The Fourth Turning Is Here (part 2)

January 29, 2024

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Having laid out the basics of Howe’s generational theory of historical cycles, I now turn to his discussion of the current social era. In his scheme, this is the Crisis phase or Fourth Turning of the Millennial Saeculum that began in 1946. Such crises do not occur randomly in the modern world, but recur regularly because of the generational dynamics. The generations that inherit the institutional regime constructed in one crisis live in such a way as to set the stage for the next crisis.

Eventually, after new institutions are created, the generations who know how to manage them competently and fairly will disappear—as will the generations who are content to be managed by them. New values and ideas will emerge, and rising generations will coalesce into factions around them….

During an Awakening, the rising priority of the young Prophet is that people adopt new ideals and values, which requires weakening, not strengthening, the behavioral constraints of community…

During Crises, the rising priority for the young Hero is that people adopt new civic goals and obligations, which requires strengthening the behavioral constraints of the community.

Typical events

Howe describes some key types of events that happen in a Crisis, based on Western history going back to the fifteenth century. I will use for examples the last American Crisis, the Depression and World War II, before looking for parallels today.

The Crisis usually has a precursor that occurs in the previous Unraveling stage of the cycle. An example is World War I, which foreshadowed the larger global conflict to come but did not resolve the domestic conflicts of the time or focus the nation’s attention for very long. In the 1920s, “the Third Turning mood resumed, only now with a darker, more nihilistic tone than before the war.”

The Crisis phase begins with a catalyst that suddenly changes the mood. An example is the stock market crash of 1929.

The Crisis includes at least one regeneracy, an event that encourages social unity and directs energy toward civic life. An example is Franklin Roosevelt’s first inaugural address, declaring that “the only thing we have to fear is fear itself.”

The Crisis reaches a consolidation, when society rallies in support of a struggle for survival. The obvious example here is Pearl Harbor and the immediate declarations of war.

Society can then move toward a climax, the victory of a new order over the old. The climax of World War II came with military victories over Germany and Japan in 1944.

Finally, the Crisis reaches its resolution, which resolves the main issues and fully establishes the new order. At the end of the war, the U.S. provided the leadership to establish the United Nations and international financial institutions, decisively ending its period of isolationism. Around the same time, it institutionalized federal support for economic security with the G.I. Bill of Rights. Members of the G.I. Generation, who had endured sixteen years of Depression and war during their childhood and/or young adulthood, were well rewarded for their service and went on to become America’s solid middle class and secure senior citizens.

The Millennial Crisis

The term “Millennial” does double duty here. It names both the historical cycle that is now climaxing and the younger generation that Howe casts as the Heroes in that climax, comparable to the G.I. Generation of the previous cycle.

Only a few of the typical Crisis events have occurred so far. Howe regards 9/11 and the American invasions of Afghanistan and Iraq to be the precursor. This was followed—as was World War I—with a period of disillusionment and isolationist sentiment.

The catalyst for the current Crisis was the Global Financial Crisis of 2008. The country briefly came together in support of vigorous federal action to combat the recession. But as economic growth resumed, albeit very slowly, political division and gridlock reappeared.

A kind of regeneracy occurred during the 2016 election. The Trump campaign “mobilized party partisans to an intensity not seen since the mid-1930s.” No consensus on where the country should go emerged, but at least people were politically engaged. Many were passionately engaged, as the rise of right-wing militias and threats of political violence showed. A movement of educated voters toward the Democratic Party and of less educated white voters toward the Republican Party suggested that a major political realignment might be under way.

If this Crisis is to resemble previous ones, it still needs consolidation, climax and resolution. Instead, “governing at the national level has ground to a halt,” and pessimism about the country’s future prevails.

Prospects for accelerating crisis

Because the Millennial Crisis has not reached its climax, Howe can only suggest what dramatic events may lie in store. One possibility is another financial crash. Although the economic stimulus measures adopted during the Great Recession and the Covid pandemic did restore the economy to what passes for normal, the reliance on such extraordinary measures is a sign of underlying weakness.

Chronic stimulus lowered savings, fed zombie firms, and suppressed business dynamism. Worse, it raised the risk of yet another crash by glutting Wall Street in order to feed Main Street. It habituated investors to low taxes, to guaranteed consumer demand, to narrow credit spreads, to debt pyramids built on near-zero or negative real interest rates, and to promises of Treasury bailouts and Fed backstops in case there’s trouble.

Howe wonders if the country is economically resilient enough to handle a serious crisis.

Never before has America approached a major national trial with such a low rate of economic growth, with such a meager savings rate, with such heavy public and private indebtedness to the rest of the world, and with so little available fiscal room—thanks to a large public sector that is now mainly dedicated (through benefits and tax breaks) to funding the personal consumption of its eldest citizenry. This time around, in short, the very structure of the economy is tilted steeply toward the old and the past. Unless America can rapidly reverse that tilt, no ambitious investment agenda on behalf of the young and the future will be affordable.

He anticipates the need for a major reversal of policy, “from leveraged personal consumption to unleveraged national investment.” Crisis-level spending on national priorities may require getting people to spend less on themselves, whether by encouraging saving, raising taxes, rationing consumer goods, or letting prices rise.

A second accelerator of the Crisis could be civil war. Polls find about half of respondents saying that a civil war is likely. Talk of secession is also popular, especially among MAGA Republicans. Hostility toward the federal government, declining respect for democratic institutions, cultural polarization, and a heavily armed electorate all create the potential for armed conflict.

