Lessons From History Can Help Restore Stability

This post was originally published as part of a series on The Regulatory Review. Reprinted with permission.

As the authors of a book that argues that a combination of government and markets has built a country truest to its fundamental political values, we see plans to radically downsize government as a contradiction of the historical evidence. As our book relates, the country has established a web of laws that interact with markets to build up our infrastructure, protect people, and help the most vulnerable among us.

The efforts of the Trump administration to bypass these laws, including constitutional commands, is moving the country towards a constitutional crisis. There are dozens of pending lawsuits challenging the Administration’s actions, and anticipating the injunctions that will follow, the Vice President is advocating that the White House disregard court decisions. And, perhaps most regrettably, we have a Republican Congress that has abdicated its constitutional responsibility to protect our system of checks and balances and instead has bent its knee to whatever the Trump administration demands of it, including confirming unfit cabinet nominees.

What does this constitutional crisis portend for the balance between government and markets?

Both government and markets require stability and reasonable predictability. Market stability and predictability are based upon markets observing and following rules of competition. Today, unpredictable tariff pronouncements, the firing of inspectors general who serve as watchdogs against fraud and abuse in government, the suspension of laws banning foreign bribery, shutting down the country’s consumer protection agency, and compromising data housed by the U.S. Department of Treasury are all actions that threaten market stability and reliability.

Government stability and reasonable predictability, which require that government officials follow the rule of law, have also been abandoned. Retaliatory firings of government officials, widespread bureaucratic buyouts, the deletion of databases and other public information, and the aforementioned violations of established law represent a weakening of the rule of law.

As a result, markets and government are destabilized, as both the rules of competition and the rule of law are cast aside in the service of presidential power. When these protections are torn down, there is no balance between government and markets. As a political economy, we may well be in unchartered territory.

Our book argues that the history of government and markets has been determined by a democratic conversation about the appropriate balance between them, and that the public will support a change in the mix when it is out of balance. This change, as we pointed out in an earlier essay, can take years, but there has always been an adjustment that may be incremental or more significant. In that essay, we predicted that the accountability of the Trump Administration will come as enough voters recognize that he has not only failed to address the problems he promised to address, particularly the lack of economic opportunity, but that he is adding to those problems.

Our book, however, also recognizes two sources of disruption of this ongoing democratic conversation. One is politicians who highjack the conversation by relying on racism, xenophobia, “us-versus-them” politics, and prejudice to hide their actions while disrupting the balance between government and markets. The country is in the thick of dealing with politicians’ use of these tactics at the moment, amplified by the reliance on misleading social and some mainstream media by many people in the country.

The other disruptor has been the U.S. Supreme Court at various times in our history. The Court, as Alexander Bickel indicated, is counter-majoritarian, which puts it in the position of accepting the results of the democratic conversation or rejecting them. The Court’s positioning has been based on judicial philosophies and, less honorably, on racism and xenophobia.

The role of the Court has been much debated because of its unique role as the independent arbitrator of the democratic conversation. But the current situation is outside of those parameters. The power grab by the executive branch is unique because the President has accompanied it with the claim that he somehow has constitutional authority to operate outside of legal and constitutional limitations.

We expect the Supreme Court to recapture its traditional role as protector of the Constitution because to do otherwise will throw off the fundamental methodology of the country’s political economy identified in our book. The Constitution establishes the policy areas in which that conversation takes place, and the laws on the book constitute the results of that conversation. Although the Court’s role has been to adjust the results of the democratic conversation, it has never been to overthrow democracy. We trust that the Court will not do so this time around either.

Today’s looming constitutional crisis may offer us an opportunity to assert, reassert, and emphasize the central necessity for a well-balanced political economy, a political economy that is best measured against the democratic values discussed in How Government Built America. We once again thank Belleisen and Welton for joining us in updating the centuries-old democratic conversation about the appropriate mix of government and markets.