Glass House (part 3)

April 6, 2017

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The “1% economy”

Brian Alexander’s book Glass House is subtitled “The 1% Economy and the Shattering of the All-American Town.” Alexander is a journalist, not a macroeconomist, and he doesn’t attempt much analysis of the economy as a whole. Nevertheless, he seems sure that the brand of capitalism we have been practicing lately is largely responsible for Lancaster’s decline.

Alexander suggests that owners and investors have more than one route to profit: “You can increase profits by building value through research and development, creating new products, investing in plants and equipment. But that takes time….Instead, you can also increase company profit by making the same products with the same sales volumes, but cutting expenses.” Which route is chosen dramatically affects people’s lives: “If you were the target company employee, or a small town where that company was located, you might prefer to add value through investment in people, machines, and research and development, for a long-term benefit.”

I didn’t see anywhere in the book where Alexander explained how this choice is affected by the general nature of the “1% economy,” but I’ll offer a few thoughts. Two features of the 21st-century US economy thus far are extreme economic inequality and sluggish economic growth. (Some would say the two are related, although the relationship may not be simple.) The wealthy minority have a lot of capital available to invest. But very weak income growth for the majority limits their ability to spend on new products. Under those conditions, it is not surprising that a lot of capital would go to buy existing enterprises rather than create new ones; nor is it surprising that cost-cutting rather than expansion of production would be a favored route to profit. If this strategy works to make the 1% richer despite hollowing out the middle class, that only reinforces the inequality and sluggish growth, creating a vicious cycle.

Ideological responses

The workers and townspeople who are the victims of economic decline have little knowledge of macroeconomics or high finance. Without understanding the underlying causes, they react to the symptoms they see–the wage concessions, the layoffs, the family instability, the reduced commitment to work, the drug problem and the crime. They try to interpret what they see within a traditional belief system linking hard work, self-reliance, economic success and strong families. If more people are failing, well, that must be due to some mysterious decline in personal responsibility and achievement.

Like many Midwestern small towns, Lancaster, Ohio had always been at least moderately conservative. But as economic conditions deteriorated, “A significant faction within Lancaster lost its moderate conservatism. Stoked by cable news, internet videos, and right-wing politicians, they insisted that most of Lancaster’s problems had to be the natural product of an over-generous social service system that coddled lazy, irresponsible people.” Few stopped to consider what work ethic the high-flying financiers were living by when they made millions off of other people’s misfortunes.

Dependency on government was increasing in two ways: direct assistance through programs like food stamps and Medicaid (whose expansion under Obamacare Ohio chose to implement), and reliance on public money to create jobs. “Medicaid and Medicare supplied over 60 percent of the hospital’s income. The public schools were the second-largest employer in town.” Glass-maker Anchor Hocking had dropped to third. But the increasing dependency was accompanied by denial or resentment.

A certain kind of racism was entangled with popular attitudes toward the needy, but Alexander is careful to qualify it. It was more complicated than a simple prejudice against people who looked and acted different. It was more the resentment of struggling whites against any suggestion that people of color deserved more help than they did, or the idea that one group should have to bear the costs of some other group’s failures. It was easier to direct hostility across racial lines than to identify the shadowy financial interests and economic forces that were really responsible for their problems. “Somebody, they thought, was screwing them out of the good-life lottery. Somebody was screwing them. It just wasn’t who they thought.”

Political fallout

The political leaders of Lancaster and many of its higher-income residents were Republicans. Alexander describes them as having an anti-tax philosophy that kept them from raising the money to maintain the town’s infrastructure and institutions. They also had a “pro-business bias [that] blinded them to how Newell and Cerberus [new owners of the glass company] picked their pockets.”

The blue-collar workers of Lancaster were more likely to vote Democratic, if they voted at all. But they were turned off by the Party’s preoccupation with the rights of minorities like African Americans and gay people.

In 2012, Fairfield County, where Lancaster was located, voted 57% for Romney, although Ohio went narrowly for Obama. In 2016, the county went 60% for Trump, helping turn the state red again.  The great irony here is that by voting for Romney and Trump, the people of Lancaster were casting their lot with the kind of financial wheelers and dealers Alexander holds responsible for the town’s decline.

