Political Risk Brief
Summer 2018

Super Trends: Drivers of U.S. Political Risk

Introduction

Informed by more than a decade of Political Risk Assessments involving discussions with over one thousand policy makers, experts, and opinion leaders, Baron has identified powerful currents that shape the political landscape and drive policy outcomes.  The confluence of the Political Risk Super Trends now unfolding portends an increasingly volatile political environment.

1. Social Capital Collapse

The United States has suffered a serious deterioration in the foundations of social stability.  Deaths of despair – defined as those caused by suicide or substance abuse – have more than doubled among certain demographics since 1990.1  For example, opioid overdose rates have increased 200 percent since 2000.2  “Associational life,” including activity in civic associations and volunteer organizations, has declined dramatically.3  Many Americans, as prominent sociologists have articulated, today find themselves “bowling alone” and their communities “coming apart.”4  Rising societal distress has an important relationship to political outcomes.  Donald J. Trump’s performance during the 2016 GOP primaries correlated to a noteworthy degree with state-level social-capital scores.  During the competitive phase of the Republican nominating contest, then-candidate Trump prevailed in only three of the 15 states with the highest social capital ratings.5  Amid deteriorating communal stability, the nation’s political landscape increasingly will be defined by the search of millions of working-class Americans for security, identity, and purpose.

2. Labor Force Constraints

The ongoing collapse in social capital increasingly constrains the nation’s labor force, despite legions of dynamic opportunities.  The labor force participation rate for prime-age men (ages 25 to 54) has declined by 10 percent since the 1950s, with a four-percent decrease during the past two decades alone.6  Employers today struggle to find drug-free job applicants; prospective employees failed drug tests at record levels in 2017.7

“The United States suffers the more worrisome challenge
of jobs without workers.”

The most recent Small Business Optimism Index reported that 83 percent of small businesses trying to fill open positions found only “a few or no qualified candidates.”8  Men without college degrees now spend 75 percent of leisure hours playing video games, instead of investing greater free time in education and skills training.9  Rather than face the conventional problem of workers without jobs, the United States suffers the more worrisome challenge of jobs without workers.

3. Escapism and the “Siege of Solitude”

Confronted with an unraveling family structure and declining labor force participation, Americans seek new sources of meaning.  Conventional channels of individual fulfilment have declined markedly, with membership in traditional religious organizations down 20 percent and the rate of those claiming no religious affiliation quadrupling since 1970.10  Exploding recreational drug use and the rampant abuse of prescription medication suggest that previous sources of fulfillment have not yet found a constructive replacement.11  Seeking to escape from isolation and the anxiety induced by a rapidly-changing society, Americans employ social media to self-segregate into online communities of like-minded individuals.12  The enhanced meaning people increasingly assign to food, the environment, exercise, and partisan politics suggests a compelling need for alternative belief systems from which to derive personal fulfilment.  With hyper-charged pleasure-seeking propelled by the advent in the near-future of virtual reality, the potential for a radical intensification of this phenomenon looms large over the cultural landscape.13 

4. China Delenda Est

Opposition to the regime in Beijing unites policy makers from across the ideological spectrum.  The once-conventional wisdom that economic growth would lead China to political liberalization now lacks credibility.  American elected officials today overwhelmingly view China as one of the world’s worst violators of human rights, the perpetrator of an unprecedented theft of intellectual property, and a top national security risk.  The anti-Beijing consensus appears only to be solidifying.  For example, Senators Marco Rubio (R-FL) and Catherine Cortez Masto (D-NV) recently introduced the Countering the Chinese Government and Communist Party’s Political Influence Operations Act.14  Both the American Right and the Left appear determined to thwart China’s increasing global influence and strategic position relative to the United States. 

5. Soft Nationalization

From technology to energy to food, seemingly diverse corporations stand accused of intentionally “addicting” consumers and seeking to escape responsibility for the resulting damage.  The critics of free enterprise who level these charges seek to hold large companies accountable for the alleged cumulative costs to society.  An expanded application of the 1998 Tobacco Master Settlement Agreement, this “soft nationalization” threatens entire industries with massive regulation but presents an enticing concession: government-sanctioned cartel arrangements that ensure dominant incumbent firms avoid competition from innovators unable to bear compliance costs.  Such arrangements promise to provide established companies with a nearly unbridgeable “moat” as defense against plucky startups.  The disincentives to innovation created by soft nationalization threaten tragic consequences.  Consider the mounting regulatory challenges to e-cigarettes even as almost 40 million Americans continue to use traditional tobacco products known to inflict tragic levels of preventable disease and premature death.15  If the momentum in favor of soft nationalization continues unabated, the innovation that underpins U.S. economic growth must be considered at serious risk.

