The Economics of Populism and Presidential Campaigns

Anything popular is populist, and populist is rarely a good adjective — Brian Eno

With less than a year before Americans go to the polls to cast their votes for a new president, the vetting of declared candidates is fully underway. The media has pored over backgrounds, public statements and ideologies; meanwhile, the candidates are making the rounds – on Sunday talk shows, as well as across the country.

To date, there have been five Republican and two Democratic debates, with a total of six more scheduled. Although it feels like overkill, the process is necessary to whittle down the numbers and separate contenders from pretenders.

By the time the Democratic national convention is finished in late July, both parties will have selected their candidates.

As always, the economy is one of the top subjects politicians argue about while on the stump. While methods and philosophies vary, one commonality frequently on display in both parties is variants of economic populism.

Economic Populism Defined

Although there is no one accepted definition, Cambridge Dictionaries Online defines the term ‘populist’ as follows:

Political ideas and activities that are intended to get the support of ordinary people by giving them what they want.

‘Economic populism’ simply narrows the focus and benefits to those of economic activities, whether they be lower taxes, increased social safety net allocations, or something else altogether.

Populism Has Long Roots

Populism and economics have gone hand in hand for over a century. Per an article in The Economist, back in 2006:

In the United States, too, populism had rural roots, in the prairies of the Midwest. In the 1890s, the People’s Party campaigned against what it saw as the grip of urban cartels over the economy. This cause reached its zenith in the 1896 presidential election, when the populists backed the campaign of William Jennings Bryan, a Democratic crusader against the gold standard.

The major shortcoming of populism is the risk of empty promises.

Although pledges and exaggeration often go hand-in-hand during presidential campaigns, perhaps the most infamous example was Herbert Hoover’s “A chicken in every pot and a car in every garage” slogan leading up to the 1928 election. Although he won, the Great Depression began less than a year later, scuttling Hoover’s hopes of achieving prosperity and dooming his chances for a second term.

Economic Populism: Present Day Examples

Economic populism has become  mainstream, shifting from feel-good platitudes like Hoover’s example into (at times) specific pledges that critics charge as attempts to ‘buy’ votes with empty promises. Modern populism now crosses party lines, as evidenced by the following three examples:

Hillary Clinton

The former Secretary of State has taken positions most mainstream Democrats embrace, including increasing taxes on the wealthy, a middle class tax cut, a plan to make student loans more affordable, raising the minimum wage to $12, paid family leave, and other platform proposals.

The economics of her proposals are not fully fleshed out, with some sounding of greater benefit to the middle class than reality would likely demonstrate. For example, The Brooking Institute points out how her proposal to allow refinancing of student loans at lower rates actually provide disparate benefits to higher-income individuals:

Refinancing loans provides the greatest benefit to borrowers with large outstanding debts. This doesn’t seem like such a bad thing until you realize that households with large outstanding debts tend, on average, to be high-income households. Many borrowers who take on large debts do so in order to pursue degrees that lead to high incomes, in fields such as law and medicine. These are not the same households who are struggling financially and are perhaps in need of a bailout.

Overall, her New College Compact proposal would cost an estimated $350 billion over the next ten years. Clinton plans to pay for the proposal by eliminating certain tax loopholes and other benefits that the wealthiest Americans currently enjoy.

Bernie Sanders

The senator from Vermont has attempted to mimic Barack Obama’s successful 2008 “Change We Can Believe In” movement, with a major twist: Sanders is channeling voter anger over the near-collapse of the economy during the Great Recession by calling for an economic “revolution.”

Sanders has positioned himself further to the left than Clinton on many issues, including free college tuition, raising the minimum wage to $15, eliminating Super PACs, breaking up the largest U.S. banks, tax reform and other groundbreaking ideas.

Sanders unabashedly calls himself a “democratic socialist” – and his proposals (if enacted) would be historic in terms of their budgetary impacts. Per The Wall Street Journal:

The Sanders program amounts to increasing total federal spending by about one-third—to a projected $68 trillion or so over 10 years.

For many years, government spending has equaled about 20% of gross domestic product annually; his proposals would increase that to about 30% in their first year. As a share of the economy, that would represent a bigger increase in government spending than the New Deal or Great Society and is surpassed in modern history only by the World War II military buildup.

Sanders’ proposals would undoubtedly face stiff opposition in Congress.

Donald Trump

The real estate developer/reality T.V. star has proposed his own unique form of economic populism. Claiming that illegal immigrants cost the U.S. taxpayers billions in social services, he has steadfastly promised to deport the millions living in the country and to build a wall along the U.S./Mexico border — which he promises Mexico will pay for.

The Republican base has enthusiastically embraced these ideas, helping him to rocket to the top of the polls. Trump has also promised across-the-board tax cuts, trade reforms and returning outsourced jobs to the United States.

Trump and Sanders have one thing in common: the platforms for each carry budget-busting price tags:

Analysts at the left-leaning Citizens for Tax Justice and the conservative-leaning Tax Foundation released top-line estimates on the Republican presidential front-runner’s tax plan that was unveiled Monday.

According to the Citizens for Tax Justice, Trump’s tax proposal would reduce revenues by around $900 billion per year, which would translate to about $9 trillion over a decade. The Tax Foundation is singing a similar tune: It predicts that the billionaire’s plan would reduce tax revenue by some $10 trillion over the next 10 years (when measured alongside economic growth).

Trump’s campaign manager Corey Lewandowski argues that, assuming a 3% growth rate in GDP, the plan is revenue neutral.

Populism: More Popular than Ever

In recent years, it has become popular for candidates to make sweeping proposals that appeal to their likely voting base while claiming their programs are ‘paid for’ in ways that economists and pundits scratch their heads over. Cynics argue that such tactics may win votes, but contribute to the general decline in American politics, furthering the gridlock and malaise already gripping Washington D.C.

Regardless of whether or not plans or platforms can ultimately be achieved, expect it to continue for the foreseeable future.

As Bernard Baruch once said, “Vote for the man who promises least; he’ll be the least disappointing.”