Another possibility is a new great-power war. As in the world of the 1930s, we see undemocratic regimes on the rise, declines in global trade, larger waves of refugees, and closer ties among our principal adversaries, in this case China, Russia, Iran and North Korea. In 2022, Russia invaded Ukraine, perhaps trying to take advantage of Americans’ recent disengagement from foreign affairs. Our major parties disagree over support for Ukraine and the NATO alliance.

These accelerators of crisis could intersect in dangerous ways. A new financial crash could intensify domestic or global conflict, as the Great Depression did in the 1930s. Civil conflict in the United States could increase the nation’s vulnerability to foreign attack, either because a foreign adversary takes advantage of our internal divisions, or because one side in the civil conflict gets assistance from a foreign power. [Recall that the Mueller investigation found that Russia interfered in the 2016 election in support of Donald Trump.]

Many scenarios are possible. One is that our internal differences are settled at the ballot box, and the country unites to address some external threat. Another is that unresolved internal differences become the greatest threat, and cannot be settled without serious violence.

The social transformation

Howe describes five major changes that societies typically experience by the time a Crisis is over.

First, individualism declines and community strengthens. This is the opposite to what happens in Unraveling periods, which are noted for erosion of community ties. Think of Robert Putnam’s classic Bowling Alone, published in 2000. Howe observes, “Loneliness and isolation are highly correlated with substance abuse, chronic disease, depression, mental illness generally, and suicide. Deaths from such causes surged during the 2010s.” A Crisis tends to bring people together, first in family, social networks and partisan tribes, but eventually in collective social causes.

Second, privilege gives way to greater equality. The rising inequality that is normal in capitalist societies peaks in the Unraveling phase, but yields to greater egalitarianism in the Crisis phase, for several reasons. Government raises taxes on the wealthy to address national problems. Sudden shifts in spending priorities may hurt old industries and create opportunities for new ones. The nation enlists the support of economically marginalized groups by offering them a “new deal.”

Third, defiance of authority gives way to greater respect for authority. The emergence of new values in an Awakening and the deepening of cultural conflict in an Unraveling have undermined trust in traditional authorities. “As conflicts deepen, people will feel forced to choose between the authority of one or another partisan tribe.” By the time the Crisis is resolved, the authority of a new regime has become broadly accepted.

Fourth, temporary fixes that defer more serious action for later give way to more permanent solutions. The nation stops just trying to muddle through while factions argue endlessly. It tackles the big questions and tries to set a course for the future. In particular, it addresses the prospects of younger generations and tries to create a better world for them.

Finally, convention triumphs over ironic detachment. Besides outright defiance, another way of attacking social conventions during an Awakening or Unraveling is satire. A Crisis, on the other hand, is a time to get serious. What people write, speak, sing about, or act out becomes important. New rules appear, and not just the silly ones proposed by a popular comedian. “Manners traditionalize, families grow closer, proper behavior is ritualized, and personal violence and risk-taking decline.” Authoritative violence to enforce new rules is usually part of the process, however.

Generational contributions

How will each living generation of adults contribute to resolving the current Crisis? We cannot know for sure, but Howe makes some historically informed predictions.

During this Crisis, members of the Boom Generation have been moving into elderhood and are now between the ages of 64 and 81 by Howe’s reckoning. They have been noted for their individualism, risk-taking, and strong values orientation. Now they have an opportunity to play a role comparable to the last generation of the Prophet type, the Missionary Generation of Franklin Roosevelt. Its members had been “the great scolds of the Roaring Twenties,” but during the Depression and World War II they “consolidated their moral authority” to unify and mobilize the country. Howe expects the Boom Generation to produce a “Gray Champion” to play a similar role today. Boomers may well agree to sacrifice some of their accumulated wealth, through higher taxes, to support the needed reforms benefitting younger generations.

Members of Generation X have been moving into midlife and are now between the ages of 42 and 63. On the average they have had a tougher time than the more fortunate generations—Silent and Boom—that preceded them. Not only did they suffer as children from the family upheavals of the Awakening era, but as young workers they experienced reductions in real wages and a shrinking middle class. Left to their own devices in a system favoring private competition over public support, they have been noted for their “self-sufficiency, resilience, keen survival instincts, and the power to distinguish reality from illusion.” Their generation has produced many entrepreneurs and military leaders. Politically they tend to distrust government, prefer libertarianism, and vote Republican if they vote at all. The majority of Capitol rioters on January 6, 2021 were from Generation X. As the current Crisis unfolds, some Xers might become supporters of fascist or secessionist movements. More likely, Howe thinks, is that they will “seek to defend a powerful and newly energized republic as a means of securing the kind of well-anchored institutional world that was denied to them earlier in life.” One reason they may do so is that they are fiercely protective of their own children and want the best for them.

Members of the Millennial Generation have been moving into rising adulthood and are now between the ages of 19 and 41. Compared to Generation X, they have been more protected and respectful young people, doing more homework, participating in more extracurricular activities, and doing more volunteer work. When they hit the crime-prone years—late teens to early thirties—rates of violent crime fell dramatically. They are less comfortable in the unregulated marketplace and welcome more rules. They respect science and technical expertise more than ideologies and religious beliefs. They are the most Democratic-leaning of living generations, and are likely to join civic crusades to address pressing social problems.