Donald Trump promised the downwardly mobile workers of towns like Lancaster to “make America great again.” What those workers couldn’t acknowledge was that “buccaneering free-market finance” had done so much to undermine that greatness. It was so much easier to blame “sin, laziness, scientists, immigrants, unions, and any number of other enemies of the American Way.” Trump cleverly combined populist anger with right-wing conservatism. The good manufacturing jobs would come back if the government would defend the borders, make tougher trade deals with other countries, and lighten the tax and regulatory burden on business. Trump shared Romney’s admiration for the wealthy as the job creators. What was missing from his critique was any suggestion that they might be investing the country’s wealth unwisely.

Alexander does not discuss the 2016 election, but I think he would agree that it does not portend a reversal of fortunes for towns like Lancaster. What I fear it does is add a layer of political exploitation to the economic exploitation that has already occurred.


The Distribution of National Income (part 3)

February 23, 2017

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I admit that my last two posts have been pretty heavy on the facts and figures. But now we can use the conclusions to shed some light on the political polarization of the country.

Two main conclusions of Piketty, Saez, and Zucman’s analysis stand out. First, the distribution of pre-tax income is now more uneven than at any time since the 1920s. The top tenth of the population is getting almost half the national income, while the entire bottom half of the population is getting only one-eighth of it. Second, taxation and government spending are only mildly progressive and redistributive. Redistribution reduces the top tenth’s share from 47% to 39%, while increasing the bottom half’s share from 12.5% to 19.4%.

The politics of redistribution

To start assessing the political implications of these conclusions, let’s do a mental experiment. Imagine that each of the broad income groups described in the report took a position on government taxes and spending based solely on their narrow economic self-interest. We would expect people in the top tenth of the distribution to oppose the government’s redistributive role, since they pay more of its costs and qualify for fewer of its benefits. The lower-half of the population should be more supportive, since they receive more in benefits than they pay in taxes.

However, the political stance of the remaining two-fifths–those with incomes in the upper half but not in the top tenth–is likely to be more ambivalent. Their pre- and post-tax shares of national income are about the same (40.5% vs. 41.6%). What they receive in benefits offsets what they pay in taxes. Bear in mind that post-tax income in this analysis includes all forms of government benefits–monetary transfers, in-kind transfers, and general spending for the public good. If they focus on the benefits, they may support government spending; but if they focus on the costs, they may support tax cuts. (Or they can support a lot of both, and put up with deficits and more national debt.)

Since the major political parties disagree so much on taxes and spending, we would expect higher-income people to prefer the Republican Party and lower-income people to prefer the Democratic Party. This is true up to a point. Income is a fair predictor of party affiliation and voting, and the effect of income on voting has actually increased as the gap between rich and poor has widened. Gelman, Kenworthy and Su reported, “For the nation as a whole…there is a broad similarity between the trends in income inequality and the rich-poor gap in partisan voting. Each declined after the 1940s and then rose beginning in the 1970s or 1980s” (Social Science Quarterly, December 2010).

Gallup surveys have found that Democrats are much more likely than Republicans to believe that the present distribution of wealth is unfair, and that higher-income groups should pay more taxes.

The role of beliefs

Narrow self-interest is not the only basis on which people vote, however, even on questions of economics. Beliefs about how the economy works or should work are important, as well as beliefs about the impact of public policy on the general prosperity. Politics in a democracy is partly a struggle for the hearts and minds of the people, especially the hearts and minds of the middle class. They may align themselves with either the rich or the poor, depending on whose interests they think best represent the general good.

The upper-tenth have a disproportionate share of the money, but only a minority of the votes. To have their way politically–and they’ve been doing a pretty good job of that lately–they need good arguments against high taxes on the rich and high spending for the less fortunate.

One of those arguments is the appeal to meritocracy. Higher-income people can defend the very unequal pre-tax income distribution as a reflection of people’s real contribution to society. The successful deserve what they get; the unsuccessful deserve less; and the trouble with redistribution is that it punishes achievement and rewards failure. A related argument is that the rich are the job creators who use their incomes and wealth to invest in economic growth for the benefit of all.

Support for these views is widespread. Gallup has reported that when Americans are given a choice between taking steps “to distribute wealth more evenly” or “to improve overall economic conditions and the jobs situation,” people of all political affiliations and income levels prefer the latter by a wide margin.