6. The Rock Creek Rebellion

Donald Trump’s 2016 victory supercharged the long-standing transformation of Washington, D.C. elites into a distinct and profoundly tribal political class, the members of which have thrived under a rapidly expanding federal regulatory state.  In 1999, the median household income of Northwest Washington, D.C. zip codes encompassing areas west of Rock Creek Park was 80 percent higher than the national median household income that year.  The 2016 Census revealed that this figure has increased to 120 percent.16  

“Elite Northwest D.C., home to Washington’s political class,
has become increasingly monolithic.”

At the same time, elite Northwest D.C., home to Washington’s political class, has become increasingly monolithic.  Between 1996 and 2016, Republican performance in presidential elections dramatically collapsed by two-thirds in the precincts representing those neighborhoods, with the steepest drop-off occurring after 2012.  In the vast majority of those precincts, President Trump earned single-digit percentages of the popular vote.17    

President Trump, the ultimate Washington, D.C. cultural outsider, finds himself in a vicious class conflict as he delivers the disruption this influential cohort feared: a 36 percent reduction in new pages published in the Federal Register.18  In a GOP increasingly dominated by Trumpian themes, future Republican presidents likely will encounter similar, and perhaps escalating, “resistance” from Washington, D.C. legal and regulatory elites.  Effective policy-making under such circumstances could become nearly impossible.

7. Industrialism

While U.S. tech giants struggle to maintain the support of “America’s forgotten communities,” industrial companies today occupy a privileged political position.19  In his address to the National Association of Manufacturers, President Trump remarked, “There is great patriotism that lives inside the men and women who leave their hearts on the factory floors … they are building this nation that we love so much.”20  Similarly, Senator Bernie Sanders (I-VT) in March 2016 declared, “Electing establishment politicians who make promises to protect manufacturing jobs on the campaign trail only to break them once they are sworn in will not help rebuild … America.  It will only lead to the continued deindustrialization of cities and towns … We have got to do a lot better than that.”21  Donald Trump’s 2016 victories in industrial midwestern states, especially Michigan, demolished the Democratic Party’s Electoral College “blue wall” that, according to conventional analysis, made the GOP nearly uncompetitive at the presidential level.22  Reflecting a powerful nostalgia for American manufacturing might during the 1940s and 1950s, this electoral revolution has positioned the Midwest, and therefore the industrial economy, at the center of the political conversation.

Anne Case and Angus Deaton, “Mortality and Morbidity in the 21st Century,” Brookings Institution, March 23, 2017, 397-476, https://www.brookings.edu/wp-content/uploads/2017/08/casetextsp17bpea.pdf/.

Rose A. Rudd, Noah Aleshire, Jon E. Zibbell, and R. Matthew Gladden, “Increases in Drug and Opioid Overdose Deaths – United States, 2000-2014,” Centers for Disease Control and Prevention, January 1, 2016, https://www.cdc.gov/mmwr/preview/mmwrhtml/mm6450a3.htm/.

Sen. Mike Lee, “Social Capital Project,” U.S. Senate, https://www.lee.senate.gov/public/index.cfm/socialcapitalproject/.

Robert Verbruggen, “Mike Lee Wants to Stop America from Coming Apart,” National Review, May 17, 2017, https://www.nationalreview.com/2017/05/mike-lee-social-capital-project-report-charles-murray-robert-putnam/.

Baron Public Affairs, LLC analysis of data from the “Social Capital Project” of Sen. Mike Lee.
Of the top 20 states measured by the social capital index, 15 held primaries on or before April 26, after which point neither of the remaining challengers to President Trump was mathematically able to secure a majority of delegates absent a brokered convention.  Several days later, both Sen. Ted Cruz (R-TX) and John Kasich withdrew from the race.  Of those 15 states, President Trump only won three (New Hampshire, Vermont, and Connecticut). 