Does every individual in a generation conform to such descriptions? Of course not. But enough shifts in attitudes and lifestyles occur to give each generation its distinctive character. Howe summarizes the respective generational roles he sees as the Millennial Crisis unfolds:

Let elder Boomers conceive the visionary ends. Let midlife Xers furnish the practical means. But then let young-adult Millennials, working together, furnish the critical mass that moves their entire society rapidly in one direction.

Continued

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The Fourth Turning Is Here

January 24, 2024

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Neil Howe. The Fourth Turning Is Here: What the Seasons of History Tell Us about How and When This Crisis Will End. New York: Simon & Schuster, 2023.

Ever since I read Generations (1991) by Neil Howe and William Strauss three decades ago, I have been fascinated by their cyclical theory of history. Strauss died in 2007, but Howe is still going strong. His latest book, The Fourth Turning Is Here, further refines the theory and applies it to more recent events.

I think this interpretation of history provides a lot of insight into where America is now and where it is likely to go. The future cannot be known with any precision, but the cyclical patterns identified by Howe and Strauss give us some useful clues. At least they alert us to possible futures that we may want to embrace or avoid.

In this post, I’ll lay out the theory, and then in later posts apply it to the current social situation, which Howe regards as a once-in-a-lifetime social crisis. As we will see, the Millennial Generation will have a lot to say about how the crisis is resolved, although all living generations have some role to play.

Personal and historical cycles

This theory asserts a relationship between phases of the human lifecycle and phases of historical cycles that also last about the length of a lifespan, about 80 to 100 years. Howe refers to these historical cycles with the Latin word “saeculum,” which the Romans applied both to long lifetimes and long periods of history. In Howe’s interpretation, we are in the final phase of the “Millennial Saeculum” that began at the end of World War II. The previous “Great Power Saeculum” extended from the end of the Civil War to 1945.

Ancient writers like Ibn Khaldun and modern historians like Arnold Toynbee both described repetitive patterns over such long periods. Toynbee “found the span of time between the start of one ‘general war’ and the start of the next to have averaged ninety-five years with a ‘surprising degree of coincidence’ across the millennia.”

But why should such cycles exist at all, especially in modern societies more preoccupied with linear progress? Why isn’t modern history just a story of continuous progress in technology, productivity, material prosperity, and so forth? The general answer is that change is rarely that continuous. “Our collective social life, as with so many rhythmic systems in nature, requires seasons of sudden change and radical uncertainty in order for us to thrive over time.” Periods of relative social stability are interrupted by social crises that require rapid institutional innovation and reform. After such a crisis, people try to conserve the new order until pressures for change build up again. That means that each generation is not just progressively different from the one before—better educated and more productive, for example—but each is situated differently in relation to major social events.

[I]magine that the society is suddenly hit by a Great Event (what sociologist Karl Mannheim called a “crystallizing moment”), some emergency, perhaps a war, so consequential that it transforms all of society’s members yet transforms them differently according to their phase-of-life responses.

For children, this response might be an awestruck respect for adults (and the desire to stay out of their way); for young adults, taking up arms and risking death to meet the enemy; for midlifers, organizing the troops and mobilizing society for maximum effort; for elders, setting strategy and clarifying the larger purpose.

Each generation is forever shaped by whatever is going on in society when they are growing up. Each generation also shapes later events by bringing their early experiences with them into later phases of the lifecycle. The interaction between historical change and personal change creates repetitive cycles, as explained below.

The four turnings

Each saeculum includes four “turnings,” which are analogous to the seasons of spring, summer, fall and winter. Each has a “characteristic social mood…reflecting a new shift in how people feel about themselves and behave toward each other.” Each turning lasts for about a quarter of the human life span. Howe divides the life span into the phases of youth, rising adulthood, midlife and elderhood. With each turning, each generation advances to the next phase of life. Each generation is shaped—especially as children—by the turnings it experiences, but each has its opportunity to shape events and moods as it ages. The interplay of turnings and generations creates four recurring types of generations, each with its own distinctive role in each of the four turnings. I’ll describe the turnings first, and then the generations.

The First Turning, analogous to spring, is a High. Howe describes it as “an upbeat era of strengthening institutions and weakening individualism, when a new civil order implants and an old values regime decays.” This comes after the previous fourth turning, when society had to confront and surmount a serious social crisis. The most recent example of a High is the postwar period that followed the crisis period of the Great Depression and World War II. The High of the previous saeculum was the “Gilded Age” after the Civil War.

The Second Turning, analogous to summer, is an Awakening. This is “a passionate era of spiritual upheaval, when the civic order comes under attack from a new values regime.” The most recent example is the “Consciousness Revolution” of the 1960s and 70s—Howe dates it from 1964 to 1984. The Awakening of the previous saeculum was the one that historians call the “Third Great Awakening” (1886-1908), associated with both religious fundamentalism and the the more progressive Social Gospel movement. These spiritual or cultural revolutions occur regularly, but they catch most people by surprise. Why disturb the relative peace and prosperity of a High? A key reason is the appearance of a new generation, which has no memory of the previous crisis, no mandate to build more order, and greater freedom to explore an inner world of meaning, self expression and higher purpose.