That helps explain the working-class conservatism reported, for example, by J. D. Vance in Hillbilly Elegy. Although many low-income whites have more to gain from government spending than they have to lose from taxation, they cling to an ideology of self-reliance and hostility to government “handouts”. Reliance on government carries with it a stigma that I see as partly a racial stigma. Slavery, segregation and discrimination impeded black achievement and fostered government dependence, contributing to a stereotype of black laziness. Whites could maintain their sense of superiority by dissociating themselves from such dependency. That meant dissociating themselves from Big Government and liberal politics, especially after the Democratic Party embraced the civil rights movement in the 1960s.

Progressives need to change the national conversation about economic inequality, so that it is no longer about industrious job creators at the top, undeserving slackers at the bottom, and families in the middle who should be grateful to the rich for whatever wages they are offered. They need to challenge the dubious assumption that private wealth is always invested for the public good, while government spending is nothing but a drag on the economy. Considering our low rate of economic growth, our lagging productivity, and our wage stagnation, it isn’t obvious that concentrating more and more financial capital at the top has been such a winning strategy. Meanwhile, we cannot seem to find the money to make vital investments in our human capital, so that young people can get educations without accumulating a mountain of debt. People should not have to apologize for getting help to develop their human potential, especially when that enhances their capacity to contribute to society.

Voters shouldn’t have to choose between policies that create jobs and those that alleviate inequality. In a properly functioning democracy, they ought to go hand in hand, as they did during the postwar economic boom.

Progressive beliefs have the potential to spread to all class levels, just as conservative beliefs have. Already there are many higher-income individuals, such as Warren Buffet and George Soros, who advocate for more egalitarian policies.

Trump: populist or plutocrat?

Where does President Trump fit into the politics of redistribution? As a billionaire, he stands near the top of the economic pyramid. Like many other rich men, he sees his success as a sign of his superior merit, no matter what Trump University students or other detractors say in their lawsuits. Indeed, he declares himself to be uniquely suited to save the US economy.

Trump has filled his cabinet mainly with other rich folks who are not noted for their egalitarian views. Mother Jones reported that his cabinet selections have an average net worth of $357 million. The richest 1% of American households have an average net worth of only (did I say “only”?) $18.7 million.

Why is Trump so popular? I think primarily because he presents himself as the ultimate job creator, who will boost economic growth by bringing back lost American jobs. He will use the unorthodox strategy of getting other countries to give us more favorable terms of trade, so that our manufacturing industries prosper, presumably at someone else’s expense. All Americans will benefit, especially downwardly mobile workers, when he puts America first and makes America great again.

We are supposed to be so impressed by these promises that we overlook his tendency to favor the privileged over the rest of society. Strip away his economic nationalism, and what’s left is the usual Republican tax breaks for the rich and benefit cuts for the poor. We don’t have the detailed plans yet, but all indications point to a tax reform bill that will give the biggest reductions to the top brackets, and an Obamacare replacement that will make health insurance less affordable for the poor. Although Trump appealed to enough Democrats and independents to eke out an electoral college victory, the core of his support is among  Republicans.

The Trump administration has a real potential to exacerbate income inequality and political polarization. Maybe he can grow the economic pie so much that people don’t care how unequally it is divided, but I wouldn’t bet on it.

 


Inaugural Address Sells America Short

January 23, 2017

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The first inaugural address I remember listening to was Dwight Eisenhower’s in 1957. My parents took me to see his first inauguration in 1953, but I was too small to get much out of it. I can only remember seeing the tips of the flags going by in the inaugural parade. Over the years, I have liked some of the speeches more than others, but I can honestly say that President Trump’s was the worst inaugural address I have ever heard. For future historians, it should mark a low point in American politics from which I only hope we recover.

The address presented a grim view of America, a country of unemployment, poverty, ignorance and crime. “Rusted out factories scattered like tombstones,” families “trapped in poverty in our inner cities,” and an educational system that leaves students “deprived of all knowledge.” None of these things is actually as bad as it was in the fairly recent past (remember 10% unemployment?), but Trump is not one to let inconvenient facts get in the way of the story he wants to tell.

