democrats, 39 percent of independents, and 47 percent of Republicans favored this course.

The tone-deafness of Democratic politicians on this problem can be seen on responses to the question “How serious a problem is illegal immigration in the U.S. as a whole?” Among the electorate as a whole, 58 percent considered illegal immigration to be either “very serious” or “somewhat serious.”

What Trump would like is a merit-based immigration system, in which entry would be granted only to foreigners with the skills to contribute to the economy. In putting such a system in place, chain migration allowing virtually anyone to enter would be ended, enforcement would be stepped up, and his famous border wall would be erected to control the flow of people and contraband from Mexico. All of these policy preferences would be at hazard in the coming midterm elections.

3. Halting the Slide to Authoritarian Power

Possibly the most heated and bitter controversy between the parties is which of them is more likely to move the United States toward a more authoritarian regime. Each side believes the other desires to centralize power and control society.

On the part of the Left, progressives have imagined the Republican Party as a bastion of white identity politics, which they believe to be the result of racism. Immediately after Donald Trump’s election, a Columbia University humanities professor — who was in fact a progressive — wrote an essay in the New York Times that lamented the Democratic party’s adoption of identity politics. In it Mark Lilla wrote,

It is a truism that America has become a more diverse country. It is also a beautiful thing to watch. . . . But how should this diversity shape our politics? The standard liberal answer for nearly a generation now has been that we should become aware of and “celebrate” our differences. Which is a splendid principle of moral pedagogy — but disastrous as a foundation for democratic politics in our ideological age. In recent years American liberalism has slipped into a kind of moral panic about racial, gender and sexual identity that has distorted liberalism’s message and prevented it from becoming a unifying force capable of governing.

Of course, his fellow progressives could not possibly agree with this assertion, and viewed its expression with repugnance. In fact, the reaction of progressives to Lilla’s essay speaks volumes about what they think of the Republican Party. In commenting on Lilla’s ideas, Joshua Seitz on the Politico website wrote,

It’s ironic, then, that today’s critics of identity politics focus not on the GOP, which has progressively degenerated into a revanchist white pride party, but on Democrats who, according to Columbia University’s Mark Lilla, espoused a politics of inclusive liberalism “from the New Deal up until 1980,” but then pivoted toward an “ideology … that fetishizes our individual and group attachments” at the expense of “a universal democratic ‘we.’”

In this quote you can see what many (if not most) progressives think about Republicans, that their party “has progressively degenerated into a revanchist white pride party”, By their lights, they see Republicans as a collection of racists. This observation also gives the only rational for calling Republicans fascists. By similarity to the Nazi Party of 1930s fascist Germany, any party that is both nationalist and racist must be fascist. What Democrats see at stake in the midterm elections is the possibility of wresting control of government back from the racist, fascist Republicans.

However, the vast majority of Republicans (including myself) do not recognize themselves in this description. The assertion Republicans are racists does not square with the large number of blacks, hispanics, and other minorities who are members of the party. Examples of prominent Republican blacks include such worthies as Alveda King, Colin Powell, Condoleezza Rice, Michael Steele, Herman Cain, Justice Clarence Thomas, Rep. Allen West (R-FL), Rep. Will Hurd (R-TX), Rep. Scott Thomas (R-TX), Rep. Mia Love(R-UT), Don King, Alan Keyes, Larry Elder, J.C. Watts, Thomas Sowell, Shelby Steele, Rep. Tim Scott (R-SC) and a great many more. If Trump were a racist, would he have a black as an important cabinet member (Ben Carson heading HUD)? If Trump were a racist, would he be trying to increase federal help for black colleges significantly?

Many might note the acronym Nazi stands for die Nationalsozialistische Deutsche Arbeiterpartei, which translates to the National Socialist German Workers’ Party. The Nazis were not just nationalists, but socialists as well. A first-hand observer of the rise of European fascism in the 1930s, Friedrich Hayek, noted there was fundamentally no essential difference between German fascism and Soviet Communism. The one cosmetic difference was a fascist legal fiction that the people who owned companies actually controlled them. In fact, the 1930s’ fascist governments of Benito Mussolini and Adolf Hitler held total control through government regulations and other means. (See also here.) The same is true of fascist Russia today. A developing fascist state is characterized by its government seeking ever more roles in and power over society in general, and over the economy in particular.

By this measure, Donald Trump and the Republicans show no resemblance to fascists. They are doing the very opposite of accumulating more power for the government. Rather than increasing government regulation over society, Donald Trump is deconstructing the regulatory state at a record pace. At the same time, the Republicans are releasing more economic assets to companies and the people through tax cuts and tax reform.

It follows one important objective for Republicans in the midterm elections is to stymie Democrats’ efforts to label them as racists and fascists. The adherents to the GOP are generally neither. However, an even more important goal is to frustrate progressives’ efforts to actually move the United States toward a more fascist social organization. For while American neoliberals are not similar to fascists at all, progressives resemble fascists ever more over time.

As I have noted before, this is a very old story. It stretches back at least a century to the administration of Woodrow Wilson. Ever since then, progressives have been accumulating proliferating power over society, particularly economic power, in the federal government. This accretion of federal power has been particularly noticeable in the regulatory state of independent government agencies. Possibly the greatest issue in the midterms is whether or not this power should be greatly reduced.

How more consequential can midterm elections get?

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