The Third Turning, analogous to fall, is an Unraveling. This is “a downcast era of strengthening individualism and weakening institutions, when the old civil order decays and the new values regime implants.” The Awakening era has generated enough new ideas and ideals to threaten existing institutions, without yet producing a consensus on institutional reform. The most recent example is the “Culture Wars” period (1984-2008). The Unraveling of the previous saeculum was the “World War I and Prohibition” era, when “opinions polarized around no-compromise cultural issues like alcohol, drugs, sex, immigration, and family life.”

The Fourth Turning, analogous to winter, is a Crisis, “a decisive era of secular upheaval, when the values regime propels the replacement of the old civil order with a new one.” Obvious examples include the American Revolution, the Civil War, and the Depression/World War II era (1929-1946). The last of those gave us bigger government, with its permanent military establishment and social welfare policies. Now The Fourth Turning Is Here. Howe dates the most recent Crisis from the Great Recession of 2008, and he expects it to end sometime in the 2030s. The economy has recovered, for now, but we still face extreme inequality, debt-fueled spending, shrinking world trade, political gridlock, climate change, and rising threats to democracy at home and abroad. But like previous long cycles, it may just be the winter before the spring. “If the current Fourth Turning ends well, America will be able to enjoy its next golden age, or at least an era that will feel like a golden age to those who build it.”

The four generational archetypes

In this theory of cycles, both generations and turnings are approximately the same length as a quarter of the life cycle. The exact dating of generations and turnings depends on finding a good fit between the two. “The leading edge of every generation…emerges from infancy and becomes aware of the world just as society is entering one of these eras.” Then it enters “rising adulthood” just before the following era. The Boomers started being born just before the end of World War II and entered adulthood just in time to help create the “Consciousness Revolution” of 1964-1984. Howe gets the best fit by dating their births from 1943, rather than using the more traditional 1946, the year when birth rates spiked.

The Four Turnings shape the character of four generational archetypes, which in turn shape subsequent turnings. The Hero type is born during an Unraveling, and then enters adulthood during a Crisis. The Hero generation we know best is the G.I. Generation (born 1901-1924), which has become known as the “Greatest Generation.” “We remember Heroes best for their collective coming-of-age triumphs…and for their worldly achievements as elders.” Being born in an Unraveling has the advantage that parents often go out of their way to protect their children from the cultural storms that are raging, which encourages the new generation to be cooperative and respectful. Once the Unraveling and Crisis have past, Heroes preside over the reformed institutional order they have helped build. The G.I. Generation presided literally, providing the string of seven U.S. presidents that held office from 1961-1992. Now Howe classifies the Millennial Generation (born 1982 to 2005—the latter date is a little uncertain) as a new Hero type, although it remains to be seen if they will live up to their advance billing.

The Artist type is born during a Crisis, and then enters adulthood during the following High. The Artist generation we know best is the Silent Generation (born 1925-1942). “We remember Artists best for their quiet years of rising adulthood…and their midlife years of flexible, consensus-building leadership.” Protected to the point of suffocation during the Crisis, they grow up cautiously conforming to the expectations of the institution-building older generation. In midlife the Silent have been sandwiched between more powerful G.I.s and more passionate Boomers, making them somewhat indecisive and conciliatory. Howe expects the children being born into the current Crisis—he calls them Homelanders—to be similar. Skipped over for the presidency for many years, the Silent finally got their one president, Joe Biden (born 1942).

The Prophet type is born during a High, and then enters adulthood during an Awakening. The Prophet generation we know all too well is the Boom Generation (born 1943-1960). “We remember Prophets best for their coming-of-age passion…and their principled stewardship as elders.” Prophets experience easygoing, indulgent parenting and develop high standards of personal fulfillment. They are very critical of flaws in social institutions, such as poverty, racism, sexism and environmental degradation. They tend to become the midlife moralists and culture warriors of the Unraveling era, but they can also provide inspiration for the next Hero generation. According to Howe’s dating, Boomers have produced three presidents—Bill Clinton, George W. Bush, and Donald Trump.

The Nomad type is born during an Awakening, and then enters adulthood during an Unraveling.  That includes Generation X (born 1961-1981). “We remember Nomads best for their rising-adult years of hell-raising.” Why hell-raising? Because the cultural upheaval of an Awakening is probably the worst time to be parented. During the Consciousness Revolution, parents were distracted by their new opportunities for self-fulfillment, and the sudden revolution in sexual and gender norms led to a surge in divorce. Generation X tended to become rootless and rather alienated from social institutions, contributing to the Unraveling that began in the 1980s. In a Crisis, however, they may become pragmatic leaders doing whatever needs to be done to survive, such as leading troops in battle. Barack Obama (born 1961) is Generation X by Howe’s dating, although a Boomer by more conventional dating.

Generational configurations and endowments

Each of the four turnings has its own distinctive generational configuration. During an Awakening like the Consciousness Revolution, Heroes are entering elderhood, Artists are entering midlife, Prophets are entering adulthood, and Nomads are being born. This is a formula for generational conflict, as elders who are committed to the existing order confront young Prophets who are raising new moral issues and demanding more personal freedom. This was the situation when Hero presidents Johnson and Nixon ordered up the Vietnam War and young Prophets responded with moral indignation. During a Crisis, the generational types are reversed, with Prophets entering elderhood, Nomads entering midlife, Heroes entering adulthood, and Artists being born. When the elder Prophet Franklin Roosevelt told the country what it needed to do, young Heroes signed up for service, whether in the WPA, Civilian Conservation Corps, or military service.