Why is the country in such terrible shape? Well, for two reasons, in Trump’s view. First, “a small group in our nation’s capital has reaped the rewards of government while the people have bore [shouldn’t that be “borne”?] the cost. Washington flourished, but the people did not share in its wealth.” And second, “we’ve made other countries rich while the wealth, strength and confidence of our country has dissipated over the horizon.” We’ve given too much in military and non-military aid to other countries, while allowing our own military power and infrastructure to deteriorate. American has gotten poorer and weaker, while Washington politicians and foreigners have gotten rich and powerful.

The solution is as simple as the problem: “From this day forward, it’s going to be only America first.” Trump’s vision of a great America is a country with the strongest military (which he doesn’t admit we already have), a good transportation system (lots of room for improvement there), and strong borders to protect against foreign labor and goods. “Buy American and hire American….Protection will lead to great prosperity and strength.”

I have read the speech over and over, asking myself if I’ve missed anything. But that’s really about it. There’s nothing else there besides this simplistic view of our problems and economic nationalism as the solution.

No lofty vision here

Other presidents have identified American problems, and many have criticized specific domestic or foreign policies. But they have generally framed their issues within some overarching positive vision, a vision of democratic government, the free-enterprise economy, and/or international cooperation. Lyndon Johnson’s “Great Society” was one in which government worked to abolish poverty and racial injustice. Ronald Reagan’s more conservative vision was based on a faith in free markets to create prosperity for all. And every president since Franklin Roosevelt has accepted America’s leading role in promoting global democracy, peace and prosperity.

Such lofty goals are conspicuous by their absence in Trump’s address. He ascends to the presidency at a time when much of the public has lost confidence not only in government, but in free markets and global democratic progress as well. Trump and his hard-core supporters seem to want to throw in the towel on building a better world, and just revert to a nineteenth-century nationalism in which each country just looks out for itself. That nineteenth-century nationalism ended badly, by the way, in the world wars of the twentieth century. American global leadership in the postwar era was supposed to prevent that from happening again. Trump’s neo-nationalism appeals to the most reactionary elements in Europe, especially to autocratic leaders like Putin, who  prefers old-fashioned nationalism to international cooperation led by the world’s strongest democracy. Similarly, Charles Lindbergh’s “America First” in the 1930s suited Hitler just fine.

What Trump leaves out of his short address is as revealing as what he includes. He does not mention human rights, social justice, environmental protection, or racial and gender equality. For a man preoccupied with economic problems, he has surprisingly little to say about economic inequality. In his simplistic story, the enemies of working families are Washington politicians and foreigners. He fails to mention that we have the greatest class inequality since the Gilded Age. I guess he has no problem with that, which is why he can staff his administration with billionaires and Wall Street bankers. His extraordinary hostility to the political establishment coexists comfortably with an extraordinary complacency about the corporate establishment.

Building up, or just tearing down?

If we are to move forward in solving our problems, we need a new vision for the global, postindustrial era. We will need to find the right balance between government and markets, between nation states and emerging global institutions, between new technologies and human labor. Reactionary economic nationalism cannot provide that vision.

Without a positive but realistic vision of the future, this administration is likely to accomplish little besides undoing what governments have been trying to do. President Trump can tear up trade agreements, weaken NATO, encourage the breakup of the European Union, halt Obama’s clean energy initiative, repeal the Affordable Care Act, abolish the Consumer Financial Protection Bureau, and so forth. He can select administrators with little respect for the agencies they are appointed to lead, such as an EPA head who opposes most environmental regulation, a Secretary of Education who doesn’t support public education, a Secretary of Labor who places a low value on working-class labor, or an Attorney General with a narrow view of justice. All of this has the potential to aggravate rather than alleviate social problems.

Attacking government is easy. What is much harder is getting it to work better for the ordinary people Trump claims as his constituents. He says, “Every decision on trade, on taxes, on immigration, on foreign affairs will be made to benefit American workers and American families.” That would be wonderful if it turned out to be true, but just trashing the federal government won’t be enough to make it so. On their first day in office, Trump and his spokespersons demonstrated their willingness to use “alternative facts” (formerly known as falsehoods) to portray the inauguration as a more successful event than it was. Whatever Trump does, he will probably assure us that it’s the greatest, assert some “alternative facts” to support that, and attack anyone who says otherwise.

America is better than this, and deserves more in a president.

