There are failures too — the subtitle of my book is “Successes and Failures.” Maybe Trump is the political sphere’s version of the Blackberry: historical progress, but ultimately to be supplanted by something even better. What I can assure you is that people continue to suffer from significant policy mistakes, and they know it. Even while the elites continue failing to acknowledge and even hiding evidence — as I explained in my book — about their failures, populism is not going away, even when Trump does. Thank you.

All right, great. Now we have 10 minutes or so from Dr. Strain.

Strain: Thank you, Dr. Mulligan, for that thoughtful presentation, and there’s a lot there, for sure. And I would encourage everybody to buy Casey’s book. You can find it on Amazon and other places as well. It’s very thoughtful and certainly worth your time, and regardless of what happens next month, I think Casey’s point that populism may be here to stay — including other iterations of populism following President Trump — is certainly a thoughtful thesis and one that all people who are interested in politics, economics, and public policy should read. So I would strongly encourage you to buy Casey’s book.

My book is The American Dream Is Not Dead: (But Populism Could Kill It). I think you can tell by the subtitle that Casey and I have different views on this question. And so I’m delighted to be having this conversation today. And thanks to everybody for tuning in.

Let me just dive in here. What is populism? Casey touched on this and quoted me, and I didn’t hear Casey’s presentation before he gave it — I heard it for the first time with the audience. So you’ll see the scare quotes in here around the people on the elite side. If I had heard Casey’s presentation, I might have taken those out. But let me give a three-part definition.

First, a political stance, aggressively pitting the people against the elites, I think, is a key part of any definition of populism. This does not mean that the elites don’t exist, and the people don’t exist. But it does mean that I think that this dichotomy is overdone by populists and populism. The dichotomy is less strong than the populists would have you believe.

Second, emphasis on the decency of the people and the corruption of the elites is an important part of populism — that the elites are rigging the system against the people. That’s a common phrase you hear Elizabeth Warren and Bernie Sanders use, for example, as well as the president.

And then, finally, an embrace of pessimism, the notion that things are terrible and our trajectory is bad for the nation and for individuals, and an effort to close the country and turn inward. “Immigrants are the problem. Globalists are the problem. Globalization is the problem. We’re losing abroad.” This is a zero-sum mentality, we need to turn inward, focus on ourselves, and we need to do that because things are really terrible. So that I think is the way that I think about populism.

Let’s talk about Trumpian populism. I think it’s important to identify which of the president’s initiatives are populist and why. When the president orders scrambled eggs for breakfast, that’s not a populist act. Lots of people have scrambled eggs for breakfast. And certainly, not everything the president has done is populist, but there are quite a few things that are.

Looking at the best parts of the president’s agenda, Casey talked a lot about one in his presentation: deregulation. I think that’s been successful. There’s also the 2017 tax law, and particularly the corporate tax provisions in that law, which I think are very successful. These are the best parts of the president’s overall economic policy agenda, but I wouldn’t include those as populist. I think that reducing the corporate income tax rate is something that Mitt Romney would have done if he were elected. There would have been a lot of pressure on John McCain to do that if he were elected. And that’s been a standard goal of Republican conservative economic policy for quite some time, and the same thing goes for deregulation. Find me a Republican who doesn’t think that the US economy is too heavily regulated.

Those are certainly a part of the president’s policy agenda, and they are successful parts of the president’s policy agenda, but I wouldn’t call them populist. Instead, trade wars, attacks on domestic institutions, attacks on international institutions, attacks on basic norms, hostility toward immigrants and immigration — those components of the president’s agenda are populist and meet the definition of populism that I put out at the beginning. In addition, I would argue that the president typically enters the public debate and the discourse as a populist as well. And that’s a big part of his presidency.

The component of the president’s populist agenda that he’s made the most progress on, I think, is the trade war. And so let’s just take a look at that in a little more detail. I would argue that the trade war didn’t work, even on its own terms. The terms of the trade war are the standard terms that are used by Democrats and Republicans who support protectionism, which is that there’s this group of workers and these parts of the country that have been neglected by the elites. The elites are more interested in globalism and more interested in overall economic performance, which presumably will help them than they are in manufacturing workers and manufacturing towns. So we need some protectionist policies in order to correct that imbalance. And even if those policies increase consumer prices, slow investment spending, slow overall economic growth, they’re worth it because they afford special benefit to this group of neglected workers — in this case, manufacturing workers or certain neglected regions of the country.

Casey mentioned the president’s inaugural address’s phrase, “American Carnage.” The president spoke about hollowed-out factory towns — I think the phrase was scattered like tombstones across the nation. This is what we’re talking about. You’ll recall, when the trade war began, Commerce Secretary Wilbur Ross going on television holding up a can of Campbell’s soup and saying, “This can will cost you 1.5 cents or two cents more than it otherwise would.” The idea is that we can spread the pain of the trade war over the entire nation, and it’s really not going to be that bad — it’s just going to cost you an extra penny to buy your can of soup. But that’s going to allow significant benefits to flow to manufacturing workers, who again deserve special attention.

The best piece of evidence I’m aware of that looks at this hypothesis is a 2019 paper by Federal Reserve economists, Flaaen and Pierce. They do what seems to be a pretty careful job trying to identify the effect of the trade war on manufacturing. And they find that protection from import competition provided by the tariffs does, in isolation, increase manufacturing employment. So looking at that one component, protection from import competition, actually does increase employment by about 0.3 percent under the measure that they use. But that, of course, is not all that trade wars do. Trade wars also increase the costs businesses face to purchase the goods they need for production — intermediate goods in the production process. And Flaaen and Pierce estimate that this effect reduces employment by 1.1 percent.

So even there, the effect of the trade war on employment from increasing the cost of intermediate goods is significantly larger than the positive effect of protection from imports. And of course, trade wars don’t just happen. They’re wars. There’s a tit-for-tat. The president doesn’t just impose tariffs and then that’s the end of the story. Nations retaliate. And they also took that into account by looking at three factors: protection from imports, increases in the cost of intermediate goods to production, and tit-for-tat. And they find that overall manufacturing employment actually was reduced by 1.4 percent — again, as a consequence of the trade war.

So the trade war didn’t work, even on the populist terms. The question, has Trumpian populism succeeded? For the trade war, the answer has to be no. Because the trade war hurt manufacturing workers, which are the group that the president argued needed special attention. The trade war had other effects as well of course: a reduction in the varieties of imported goods that US consumers could enjoy, higher prices that consumers faced at the cash register, fewer exports which hurt export-intensive firms — particularly farms — lower stock returns, and higher default risk. Again, this must be a consequence of the tit-for-tat. Most of the items on this list are pretty well-established by existing economics research.

Policy uncertainty from the trade war slowed business investment, which worked against the president’s signature legislative accomplishment, which was the corporate tax reduction. The president encouraged investment with his right hand by reducing corporate tax rates, and then he discouraged investment with his left hand by starting trade wars. So when looking at the spillover effects, not only did Trumpian populism not work for the populist objectives, but it also reduced the president’s other objectives’ effectiveness.