Finally, each generation has its own endowment of qualities that it brings to society. For Heroes, they lie in the area of “community, affluence, and technology”; for Artists, “pluralism, expertise, and due process”; for Prophets, “vision, values, and religion”; and for Nomads, “liberty, survival, and honor.” As each older generation dies off, a new generation growing up under similar circumstances can compensate by providing a similar endowment. In our time, the loss of the G.I Generation has created a vacuum in institutional organization and leadership that the Millennial Generation should be able to fill. As the current Crisis unfolds, the result may be a sudden shift away from individualism and culture wars and toward teamwork and social cooperation. Howe says that “every generation usually turns out to be just what society needs when it first appears and makes its mark.” And since the turnings occur within a long cycle that is about the length of a lifetime, each turning is a once-in-a-lifetime experience—and opportunity—for every living generation.

Continued

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Trump Disqualification Will Test Supreme Court

December 21, 2023

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This week the Colorado Supreme Court disqualified Donald Trump from running in the state’s presidential primary. It based its decision on Section Three of the Fourteenth Amendment, which states:

No person shall be a Senator or Representative in Congress, or elector of President and Vice-President, or hold any office, civil or military, under the United States, or under any State, who, having previously taken an oath…to support the Constitution of the United States, shall have engaged in insurrection or rebellion against the same, or given aid or comfort to the enemies thereof.

The Fourteenth Amendment, which was ratified in 1868, included this provision in order to prevent Confederate leaders from returning to office after the Civil War. No state has ever used it to disqualify a presidential candidate, but then, no candidate has ever run for president while fending off charges that he tried to obstruct the certification of the previous election.

Having read the opinions of the four-justice majority and the three dissenters, I see the decision as legally strong but politically troubling. Legally strong because it is very thorough and carefully reasoned; politically troubling because it gives Donald Trump another reason to claim that courts are meddling in the 2024 election and potentially thwarting the will of the voters.

The case creates quite a dilemma for the U.S. Supreme Court, assuming it considers Trump’s appeal. If the justices let the Colorado decision stand and other states follow Colorado’s lead, the disqualifications could indeed determine the outcome of the election and outrage Trump supporters. Maybe they will even try another insurrection. But if the justices overrule Colorado, they better come up with an argument as well reasoned as the original decision. A weak argument that only the Republican appointees to the Court find persuasive would be another embarrassment the Court does not need right now. (It won’t help if three of the justices voting to overrule were appointed by the candidate appealing the decision.) More importantly, if the justices are so eager to keep Trump on the ballot that they eviscerate this section of the Fourteenth Amendment, they may weaken the country’s defenses against would-be dictators, now or in the future. This is a high-stakes case that requires all the wisdom the Court can muster.

Here is a closer look at the issues.

The Colorado case

Six Republican and independent voters sued the Colorado Secretary of State to keep Donald Trump off the ballot, with the assistance of Citizens for Responsibility and Ethics. A civil proceeding to adjudicate the issue began on October 30 and included five days of testimony.

In November, Denver District Judge Sarah B. Wallace ruled that Trump had, in the words of the Fourteenth Amendment, “engaged in insurrection.” Nevertheless, she allowed him to remain on the ballot on the grounds that the presidency is not an “office” for purposes of Section Three. That raised a lot of eyebrows among constitutional lawyers.

The majority decision

In a four-to-three decision, the Colorado Supreme Court ruled that the finding of insurrection should stand, but that the exclusion of the presidency from the concept of “office” was a reversible error. The majority pointed out that the Constitution itself refers to the presidency as an “Office” twenty-five times. They also argued that the exclusion leads to an absurd conclusion:

President Trump asks us to hold that Section Three disqualifies every oath-breaking insurrectionist except the most powerful one and that it bars oath-breakers from virtually every office, both state and federal, except the highest one in the land.

Even the three dissenters agreed with that part of the decision.

The majority also argued that under our Constitution, the state’s authority to conduct presidential elections must include the authority to enforce the constitutional qualifications for office. Here they cite an opinion written by Neil Gorsuch when he was an appellate judge.

As then-Judge Gorsuch recognized in Hassan, it is “a state’s legitimate interest in protecting the integrity and practical function of the political process” that “permits it to exclude from the ballot candidates who are constitutionally prohibited from assuming office.”

The justices analyzed Colorado’s Election Code and concluded that “the General Assembly has given Colorado courts the authority to assess presidential qualifications….”

The majority acknowledged that Congress has never enacted legislation to enforce Section Three. But they took the same position regarding this section that the courts have taken with other sections of the Fourteenth Amendment; namely, that Congressional action is permitted by the Constitution but “not required to give effect to the constitutional provision.” (In technical legal language, they regarded the section as “self-executing.”) The lack of specific enforcement procedures mandated by Congress leaves states with the responsibility to enforce the insurrection disqualification as best they can.

Colorado has an expedited procedure for litigating election disputes that has been used many times. The majority justified using this expedited procedure for the insurrection issue as well, given the need to resolve disputes in a timely manner. “Looming elections trigger a cascade of deadlines under both state and federal law that cannot accommodate protracted litigation schedules, particularly when the dispute concerns a candidate’s access to the ballot.”