 


Trump’s Peculiar Populism

January 17, 2017

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A headline in today’s Washington Post says, “Trump will take office as least popular president in at least four decades.” And yet Trump is widely characterized as the leader of a new “populist” movement. How unpopular can someone be before we have to question his populist credentials? I guess the answer depends on what we think a populist is.

Two brands of populism

In our democratic system, we select presidents by popular election, so every winning candidate is supposed to represent “the people,” broadly defined. Beyond that, a populist leader is one who supposedly represents “ordinary people” in their struggle against some sort of “elite”.

Bernie Sanders is a leader of a populist movement directed against the economic elite, the wealthiest 1% who have received most of the increases in national income since the Great Recession. He calls for higher taxes on the wealthy and government measures to create middle class opportunity, such as free college tuition. I would call this “progressive populism.” It is in the tradition of Franklin Roosevelt, who had a similar dim view of economic elites:

Concentration of wealth and power has been built upon other people’s money, other people’s business, other people’s labor. Under this concentration, independent business…has been a menace to…American society.

…and a similar concern for creating economic opportunity:

These unhappy times call for the building of plans that build from the bottom up and not from the top down, that put their faith once more in the forgotten man at the bottom of the economic pyramid.

Donald Trump has attacked Wall Street from time to time, but judging from his cabinet selections, he is very comfortable with giving power to Wall Street bankers and millionaires. Wall Street seems to like him in return. Stocks are up since the election, as investors salivate at the prospect of corporate tax cuts and financial deregulation. So what “ordinary people” does Trump serve, and what “elite” does he attack?

Trump proposes to save people from an elite defined mainly as Washington insiders, the political establishment, and especially Big Government liberals. They are people who derive power and sometimes wealth from government positions. The Clintons fit the bill perfectly, since they have been Washington insiders for so long, and have also made a lot of money giving speeches since leaving office. (Conservatives like Ronald Reagan did too, but their anti-government philosophy seems to protect them from being tarred with the same brush.) In this view, the elites include government bureaucrats, regulators and the Washington press corps, as well as liberal intellectuals and policy wonks who give them their ideas.

“The people” Trump represents have to be defined more narrowly than the great majority of Americans who are not wealthy. The Trump constituency does not really include the people who welcome progressive government initiatives like Obamacare to level the economic playing field. Instead, it includes many people who blame government for their economic problems. The ones who get the most attention are those who attribute job losses to government polices: immigration policies, bad trade deals, excessive taxation and environmental regulations. I would call this “reactionary populism.”  There is some overlap between the two brands of populism on trade policy, since Sanders also opposes trade deals that hurt workers. But in general, progressive populism emphasizes what government can do for ordinary people, while reactionary populism emphasizes what government should stop doing to people.

Reactionary populism raises an interesting question in a democratic society: How much can you claim to love the people, if you hate the democratic government that is supposed to represent them?

Not the underprivileged

While Trump does represent some struggling working-class families, and may owe his margin in a few key states to their support, he is not in general the leader of the underprivileged. The most disadvantaged groups tend to be more progressive. According to the exit polls, voters with incomes under $30,000 went for Clinton, 53% to 40%. On the average, Trump’s supporters were somewhat better off than Clinton’s currently, although more of them said they were worse off than they had been four years ago. A large part of Trump’s support came from political conservatives who are doing okay themselves, but oppose using tax dollars to help people who are worse off than they are.

The reactionary nature of Trump’s populism goes a long way to explain the racial divide in the voting. I do not charge his supporters with racism, at least not in any obvious sense of the term. But the country remains seriously divided between people who want government to help the racially and economically disadvantaged, and people who are more complacent about the situation. The latter are more likely to deny that racial discrimination is still a problem, and less likely to see the racial implications of voter ID laws or stop-and-frisk policies.

Even if we give Trump the benefit of the doubt about his own actions, such as his attempt to cast doubt on Barack Obama’s American citizenship, his reactionary populism leaves him unlikely to confront racism. By default, he becomes the candidate who will protect white privilege, if not by racist actions, then by his indifference to the need for any action at all. His pick for Attorney General, Jeff Sessions, is well suited to implement this policy of racial indifference.