Council of Economic Advisers, “The Long-Term Decline in Prime-Age Male Labor Force Participation,” The White House, June 2016, https://obamawhitehouse.archives.gov/sites/default/files/page/files/20160620_cea_primeage_male_lfp.pdf/. 

Rebecca Greenfield, “The decline of pre-employment drug test,” The Seattle Times, March 9, 2018, https://www.seattletimes.com/explore/careers/the-decline-of-the-pre-employment-drug-test/.

“Small Business Optimism Index,” NFIB Research Foundation, May 2018, https://www.nfib.com/surveys/small-business-economic-trends/.

“Faculty Spotlight: Erik Hurst,” Becker Friedman Institute for Research in Economics, University of Chicago, https://bfi.uchicago.edu/news/scholar-profile/faculty-spotlight-erik-hurst/.

10 Sen. Mike Lee, “Social Capital Project.”

11 Leon Wurmser, M.D., “Mr. Pecksniff’s Horse?: (Psychodynamics in Compulsive Drug Use),” in Jack D. Blaine, M.D. and Demetrios A. Julius, M.D., eds., Psychodynamics of Drug Dependence, National Institute of Drug Abuse Research Monographs 12, May 1977, 36-72, http://www.drugabuse.gov/pdf/monographs/12.pdf/.

12 AJ Willingham, “Study: Facebook can actually make us more narrow-minded,” CNN, January 22, 2017, https://www.cnn.com/2017/01/22/health/facebook-study-narrow-minded-trnd/index.html/.

13 Term “Siege of Solitude” as coined by James Poulos. The Art of Being Free: How Alexis de Tocqueville Can Save Us from Ourselves, New York: St. Martin’s Press, 2017; and
Kyle Smith, “Oculus Rift is going to destroy families and relationships,” New York Post, May 1, 2016, https://nypost.com/2016/05/05/oculus-rift-is-going-to-destroy-families-and-relationships/. 

14 Sen. Marco Rubio, “Rubio, Cortez Masto Introduce Bill to Combat China’s Political Influence,” U.S. Senate, June 28, 2018, https://www.rubio.senate.gov/public/index.cfm/press-releases/.

15 2016 figure taken from “Smoking and Tobacco Use,” Centers for Disease Control and Prevention, https://www.cdc.gov/tobacco/data_statistics/fact_sheets/fast_facts/index.htm/.

16 Baron Public Affairs, LLC analysis of data from “Fact Finder,” U.S. Bureau of the Census, https://factfinder.census.gov/faces/nav/jsf/pages/index.xhtml/;
Ed Welniak and Kirby Posey, “Household Income: 1999,” U.S. Bureau of the Census, June 2005, https://www.census.gov/prod/2005pubs/c2kbr-36.pdf/; and
Gloria G. Guzman, “Household Income: 2016,” U.S. Bureau of the Census, September 2017, https://www.census.gov/content/dam/Census/library/publications/2017/acs/acsbr16-02 pdf/. 

17 Baron Public Affairs, LLC analysis of data from D.C. Board of Elections.
Between 1992 and 2016, Republican performance in precincts 5-13, 26-34, 50-52, and 138 dropped, on average, 67 percent. 

18 “Federal Register Pages Published 1936-2017,” Federal Register, 2017, https://www.federalregister.gov/uploads/2018/03/pagesPublished2017.pdf/.

19 Donald J. Trump, “Remarks of President Donald J. Trump – As Prepared for Delivery,” The White House, January 30, 2018, https://www.whitehouse.gov/briefings-statements/president-donald-j-trumps-state-union-address/.

20 Donald J. Trump, “Remarks by President Trump to the National Association of Manufacturers,” The White House, September 29, 2017, https://www.whitehouse.gov/briefings-statements/remarks-president-trump-national-association-manufacturers/.

21 Sen. Bernie Sanders, “Sanders Response to Clinton’s Speech on Jobs,” Friends of Bernie Sanders, March 2016, https://berniesanders.com/wp-content/uploads/2016/03/Sanders_Response.pdf/.

22 David Plouffe quoted in Annie Karni, “Clinton advisers see multiple paths to a commanding win,” Politico, September 2, 2016, https://www.politico.com/story/2016/09/clintons-advisers-tell-her-to-prep-for-a-landslide-227659/.