Although five days of testimony is a short time, especially when compared to a complex criminal case, the district court benefitted from one of the most painstaking investigations ever conducted by Congress, carried out by the House of Representatives’ Select Committee to Investigate the January 6th Attack on the U.S. Capitol. The court’s majority made a case for the admissibility of the committee’s report in a procedure of this kind.

The decision carefully examined the terms “insurrection” and “engaged in,” concurring with the district court’s conclusion that Donald Trump’s behavior fit reasonable definitions of those terms. The justices considered the criteria by which a high court can overrule a lower court’s finding of fact. They saw neither any clear error nor abuse of discretion in the lower court’s judgment.

The dissents

Justice Berkenkotter did not agree that the Colorado Election Code authorizes the court to disqualify a candidate on the grounds of insurrection. Berkenkotter acknowledged that state legislatures can grant that authority, but denied that the Colorado General Assembly had actually done so. Justice Boatright said that the expedited procedures set up to handle other election cases are not good enough for insurrection cases. Section Three “presents uniquely complex questions that exceed the adjudicative competence of…expedited procedures.” Since these disagreements concern the majority’s interpretation of state law rather than constitutional law, they are unlikely to be a sufficient basis for a reversal by the Supreme Court.

Justice Samour’s dissent raised a constitutional issue that may provide more fertile ground for reversal. Samour did not agree that Section Three of the Fourteenth Amendment is self-executing, but that it requires enabling legislation by Congress to specify the procedures by which a candidate may be disqualified for engaging in an insurrection. In the absence of Congressional guidance, Trump should be charged under the federal insurrection statute if he is to be disqualified. Otherwise, he may be denied his Fourteenth-Amendment right to due process.

I have heard some constitutional scholars, such as Laurence Tribe, disagree with that reasoning. A disqualification is not the same thing as a criminal conviction, since it does not deprive a person of life, liberty or property. This decision does not require proof beyond a reasonable doubt, but only clear and convincing evidence. If the states are to enforce the insurrection standard at all in the short time before a ballot is printed, they must be allowed some discretion.

Who’s for democracy?

The typical Republican response to the Colorado decision, voiced not only by Trump supporters but by other Republican candidates for president, is that the courts should take a hike and leave election decisions to the voters. That view of unencumbered democracy may be very appealing, but it is too simple. (It is also rather hypocritical coming from a candidate who rejected the verdict of the voters in the last election.)

Of course, we want the voters to decide elections, but they must do so within the law. When disputes arise about what is legal, it falls to courts to sort it out. Many voters might prefer Barack Obama to either Biden or Trump next year, but federal law disqualifies him from serving another term. And, like it or not, the Constitution disqualifies insurrectionists from holding public office. It’s the law of the land, which the voters and the courts ignore at their peril. Without the rule of law, we cannot have democracy, just chaos or tyranny. The level of hostility toward judges being expressed by Trump and his followers is alarming, and is another reason to question Trump’s fitness to lead a democratic society.

I fully expect the Supreme Court to overturn the Colorado decision, but I hope the justices in the majority avoid doing too much damage to the Fourteenth Amendment or to states’ ability to enforce it. I imagine they will find fault with the decision on some procedural grounds. What they cannot do is hold their own trial and reach their own finding of fact. Nor can they declare Section Three unconstitutional, since it’s in the Constitution. What they may try to do is add some procedural rules and claim that they are somehow implied by the existing text or the historical context in which it was written.

What if the justices were to say that “having engaged in insurrection” really means “having been convicted of engaging in insurrection”? That would raise the bar for disqualification considerably, maybe forcing the states to leave dangerous candidates on the ballot while their lawyers use one delaying tactic after another to evade legal accountability. In other words, very much like the situation we were in before Colorado acted. If we make the insurrection clause too hard to apply, we may not have it when we really need it.

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Fed Attempts Soft Landing

December 19, 2023

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Last week the Federal Reserve made a long-awaited and very welcome announcement. They decided not to raise interest rates again right now. Not only that, but they announced their expectation that interest rates will be allowed to fall over the next few years. That suggests that the country’s monetary policy has reached a significant turning point.

The goal of the Fed’s long series of rate increases was to curb inflation by discouraging borrowing and spending. While the stated goal of only 2% inflation has not quite been reached, so much progress has been made that the Fed now expects the economy to get there without such a tight-money policy.

When I say “the Fed expects,” that refers to the published projections summarizing the opinions of Federal Reserve Board members and Federal Reserve Bank presidents. The publication reports a median projection for each key variable by ranking the individual projections from lowest to highest and finding the middle. This month’s median projection for the federal funds rate—the key short-term interest rate—expects it to be 0.8% lower in 2024 than in 2023 (4.6% vs. 5.4%).

When the Fed raises interest rates to fight inflation, that always arouses some fear of a “hard landing.” High interest rates may discourage borrowing and spending so much that the economy contracts and unemployment rises. Currently the Fed expects unemployment at only 4.1% for 2024, not far from the 3.8% in 2023. The combination of low inflation and low unemployment is exactly what the Fed wants to achieve. It would be a rather rare “soft landing.”

How the Fed does it

The primary tool of the Federal Reserve’s monetary policy is its control over short-term interest rates. That means mainly the federal funds rate, which is the rate banks pay to borrow from one another. The actual federal funds rate depends on the supply and demand for funds in the market, but the Fed can influence it in various ways. It can change the rate of interest it pays on funds that banks hold in reserve, or the rate it charges on loans to banks.