The Russian connection

Progressive populists despise the Putin regime and the economic oligarchy it supports. Trump’s approval of Putin indicates that he has little problem with either authoritarian rule or monopolization of wealth by the well-connected rich. His wrath is directed almost exclusively at liberal leaders. His ability to portray Hillary Clinton as a corrupt elite while overlooking Putin’s far more obvious corruption and elitism is astounding and deeply disturbing for the leader of a democracy. If the Trump campaign did collaborate with the Putin regime to destroy its opponent by illegal or unethical means, that does cast doubt on the legitimacy of his presidency.

In the end, the American people will have to determine if Trump’s brand of populism makes sense to them at all. Is he a true man of the people, or an enemy of too many of the people?


Why Trump Won: Economic and Racial Interpretations

December 5, 2016

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Following an annual tradition, strategists from the Trump and Clinton campaigns met at Harvard’s Institute of Politics to analyze the election campaign and its results. This year, the discussion quickly degenerated into a shouting match, as each campaign promoted its preferred account of how Trump won.

A particular bone of contention was the role of Stephen Bannon of Breitbart News in the Trump campaign. When David Bossie, Trump’s deputy campaign manager, called Bannon a “brilliant strategist,” Jennifer Palmieri, Clinton’s director of communications, replied, “If providing a platform for white supremacists makes me a brilliant tactician, I am more proud to have lost.” Kellyanne Conway, Trump’s campaign manager, rejected the suggestion that the campaign had appealed to white supremacy and shifted the discussion to Hillary Clinton’s weaknesses. “Do you think you could have just had a decent message for the white working-class voters? How about it’s Hillary Clinton, she doesn’t connect with people? How about they had nothing in common with her? How about you had no economic message?”

As Clinton herself charged during the campaign, Clinton’s team felt that Trump won by appealing to such ignoble sentiments as racism, misogyny and xenophobia. Not surprisingly, Trump supporters preferred a narrative emphasizing Trump’s economic appeal to struggling working-class families. Each narrative contains an element of truth, but they leave us with an explanation that is both incomplete and misleading.

Win, lose or draw?

First, a note of caution. Because this election was so close, commentators need to resist the urge to over-interpret it. Sweeping statements about what the American people are saying or assertions of popular mandates to take the country in a particular direction are likely to overstate the facts. Does the election of Donald Trump mean that most Americans want to build a wall on the Mexican border? Well no; exit polling found 41% for that, but 54% against it. Does it mean that they want to deport immigrants working illegally in the U.S.? No, only 25% are for deportation, and 70% are for offering some form of legal status. And in spite of the fact that both candidates expressed concerns about job losses due to trade deals, voters are quite split on the issue, with almost as many saying that international trade creates U.S. jobs as saying it takes away jobs.

This election even tells us less than usual about what people think of the winner. According to the exit polls, fewer voters had a favorable view of Trump than Clinton (38% vs. 43%); fewer viewed him as honest and trustworthy (33% vs. 36%); fewer regarded him as qualified to be president (38% vs. 52%); and fewer felt he had the temperament to be president (35% vs. 55%). With regard to Kellyanne Conway’s contention that Clinton doesn’t connect with people, Clinton beat Trump by a margin of 23 points among voters who said that the quality mattering most to them was that the candidate “cares about me.” She won by even bigger margins with voters who placed the highest value on having good judgment or the right experience.

All this makes one wonder how Donald Trump could win the election at all. A flippant answer is that he didn’t, at least not the popular vote, which Clinton won by 2.8 million votes and about 2 percentage points. Another answer is that voters overlooked Trump’s deficiencies because of something else they liked about him. He won by a 68-point margin among voters who were looking most for a candidate who could “bring change.” Among voters who regarded Trump as unqualified to be president, 17% voted for him anyway! That probably means they were more interested in rocking the boat than steering it in a sensible direction.

A few other findings from the exit polls indicate why the election was so close. Trump won white voters by a 20-point margin, men by 9 points, voters 45 and over by 8 points, non-college graduates by 7, Evangelical Christians by 64, veterans by 36, rural voters by 27 and suburban voters by 4. Clinton won black voters by an 81-point margin, Latinos by 38, Asians by 38, women by 13, voters under 45 by 14, Jews by 48, voters professing no religion by 42, union households by 9, gay lesbian bisexual or transgender voters by 63, and urban voters by 26. Demographically speaking, Trump represented more of what the country used to be, and Clinton represented more of what it is becoming.

