Political Risk Brief
November 2016

The Era of U.S. Political Volatility


The election of Donald J. Trump as the 45th President of the United States confirms that American politics have entered an era of pronounced political volatility.  In rejecting the prevailing order, the Trump victory also appears to have emasculated elements on the Right content with accommodating, rather than overthrowing, liberalism.  The fundamental drivers of current and future instability: a collapse in social capital among wide swaths of the public and growth-crippling government intervention in the economy that undermines human flourishing.  The nation’s political landscape increasingly will be defined by the search of millions of working-class Americans for identity, meaning, and purpose amid deteriorating family stability and a lackluster economy.  As a result, questions of identity as shaped by populism and nationalism – and disdain for the governing class as elitists and globalists – will dominate.

Decline in Social Capital

Long-term trends have produced a crisis in working-class America, prominently documented in Charles Murray’s Coming Apart and J.D. Vance’s Hillbilly Elegy.  Evidence suggests decreased interest in productive activity, as indicated by both the 75 percent of leisure time that men without college degrees spend on video games (an average of 12 hours per week),1 as well as the record-low U.S. fertility rate.2  In particular, the labor participation rate has stagnated at historically low levels.  Approximately 10 million prime age men (ages 25-54) either remain out of or never have been in the workforce.3  The percentage of men who never have married has more than doubled in the past half-century.4  Families headed by single mothers have quintupled since the 1950s, thought by many to be the golden age of broad-based prosperity.5

Working-class whites are dying in greater numbers from substance abuse and suicide, as recently shown by Nobel Prize-winning economist Angus Deaton and fellow Princeton professor (and spouse) Anne Case.6  Specifically, more Americans are overdosing on opioids than ever before.7  Eminent addiction psychiatrist Leon Wurmser has noted that opioid addicts (as opposed to, for example, cocaine addicts or alcoholics) uniquely seek through their drug use “a sense of protection, warmth and union, of heightened self-esteem and self-control,”8 signaling an internalized, individual awareness of widespread sociocultural fragmentation and breakdown.

This sentiment is further suggested by cremation surpassing burial in 2015 for the first time in American history, marking a doubling over the last decade and a half.9  Although many ascribe this trend to a decline in the number of Americans affiliated with religious groups opposed to cremation, it points more deeply to the growth of a constituency of people who feel they have no place in the past and no stake in the future, rendering unnecessary a monument to memorialize them and their values.

The Great Recession: Devastating Blow to a Fragile Society

The Great Recession served as a singular trauma by foreclosing upward mobility for those with lower levels of educational attainment, exacerbating the existing trends among the working class.  As leading demographer and political economist Nicholas Eberstadt wrote in his recent book Men Without Work: America’s Invisible Crisis: “The country’s work rates virtually flatlined in the four years after the Great Recession (late 2009 to early 2014).  So far as can be determined, this is the only ‘recovery’ in U.S. history in which this basic labor market indicator almost completely failed to respond.”10  University of Chicago economist Erik Hurst, who generated the video game statistics mentioned above, has shown that after the bursting of the dotcom bubble in March 2000, “The housing boom served to ‘mask’ the labor market effects of manufacturing decline for less-educated workers.”11  Hurst argues that, with many of these workers forgoing education to work in real estate and construction while the housing boom was roaring, they failed to attain the education and skills that could have made them employable again after the financial crisis.  As a result, “Traditional monetary and fiscal policy tools, such as temporary interest rate cuts, tax rebates, or increases in government spending” are not working to bring them back into the labor force, helping explain the current period termed by leading economic elites “secular stagnation” or the “New Normal.”12

Political Realignment

The distress of the working class has been channeled into the political system in the 2008 (President Obama), 2010 (Tea Party), and 2016 (Trump and Senator Bernie Sanders (I-VT)) elections.  The impact of these electoral cycles has been the gradual erosion of the credibility of policy elites, especially the business community, in setting the public policy agenda in Washington, D.C.  Increasingly, the political conversation is focused on the distressed working class.  For example, there is intensifying opposition to tax policies favored by multinationals that might grow executive compensation, dividends, and share buybacks without increasing wages for workers.  Many point to the 2004 tax repatriation holiday as a case study for having failed to produce job growth promised by its multinational champions; even the Heritage Foundation has concluded: “The evidence clearly shows that these repatriated earnings did not increase domestic investment, job creation, or research and development (R&D).”13

The nostalgia for the economy of the 1950s – which many perceive as having offered non-college-educated men ready access to lifetime employment at a large industrial corporation, with a defined benefit pension to boot – elevates in the political conversation the importance of work as a critical source of meaning and dignity for the working class.  As Trump said in Detroit, “When we were governed by an America First policy, Detroit was booming.  Engineers, builders, laborers, shippers and countless others went to work each day, provided for their families, and lived out the American Dream.”14  Similarly, in his June 2016 visit to Elkhart, IN, the hard-hit RV manufacturing hub that was his first domestic stop as president in 2009, President Obama similarly emphasized: “Middle-class families have paid lower federal income tax rates during my presidency than during any other time since the 1950s.”15  Seen from this perspective, conventional Republicans’ encouragement of defined contribution plans and Social Security reform likely has appeared to working-class voters as intended to advance corporate interests rather than put workers’ finances on a genuinely sound footing.