The Fed also has some influence over longer-term interest rates, such as those paid on treasury bonds, business loans and mortgages. These tend to be higher, since lenders want their return to compensate them for the risks of a longer loan. But long-term rates also reflect expectations about the future of short-term rates. Banks are more willing to make long-term loans at low rates if they expect the interest they can earn from their short-term reserves to remain low for some time. That means that the Fed can influence long-term rates through what’s called “forward guidance”—announcements about where it expects short-term rates to go.

In recent years, the Fed has also influenced long-term rates by either buying or selling bonds. During the Great Recession of 2007-2009, the Fed’s purchases of treasury bonds and mortgage-backed securities maintained a liquid market for those loan instruments and helped the Treasury and homebuyers borrow at reasonably low rates.

Prior landings, hard and soft

The classic case of a hard landing occurred in the early 1980s. The runaway inflation of the 1970s led the Federal Reserve under Paul Volcker to raise interest rates vigorously. By January 1980, the federal funds rate stood at 15%, and it continued to rise even as the economy contracted. According to Ben Bernanke’s new book, 21st Century Monetary Policy, “Inflation dropped from about 13 percent in 1979 and 1980 to about 4 percent in 1982, where it stabilized for the rest of Volcker’s time at the Fed.” But the price was high. Unemployment rose to over 10%, the highest rate seen since the Great Depression. High interest rates were especially hard on the housing industry.

Fortunately for President Ronald Reagan, the economy recovered enough by 1984 to help him get reelected. He may have gotten some of the credit for inflation reduction that economists mostly give to the Federal Reserve. Although Reagan had promised to curb federal spending and balance the budget, his increased defense spending and tax cutting impeded those goals. The responsibility for inflation fighting fell mainly to the Fed.

During the economic expansion of the 1990s, the Federal Reserve under Alan Greenspan managed inflation concerns more smoothly. The federal funds rate rose in the mid-90s, but only to about 6%. To quote Bernanke again, “Between 1994 and 1996, Greenspan helped the U.S. economy make a soft landing, meaning the Fed tightened policy enough to restrain inflation but not so much as to cause a recession.” While Ronald Reagan had survived a hard landing because of its timing, Bill Clinton benefited from the soft landing.

The Fed’s long-run goal

How does the Federal Reserve decide what the federal funds rate should be? In recent years, monetary policy has relied heavily on the concept of the “neutral interest rate,” defined as the rate that is associated with neither rapid inflation nor high unemployment. The Fed can raise rates to curb inflation or lower rates to reduce unemployment, but the ideal state of affairs is when it can keep the rate neutral.

In recent years, the Fed has lowered its estimate of the neutral rate. Ten years ago, it thought that the federal funds rate needed to be over 4% to maintain low inflation and low unemployment. Now it pegs the neutral rate at only 2.5%. I won’t get into the interesting question of why the thinking has changed. But the change is important, because it reveals where the Fed wants to go with interest rates. It means that the Fed will not maintain today’s high interest rates indefinitely as a hedge against future inflation. It will bring them down as soon as it can, to avoid economic contraction and high unemployment. That suggests that the Fed is taking seriously both sides of its “dual mandate” to fight inflation and unemployment.

Of course, current expectations could still be invalidated by some new spike in inflation, especially if caused by supply shocks the Fed cannot control. Without such unforeseen events, however, the Fed seems poised to loosen the reins a bit. That bodes well for the economy, and maybe for Joe Biden too.

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Posted by Ed Steffes

Mandate for Leadership (part 2)

October 11, 2023

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I turn now to the Mandate for Leadership’s chapter on the Treasury Department, authored by William L. Walton, Stephen Moore, and David R. Burton. It contains conservative recommendations for federal fiscal policy, especially tax policy.

The Biden administration’s “woke agenda”

The chapter begins with a condemnation of President Biden’s fiscal policies:

The Biden Administration Treasury Department has failed badly in achieving every one of the agency’s core objectives. The financial affairs of the nation have seldom been in worse condition, with the national debt expanding by more than $4 trillion in Biden’s first two years in office. No President in modern times—perhaps ever—has been more fiscally reckless than has the Biden Administration.

The chapter does not mention that the Trump administration outdid Biden by adding over $8 trillion to the national debt. And while it places the blame for inflation squarely on Biden, it gives him no credit for the best record on job creation and low unemployment since the 1960s.

The authors attribute the Treasury Department’s failure to achieve its core objectives to the administration’s “woke agenda.” They cite Secretary Janet Yellen’s introduction to the department’s strategic plan:

We will have to address the structural problems that have plagued our economy for decades: the decline in labor force participation, income and racial inequality, and serious underinvestment in crucial public goods like childcare, education, and physical infrastructure. And then there are rising challenges, like climate change, which, left unchecked, will undermine every aspect of our economy from supply chains to the financial system.

The authors object to including goals like social equality, human capital development, and cleaner energy in fiscal policy. They want the next administration to limit its concerns to the “core missions of promoting economic growth, prosperity, and economic stability.” They do not see the relevance of the administration’s broader goals to the core missions, which points to a fundamental philosophical difference between Republicans and Democrats.

A flatter tax

The authors propose to “simplify the tax code by enacting a simple two-rate individual tax system of 15 percent and 30 percent that eliminates most deductions, credits and exclusions.”