The economic interpretation

Trump’s narrow victory in the so-called “rust-belt” states has led many commentators to imagine the typical Trump voter as a downwardly mobile worker, especially someone who has lost a manufacturing job. Trump beat Clinton by a wide margin (56 points) among voters who described their financial situation as worse than it was four years ago, but only 27% of voters were in that category. Slightly more voters felt that their situation had gotten better, and Clinton won by a 49-point margin there. I do think that Clinton could have done a better job addressing the concerns of the downwardly mobile. But I also respect her refusal to lie to the people of West Virginia by claiming she could bring back their lost coal mining jobs. Her opponent had no such inhibitions. (Coal jobs are being lost to automation and competition from cheap natural gas, not just Obama energy policy.)

Income data do not support the generalization that Trump supporters were especially economically distressed. Based on a crude classification by current income, they were not worse off than Clinton voters. The median income category for both Trump and Clinton voters was $50,000 to $99,000, although less than a third of voters were in that range. A higher percentage of Clinton voters than Trump voters had incomes below $50,000 (39% vs. 32%), while a slightly higher percentage of Trump voters than Clinton voters had incomes of $100,000 and up (36% vs. 33%).

Other data call into question the idea that Clinton lost by failing to address economic distress. Clinton led Trump by 11 points among voters who cited the economy as the most important issue facing the country. Trump led among those who cited immigration as the most important issue (by 31 points) or terrorism (by 17 points). Trump’s tough talk on immigration and terrorism may have done him more good than his promise to save manufacturing jobs. Without denying that certain voters supported him for purely economic reasons, there are other elephants in the room, especially Republican ones.

The racial interpretation

A very disturbing development in this election was the embrace of Donald Trump by white supremacist groups. However, focusing too much on overt racism can distract attention from the much subtler role that race plays in today’s politics. In particular, I want to call attention to the racial implications of the small-government conservatism that motivated so many of Trump’s supporters.

Trump did not only win the white vote by a 20-point margin. He won even more handily among voters who described themselves as conservatives (a 65-point margin), who disapproved of President Obama (83 points), who believed that Obamacare “went too far” (69 points) and who said that in general, government is “doing too much” (50 points). These views are very widely held, and they account for a larger share of the Trump vote than the specifically economic factors. They are especially widespread in the South. Yes, Trump won Michigan, but by less than one percentage point. He won Alabama by 28 points.

I had a good reminder last week of the connection between race and small-government conservatism, when I attended a lecture by Nancy MacLean, Professor of History and Public Policy at Duke University. She pointed out that the first manifesto in favor of school privatization and vouchers was published by economist Milton Friedman in 1955. Instead of running a public school system, the government should just give each family a certain amount of money and let them buy education in the marketplace. Coming just one year after the Supreme Court’s decision in Brown v. Board of Education, Friedman’s proposal found its most enthusiastic audience among Southerners who wanted to close public schools rather than desegregate them. Friedman defended himself against charges of racism by saying that he personally regarded integrated schools as preferable, but that the government couldn’t impose them without infringing on freedom of choice. This kind of opposition to “Big Government” has become a key argument in defense of traditional privileges and injustices that only government may have the power to fight.

As the Democratic Party gained support among minorities and women by advocating strong government measures to combat discrimination, Republicans discovered that they could gain the allegiance of white males, especially Southern white males, by placing limits on those efforts. In the name of freedom and limited government, Republicans became the party of resistance to such measures as affirmative action, the Equal Rights Amendment, and most recently, key enforcement provisions of the Voting Rights Act. In the latter case, racism and political gamesmanship are hard to distinguish, since Republicans in states like North Carolina have so much to gain by putting obstacles in the way of black voting.

Donald Trump defeated Hillary Clinton among white men by a 62% to 31% margin. True, many white men, especially the less educated, have suffered losses of jobs and income, and a few even crossed party lines to vote for Trump. But white men as a group remain the country’s top earners, although women and minorities have been gaining on them. And as a group, they have been reliably Republican for some time. Only 8% of Democrats or Republicans crossed party lines in their vote for president. The core of Trump’s support came from the white men who usually vote Republican, not because they are worse off than minorities or women, but because the Republican Party is more respectful of existing privileges. It is less likely to upset existing race/gender hierarchies. Trump won college-educated white men by a 14-point margin, and non-college-educated white men by a 48-point margin. The economic distress interpretation has some validity, especially in the less educated group. However, sociologists have long argued that status as a white man may be especially important to a man who lacks other sources of status, such as education. He may vote for the party that appeals to him as a white man, overlooking that party’s failure to address his needs as a working man.

