Classical Liberalism in 2017: The Best and Worst of Times?

It may be a bit of an exaggeration to say that 2017 was the best of times and the worst of times for classical liberalism in the United States but not much of one. Most of the important policies that the Trump administration implemented very substantially advanced classical liberalism. But President Trump’s association with those policies may well discredit them in the long run, because he violated political norms that themselves have a kinship with classical liberalism.

Begin with the positive side of the ledger in descending order of excellence. First, as has been detailed elsewhere, Trump’s appellate judges are superb. Almost to person, including most importantly Justice Neil Gorsuch, they are originalists. And the original Constitution with its structural checks on government power and protection of designated liberties is conducive to classical liberalism. Moreover, the methodology of originalism is itself the only judicial philosophy consistent with classical liberalism. Non-originalism necessarily gives arbitrary and discretionary authority to other governmental actors, mostly judges—the very kind of authority that classical liberalism abhors.

Second, the Trump administration generally performed well on both the substance and process of regulation. As to process, many cabinet officials, including the Attorney General and Secretary of Education, have made it clear that they will not issue guidance statements that have the effect of regulating citizens without requiring agencies to go through a notice and comment procedure that guarantees some measure of popular input.  This is an unprecedented counterpoint to the progressivism that wants to give ever more administrative power to the centralized bureaucracy. As to substance, the Trump administration has engaged in much appropriate deregulation and halted many unwise regulatory schemes of the previous administration.  One area where there may be overreaction is environmental regulation. Classical liberal governance should prevent businesses from imposing external costs, such as pollution, on third parties, and prudent regulation in this area is warranted.

Third, the tax reform just enacted is on balance beneficial. Our very high corporate rates made it harder for our businesses to compete given the rates abroad and the reform sensibly concentrated on reducing those rates as well as giving some more modest rate reductions to almost all individual taxpayers.  And the bill does close some loopholes for high income earners, like substantial deductions for mortgages and for state and local taxes. The latter change also promotes competitive federalism, our Constitution’s classical liberal gem.  Still even with substantial supply side effects that we can expect from tax reductions, the bill will not wholly pay for itself and thus adds to the debt.

And that reality highlights the greatest missed opportunity for classical liberalism this year—the complete failure to address our growing debt which is driven by burgeoning entitlements. And just as Trump deserves more credit than he is getting for the policy triumphs of the first year, he also deserves blame for taking entitlement reform off the political agenda. And he had the ability to take the lead by arguing that the most important reductions should be Social Security and Medicare for upper income tax payers like himself. Such cuts would have made it easier to sell rationalization of Medicare and Medicaid to get more bang for the buck.  Cutting taxes without reducing the deficit makes future tax increases or inflation more likely.

While Trump’s decision to exit the Trans-Pacific Partnership was also an economic policy debit (and a national security mistake as well because it could have helped knit together an Asian alliance against Communist China) it is of relatively minor significance. At least so far, the President has not substantially disturbed NAFTA or GATT—treaties that have both increased economic freedom and led to greater economic growth. Freer trade was historically a hallmark of classical liberalism and remains an important component.

But far worse than any policy error for classical liberalism, has been the President’s conduct in the office. He has told falsehoods via Twitter and through his spokespeople. He has written demeaning tweets, including a veiled threat against a broadcaster’s license, that are beneath the dignity of his office.  These are also affronts to classical liberalism. First, classical liberalism contains a commitment to truth seeking and empiricism. It is not an accident that the great founders of Anglo-American classical liberalism, Adam Smith and David Hume, were also proto-empiricists: openness to evidence promotes good policy.  Second, classical liberalism’s respect for the individual and distrust of authority makes it incumbent on leaders to treat their fellow citizens with respect, including of course respect for their constitutional rights.

Lest one think that my concern with the President’s public behavior represents an excessively intellectual prissiness on my part, this behavior also imposes concrete harms on classical liberalism’s prospects. Many citizens do not spend a lot of time following politics, and their respect for office of the Presidency creates an aura of good will for the occupant’s policies. But for many such Americans, the President is squandering that advantage.  As a result, they are more likely to think ill of his policies. Tax reform is a case in point. While almost all taxpayers will benefit from this reform, it is nevertheless polling very badly, and many think (falsely I believe) that these tax cuts have as their objective helping Trump personally. Low taxes and the economic freedom they bring are a cornerstone of classical liberalism and one of its few consistently popular policies.  It is measure of the President’s personal failure that he has contributed to public disdain for one of his great policy successes.