Let’s set aside the eliminations for a moment and explore the implications of a two-bracket system. The higher bracket would begin at or near the Social Security wage base, which is currently $160,200. The idea is that income below that amount is subject to Social Security taxes, so it should be subject to lower income taxes. That way, the combination of taxes would constitute a fairly flat tax, with all income taxed at similar rates. This is a departure from the more progressive system we have now, with seven different brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

Bear in mind that these tax rates apply only to taxable income, after the standard deduction or itemized deductions are taken. And the effective rate one pays is not the same as one’s tax bracket. People in the top bracket pay 37% only on the income that exceeds $578,125; they pay lower rates on the rest. Someone with a taxable income of $1 million pays an effective rate of 33% after the seven different bracket rates are applied to the portions of income they cover.

Here are some effects of replacing the current seven brackets with two brackets of 15% and 30%:

  • Taxes on an individual with $50,000 taxable income go from $6,308 (13%) to $7,500 (15%), an increase of $1192
  • Taxes on an individual with $100,000 taxable income go from $17,400 (17%) to $15,000 (15%), a decrease of $2,400
  • Taxes on an individual with $200,000 taxable income go from $42,832 (21%) to $35,970 (18%), a decrease of $6,862
  • Taxes on an individual with $1 million taxable income go from $330,332 (33%) to $275,970 (28%), a decrease of $54,362

High-income people get the biggest tax cuts, both as a percentage and in dollars, while middle-income people get a smaller tax cut, and the lowest get an actual increase. The break-even point is a taxable income of around $67,000, since individuals at that level will pay about $10,000 (15%) either way. People below that income will see at least a small tax increase, and people above that income will get a potentially large tax cut. Of course, people in the higher brackets pay most of the taxes now, since that’s where the real money is.

Under this conservative plan, high-income taxpayers get some additional breaks, because the top rate for qualified dividends and capital gains gets cut from 20% to 15%. The richest taxpayers have the bulk of that income. The corporate tax rate is cut from 21% to 18%, which also benefits corporate shareholders.

Other tax “reforms”

The authors would offset at least some of the revenue losses from tax cuts by eliminating most tax deductions and credits, such as the deduction for state taxes. This may make taxes simpler, but not necessarily fairer. Personally, I believe that people who must pay high state taxes or unusually high medical expenses deserve a break on their federal taxes.

The authors also recommend a consumption tax as the best way to raise additional tax revenue. You can think of it as a national sales tax. That is also a rather flat tax, since the rate would be the same on all expenditures. However, people who must spend all of their income to make ends meet would be hit the hardest, while people who can afford to save and invest much of their income would be more protected from it. That makes it rather regressive.

Low-income people could be hurt in three ways by these proposals: having to pay taxes at 15% instead of their current 10% or 12% rate; having to pay consumption taxes; and (less commonly) losing the advantage of itemized deductions if those would have exceeded the standard deduction.

Impact on revenue

Anyone who advocates a flatter, less progressive tax system should be able to say whether they intend their plan to be revenue-neutral or revenue-negative. Both create political challenges for fiscal policy.

To be revenue-neutral, the plan must raise taxes on one group to lower them on another. Flat-tax proposals often raise taxes on the poor to lower them on the rich. Obviously, advocates of such plans would rather talk about how they “simplify” people’s taxes than how they raise their taxes.

If, on the other hand, the plan is willing to sacrifice revenue to cut taxes for those who pay the most now, that complicates the task of reducing the deficit. Those who advocate both a flat tax and a balanced budget need to explain how they intend to accomplish that. The authors do not discuss the implications of their tax plans for revenue or the deficit.

Fiscal responsibility

The authors do have a brief statement about fiscal responsibility, in which they say that the Treasury Department should “make balancing the federal budget a mission-critical objective.” But as to the means of doing so, they give only the standard Republican advice: “The budget should be balanced by driving down federal spending while maintaining a strong national defense and not raising taxes.”

Nowhere in the economics section of the Mandate for Leadership is there a chapter, or even a section of a chapter, on the federal budget. That is a strange omission for a book that blames reckless federal spending for most of the ills of the economy. To be fair, suggestions for program cuts are scattered throughout the book, such as abolishing the Consumer Financial Protection Bureau or ending subsidies for clean energy. But I looked in vain for anything resembling a balanced budget plan. The Democrats may not have one either, but they are not the ones claiming to be able to balance the budget without raising taxes.

I can think of two reasons for this omission, neither very reassuring. One possibility is that conservatives are not really serious about budget cutting. They just like to claim that they are to get elected. Another is that they are serious, but the budget cuts they want are so unpopular they would rather not talk about them until after the next election. Given the composition of the federal budget, reducing the deficit is very hard without raising taxes or cutting popular benefits or services. I talked about this problem in a recent post.

Conservative or destructive?

I sometimes call the Republicans under the Trump leadership “radical conservatives,” but that phrase is in danger of becoming an oxymoron. How radical can proposals get before they do more to destroy existing institutions than to conserve and improve them? Both the Federal Reserve and the progressive income tax were Progressive Era reforms enacted in 1913. They have had over a century to become institutionalized. Now both are under attack. This may be a part of an effort to solidify the economic gains of the rich and powerful in our new Gilded Age by undermining democratic reforms and institutions.

Although I disagree with much of what I read in the Mandate for Leadership, I think that publications like this are useful, if for no other reason than to warn the public about what radical conservatives are thinking.

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