Political Impacts Likely to Increase

Current and near-term trends are likely to entrench and exacerbate this political reorientation and intensify the accompanying electoral instability seen during the 2016 presidential election.  In particular, the distress of the working class likely will be intensified through: labor displacement from automation (e.g., the development of autonomous vehicles risks the employment of the three million Americans employed as truck drivers);16 sustained drug abuse (see above); increasing video game usage, compounded by the emergence of virtual reality and augmented reality technologies; and a political economy that disincentivizes investment in labor-intensive sectors.

If growth cannot be rapidly accelerated, the country risks crippling dissatisfaction and even disorder.  Higher interest rates, a recession, or a possible fiscal crisis pose the risk of upheaval.  The last such period of upheaval, the 1960s, will pale in comparison.  Then, the radical minority attacked the establishment majority.  Today, the radical majority seems poised to attack the establishment minority centered in Washington.  The tribal identity politics the Left cultivated for decades were appropriated by Trump, who mobilized the working class as a beleaguered minority.  The two parties will either change to reflect this new dynamic, or fall to new movements.

The defining political axes have shifted from libertarian-statist/secular-religious to populist-elitist/nationalist-globalist.  Both limited government and traditional faith appear, for at least the moment, to be vanquished as potent political forces.  Instead, the battle has moved to the legitimacy of elites and the continued validity of American exceptionalism as superior to internationalist norms.  In the context of the trends outlined above, the chasm between the nation’s rulers and Trump voters on these questions has the potential to drive even greater political confrontation.

1  “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.

2  Frank Newport and Joy Wilke, “Desire for Children Still Norm in U.S.: U.S. birthrate down, but attitudes toward having children unchanged,” Gallup, September 25, 2013, http://www.gallup.com/poll/164618/desire-children-norm.aspx.

3  “The Long-Term Decline in Prime-Age Male Labor Force Participation,” The White House, June 2016, https://www.whitehouse.gov/sites/default/files/page/files/20160620_cea_primeage_male_lfp.pdf.

4  Wendy Wang and Kim Parker, “Record Share of Americans Have Never Married: As Values, Economics, and Gender Patterns Change,” Pew Research Center, September 24, 2014, http://www.pewsocialtrends.org/2014/09/24/record-share-of-americans-have-never-married/.

5  Ron Haskins and Isabel V. Sawhill, “Living Arrangements for Families with Children Under 18, 1950-2015,” The ANNALS of the American Academy of Political and Social Science 667, no. 1(September 2016): 12, http://ann.sagepub.com/content/667/1/8.full.pdf+html.

6  Anne Case and Sir Angus Deaton, “Rising morbidity and mortality in midlife among white non-Hispanic Americans in the 21st century,” Proceedings of the National Academy of Sciences of the United States of America, September 17, 2015, http://www.pnas.org/content/112/49/15078.full.

7  U.S. Department of Health and Human Services (HHS), The Opioid Epidemic: By the Numbers, http://www.hhs.gov/sites/default/files/Factsheet-opioids-061516.pdf.

8  Leon Wurmser, M.D., “Mr. Pecksniff’s Horse?: (Psychodynamics in Compulsive Drug Use),” 36-72, in Jack D. Blaine, M.D. and Demetrios A. Julius, M.D., eds., Psychodynamics of Drug Dependence: National Institute of Drug Abuse Research Monograph 12 (Washington, May 1977), 48, http://ww1.drugabuse.gov/pdf/monographs/12.pdf.

9  National Funeral Directors Association, The NFDA Cremation and Burial Report: Research, Statistics and Projections, September 2014, 2, http://mediad.publicbroadcasting.net/p/healthnewsfl/files/201507/03-a_2014_cremation_and_burial_report__2_.pdf; Cremation Association of North America, press release, “U.S. Cremation Rate Nearly Doubles Over Past 15 Years: Fascinating correlation between states with high cremation rates, states with large population unaffiliated with organized religion,” October 7, 2015, http://www.cremationassociation.org/news/254355/U.S.-Cremation-Rate-Nearly-Doubles-Over-Past-15-Years.htm.

10  Nicholas Eberstadt, Men Without Work: America’s Invisible Crisis (West Conshohocken, PA: Templeton Press, 2016), 16.

11  Kerwin Kofi Charles, Erik Hurst, and Matthew J. Notowidigdo, “The Masking of the Decline in Manufacturing Employment by the Housing Bubble,” Journal of Economic Perspectives 30, no. 2 (2016): 181, http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.30.2.179.

12  Ibid, 96.

13  J.D. Foster and Curtis Dubay, Backgrounder #2610: Would Another Repatriation Tax Holiday Create Jobs?, The Heritage Foundation, October 4, 2011, http://www.heritage.org/research/reports/2011/10/would-another-repatriation-tax-holiday-create-jobs.

14  J. Brian Charles, “ Transcript of Donald Trump’s economic policy speech to Detroit Economic Club,” The Hill, August 8, 2016, http://thehill.com/blogs/pundits-blog/campaign/290777-transcript-of-donald-trumps-economic-policy-speech-to-detroit.

15  President Barack Obama, “Remarks by the President on the Economy,” Concord Community High School, Elkhart, Indiana, June 1, 2016, https://www.whitehouse.gov/the-press-office/2016/06/01/remarks-president-economy.

16 Reports, Trends & Statistics, American Trucking Associations (ATA), http://www.trucking.org/News_and_Information_Reports_Industry_Data.aspx.