Reality is slowly setting in. Donald Trump will be inaugurated president. The Republicans will control all branches of government. What will happen?
We are taught to think that Republicans stand for reduced government expenditure, emphasizing an economic system predicated on laissez faire capitalism. The free market will reign supreme. Private capital will decide where and when to invest. The investments will be driven by the profit maximization projections made by corporate investors into projects of their own choosing.
However, just beneath the surface of this free-market rhetoric coming from some Republicans there are other Republicans who also understand the role of government in stimulating economic growth. They view things differently.
Just beneath the surface of this free-market rhetoric coming from some Republicans there are other Republicans who also understand the role of government in stimulating economic growth. They view things differently.
The traditional Republican would use government to reduce taxes on the wealthy while eliminating social service programs that help those in economic distress. The increased wealth concentrated at the top is then passed on to future generations by eliminating the inheritance tax. An oligarchy is created. Investment is at the perpetual whim and fancy of a class not determined by merit but by parental lineage. This view of Republican ideology is associated with Speaker of the House Paul Ryan.
The Ryan view contrasts with the Trump Republicans, those who may have learned something from the Great Depression. Trump Republicans understand that an unregulated free market creates a boom and bust cycle. The booms are great but busts create unemployment, social unrest and fears that the underclass might revolt.
Trump Republicans advocate a different federal role — government stimulus. Trump, like Ronald Reagan before him, supports jacking up the economy with great government expenditure. However, while Reagan squandered capital on a Star Wars program, which created aerospace jobs but lacked social utility, Trump wants to build infrastructure projects. He speaks of government investing in a high-speed rail network that “rivals that of China.”
The Washington-based publication The Hill reports that at her confirmation hearings, Elaine Chao, slated to lead the Transportation Department, echoed Trump’s calls to repair the nation’s crumbling infrastructure, telling senators one of her top priorities will be to establish an infrastructure “task force.” The social investment could be as high as $1 trillion.
The laissez faire Republicans always respond by asking, “How are we to pay for these new projects?” They oppose government borrowing. The Trump Republicans have an answer: Manipulate taxes and increase the debt.
Deja Vu All Over Again
When Adolf Hitler assumed power in Germany in 1933, German unemployment was approaching 35 percent. Hitler needed national unity. He solidified his base of support by taking advantage of divided working class interests — the perpetually quarrelsome communists, socialists and social democrats. Under Hitler, nationalism ruled the day. Roma, Jews and Slavs became convenient scapegoats in Hitler’s effort to establish national unity.
Within nine months of taking power, Hitler’s regime broke ground on Germany’s famous Autobahn network. The regime assumed great debt to build canals and railroads. To finance the debt, Hitler increased the already graduated income tax rates. By 1939, on the eve of World War II, German unemployment had plummeted to 3 percent. Working class suffering had been ameliorated, and fascism had secured a mass base of public support. But fascism created a massive capitalist appetite. Germany needed to expand. It needed coal from mines in Poland and oil and gas from the Soviet Union.
Fascism utilized nationalism to justify its expansion. One million Roma, 6 million Jews, and 20 million Slavs were killed as Hitler marched across Europe, at the cost of 9 million German lives. Fascism had also captivated Japan, which first invaded Manchuria, and then all of China and Southeast Asia. In the end, World War II cost 60 million lives. The world learned a bitter lesson.
Government indebtedness in support of social infrastructure programs provides jobs with discretionary income. Greater purchasing power increases demand and a once discontented working class becomes supportive of the new leadership. This could be politically advantageous for Trump. However, ultimately the forces of expansion create an economic pressure for war, the most devastating human pestilence.
In the short term it worked for Hitler. How will it work for Trump?
Robert M. Nelson