The Anti-Establishment Cycle

One common theme between the surprising successes of both Donald Trump and Bernie Sanders in this political campaign is an anti-establishment, anti-Washington sentiment. Far from being a new idea, it seems that we see a similar anti-establishment rise every few elections. While there are likely multiple causes of anti-establishment sentiment, I have one theory for why it never seems to go away, even when the old politicians are all thrown out and replaced with fresh new faces.

Let me explain this with an example: the plan to build a wall along the Mexican border. This has a been a key plank of Trump's campaign; however, it is certainly not an idea that he invented. The US government started building a security fence along the southern border during George W. Bush's presidency and continued it under Barrack Obama, yet this continues to be a key political issue in the current campaign because many voters perceive illegal immigration to still be a problem (whether they are correct about that is another matter).

From the voter's perspective, George W. Bush promised to stop illegal immigration and didn't deliver. The Republican's in control of Congress during Obama's presidency promised the same and also didn't deliver. What can explain this? The most obvious explanation is that these politicians aren't up to the job or, even worse, they don't actually want to solve the problem. Perhaps they are being paid off by special interests that want illegal immigration to continue!

In the case of the wall, none of these explanations is a good fit. As John Oliver explained, the real problems are that (1) building a wall turns out to be a lot harder than anyone thought and (2) the wall doesn't actually fix most of the problem. (Most illegal immigrants enter the country legally and then over-stay their visa.)

Let me abstract from this example to a more general description of what I think happens in many cases. First, the voters have a problem they want solved. Politicians come along to say that the problem has an easy answer but opponent's don't want to solve the problem because they're corrupt (or under the thumb of special interests), so the voters should give them power instead. Once elected, the politicians discover that the problem is a lot harder than they thought, but they don't want to admit that (because it would show their ineptitude), so they continue to blame their opponents. After a while, voters reach for the simplest explanation: these politicians must be corrupt too. So they throw them out and elect new politicians with a new easy answer.

In our example, the problem is illegal immigration and the easy answer is building a security fence. That didn't solve illegal immigration, so voters start to suspect that Republican's in Congress are incompetent or worse. Trump comes along with a new easy answer (replace the fence with a huge wall!) and explains that those who say it won't work actually want illegal immigration to continue.

Here's another example: on the Democratic side, Bernie Sanders says he can solve "too big too fail" by breaking up the big banks (the easy answer). The only reason that others won't implement his easy answer is that they're corrupt: they're being paid off by the big banks. In reality, the problem is far more complicated than this. For example, one of the reasons that we have a few big banks is that banks are so highly regulated. (Read the annual reports of M&T Bank to see how a smaller regional bank copes with regulations like Annunzio-Wylie, Sarbanes-Oxley, Dodd Frank, etc. and why it is more expensive for them than the larger banks.) More regulation of the banks is likely to make the big banks even bigger.

These are far from the only examples.

Why won't politicians raise the minimum wage in order to help poorer workers? It must be because they don't care about them. Again, the issue turns out to be more complicated. Until the last two decades, pretty much all economists believed that raising the minimum wage would help some workers but hurt others by taking their jobs away. Some more recent studies (e.g., Card and Krueger) found that this didn't happen in examples that they looked at, but they instead found businesses paid the higher wage by increasing prices. And since businesses that pay the minimum wage more often have poorer customers, you have the same problem of helping some poorer people and hurting others. (In this case, I have to say that I think there is an easy answer: the government should just give poor people money. However, the point remains about the minimum wage as the easy answer.)

Why won't politicians raise taxes to pay for more services? It must be because rich people are paying them off. In this case, the problem is that the revenue maximizing tax rate is typically much less than 100%. There have been some empirical studies on this (none of them great), but they suggest that the maximizing rate is around where tax rates are now. And in fact, despite having had a highest tax rate as high as 90% at some points in recent history, tax receipts as a percentage of GDP have only been higher than they are now at two points in history (2000 and 1945).

Why won't politicians cut taxes? It must be because they hate rich people. Nearly all of the Republican candidates in this campaign want to drop tax rates to around 20% and they claim that this will actually increase tax revenue either by increasing growth or because the current rates are above the revenue maximizing rate. As I noted above, the second claim is very likely false. As for the former, it too rests on shaky ground.

I could go on. Indeed, I actually think that the vast majority of all political problems are much more complicated than politicians want to admit. At the end of the day, "it's complicated" doesn't win many votes. Voters would rather believe that there are easy solutions,whose implementation is only being prevented by corruption. But when those easy solutions don't pan out, we can expect them to reach the only reasonable conclusion, that corruption has spread, and start the next wave of anti-establishment sentiment.