When Democrats try to address issues of racial or gender discrimination, conservatives can accuse them of ignoring economic issues to pursue “identity politics.” Critics like Kellyanne Conway can claim that Democrats lose because they don’t have “a decent message for the white working-class voters.” Without denying that Democrats need to strengthen their economic message, this does not have to be an either-or. Democrats shouldn’t have to abandon their commitment to racial and gender equality in order to support a stronger economy. Many Democratic proposals, such as universal health insurance and affordable college education, are intended to help people of all races and genders. Yes, Democrats need to appeal to working-class white men, but those men must be willing to reach across racial lines to make common cause with minorities and women in similar circumstances. The mentality that forces politicians to choose between “us” and “them” just perpetuates racism and sexism.

Reconciling conservatism and change

How do Trump voters reconcile their conservative belief that government is “doing too much” already, with their desire for a president who will “bring change”? How can any president strengthen the economy, if government isn’t supposed to do very much? Voters may be managing this in several ways, either within Republican orthodoxy or outside of it.

Within Republican orthodoxy, they can fall back on the classic Reagan position that government is the problem, and not having government do certain things is the needed change. If government will just stop taxing and regulating so much, the economy will thrive. Whether that’s what most of the voters want or not, that will probably be the guiding philosophy of the Republican Congress, supported in most respects by the new president.

Beyond Republican orthodoxy, voters can make an exception to their anti-government position in the case of jobs programs. Government spending is okay as long as it puts people to work rather than helping people who aren’t working. Similarly, obtaining health insurance through your job is okay, but having to obtain it through a government exchange is socialism. However, public works programs are hard to pay for if you exempt too much of the country’s wealth from taxation.

For other conservatives calling for change, change can mean changing things back to the way they used to be. This is one way that economic nationalism fits in. Government can try to reverse the trend of manufacturing jobs flowing out or immigrants flowing in. That appeals especially to people who have lost faith in the economy’s ability to create new jobs. I suggest that economic nationalism is a form of conservatism that flourishes when more mainstream conservatism has failed to produce the promised growth in jobs and incomes, and when economic progressives have not yet come up with a convincing alternative.

In many respects, the Trump coalition is just a familiar Republican coalition, with enough extra votes in a few key states to win the election. To the extent that the Trump phenomenon is different, it may be an expression of a conservatism gone sour, a hostility not only to Big Government but to global forces that threaten the economic supremacy of the United States and other wealthy nations. It thrives among the downwardly mobile, but appeals to enough other people to fuel a revival of right-wing nationalism.

Why Trump won

The simplest generalizations about Trump voters–that they were downwardly mobile blue-collar workers or deplorable racists–do not stand up very well. Here are a few statements about why Trump won that I think the evidence will support:

  • Although Trump lost the popular vote, he won the electoral college vote by winning battleground states by small margins. Clinton won the most urbanized states by unnecessarily big margins.
  • Although Trump voters were not as a group economically worse off than Clinton voters, he did especially well among voters who said they were worse off than they were four years ago. That may have made the difference in states with big losses of manufacturing jobs. Overall, however, voters who cited the economy as their #1 issue favored Clinton.
  • Most of Trump’s support came from the groups that usually vote Republican, especially white males. This has little to do with any Republican policies favoring the working class, and much more to do with the party’s resistance to government activism, especially activism on behalf of women and minorities.
  • In addition to standard Republican hostility to Big Government, Trump appealed to voters who blame America’s problems on immigrants or foreign trade. This is not a majority view, but an increasingly popular one in troubled Western economies.

President Trump will have his hands full trying to meet the expectations of his various constituencies: traditional small-government Republicans who are interested primarily in tax cuts, deregulation and privatization; economic nationalists who want to deport immigrants and erect trade barriers; and unemployed or underemployed workers who want jobs programs.