The Economics of Leftist Populism

To fully appreciate why the Republican Party has become a movement primarily supported by America’s most productive private-sector workers and entrepreneurs, it is necessary to understand what constitutes the opposition. It isn’t the “woke” agenda that is the most defining feature of Democrats. It’s that the policies associated with the woke agenda benefit big government and big corporations.

This runs counter to every stereotype that has been used to deceive voters for decades, but it’s true. The economic model that Democrats hope to impose on America is one where regulations inspired by leftist values—generally falling within two broad categories, “equity” and “green”—lead” to a government that can micromanage every aspect of economic life. The weight of these regulations and the taxes required to enforce them drive households and businesses into dependency on government aid and subsidies, driving small businesses into bankruptcy and enabling big businesses to consolidate their control of products and markets.

Ronald Reagan famously said, “Corporations don’t pay taxes; they pass those taxes onto their customers. When taxes are imposed on corporations, YOU pay them.” But the consequences of over-regulation and higher taxes don’t fall onto corporations equally. Large corporations have economies of scale. If they have to hire scores of full-time human resources professionals to comply with equity-oriented mandates, or scores of attorneys and environmentalist scientists to comply with new environmental regulations, they can spread those additional costs over thousands of workers and billions in revenue.

When a small business has to perform these new tasks, they only have millions in revenue to cover all these new obligations. This means they have to raise their prices more than the big corporations have to in order to still make a profit. This makes them no longer competitive, and down they go. When big corporations oppose new taxes, it’s an annoyance. When small businesses oppose new taxes, it’s a matter of life and death.

Once America’s major corporations realized they could defang the equity and green movements by embracing their agenda, even lobbying Congress and state legislatures to enact the laws the movements were demanding, and actually increase their profits and market share while destroying emerging smaller competitors, flipping to the Democratic Party was easy.

Once this happened, a realignment that had been going on for decades suddenly picked up momentum. The Democrat strategy should be obvious by now, and it is not primarily oriented to identity politics. That’s just the ideological window dressing, with plenty of evidence to debunk its substance. Productive private sector workers and entrepreneurs, regardless of their ethnicity or gender, have overwhelmingly rejected the Democrats, along with their woke and green rhetoric. But the economic strategy the Democrats are pursuing may yet work. It appeals to three constituencies.

The first of these constituencies is government workers, about 15 percent of households. This figure, while high, understates their influence because spouses of government workers are likely to share the economic priorities of their partner. Anyone working for a government contractor also benefits when the public sector expands. When government grows, these voters prosper.

Add to that the next constituency of Democrats, the households in America that pay no taxes, conservatively estimated at 40 percent. These are people in lower income groups that are often receiving government subsidies, whether it’s welfare, the Earned Income Tax Credit, or other benefits. These voters benefit when government aid programs are increased. And when you add together the government workers and the households dependent on government assistance—or at the least indifferent to its expansion because they don’t pay taxes anyway—you already have over 50 percent of the electorate.

It’s at this margin that the battle for the future of America is being fought. And every time another government regulation or tax is imposed on small businesses or households that still manage to maintain financial independence, the resentment they feel against expanding government begins to compete with the economic necessity of depending on government handouts to survive.

This is seen across all economic sectors but is most acute in the housing industry. Equity-oriented mandates for developers of subdivisions to offer qualified buyers a percentage of under-market “affordable housing” force them to raise prices for all the remaining homes they sell. Environmentalist-inspired building code requirements that never stop escalating—solar, all-electric systems, battery and EV hookups, hyper-energy-efficient windows, and insulation—also add costs to homes, while even more costs are added when the price of land and building materials are artificially increased because of environmentalist inspired restrictions on what land can be built on and where lumber and aggregate can be extracted. And then there are the costs of building permits and fees, which in California, for example (of course), can run well over $100,000 per home.

Which brings us to the third constituency of the Democrats: business owners, mostly the operators of mid-size and large corporations, who have become adept at collecting government subsidies. For example, if government overregulation makes it impossible for a home builder to make a profit selling homes that people with median incomes can afford to buy, then go into the affordable housing business and start collecting billions in government subsidies. Whether it’s affordable housing, or “permanent supportive housing” for the homeless, or solar farms and wind farms, literally trillions of government dollars now flow into the hands of corporate special interests who no longer have to operate in a competitive market.

This reality makes Trump’s election miraculous. Underlying the Democrat strategy are economic incentives that easily tempt more than 50 percent of all voters. They tempt every voter who has been driven into near poverty by the consolidation of markets and higher prices that result. They tempt every government worker who knows that Democrats will expand government. And they tempt—and are orchestrated by—those corporate interests that thrive when competition is eliminated and government subsidies pick up any shortfalls that may result from a market distorted by crippling regulations.

The populism of MAGA is increasingly derided by the corporate press as a naive, self-harming, misguided movement, manipulated by “oligarchs.” To be sure, there are a few oligarchs who have jumped into the MAGA camp. But all of them—Musk, Ramaswamy, Thiel, Andreesen, Sacks, maybe even soon to be fully joined by Bezos, Zuckerberg, Soon-Shiong, and others—are innovators who have upended entire industries by lowering costs to customers. And as has become undeniably obvious, these “oligarchs” are trying to shrink government, not expand it.

It is not easy to characterize how America has realigned because conventional labels don’t apply. This is not a battle against socialism because corporations are driving the Democratic Party. Calling it “corporatism” is too fancy and hard to understand, and calling it “fascism” evokes extraneous connotations that don’t add clarity. But it’s something of all those. And it must be stopped by appealing not only to America’s remaining productive citizens but also to those millions who could be, and who could do so much better, if government and their corporate allies would just get off their backs.