Where does the Republican party go after Trump?

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President Trump is practically and morally responsible.

The New York Times reports thousands of Republicans are leaving the GOP.

One of the most striking things to me in the November presidential election was the fact that Biden took the portion of America that represents 71 per cent of the economy. So the coastal elites, a lot of the wealthy urban areas, parts of the country where basically things are made and that there are jobs. And so you have this odd way in which the Republican Party has kind of morphed from being a party of financial elites. I mean, certainly there are still some financial elites voting for Republicans because of deregulation, low taxes, laissez-faire, et cetera.

But you’ve really got Republicans saying, hey, we’re the party of the working class. And in fact, you have some Republicans like Josh Hawley openly saying, that is us. “We are about the working class now.” I want to talk a little bit about who Republicans are really for. But let me ask you first that basic question. Do you think it’s possible that Republicans could be the party of the working class?

I think you’re right, that if you count up the states where they won, the Democrats represent the majority of the country’s productivity. The part of America Trump won is more towards the centre of the country where there is a more working class population. But the picture isn’t completely simple. In voters with household incomes under $100,000, Biden won solidly. Of course, there was a mix of different kinds of voters in that demographic – white, black, hispanic, young, old, et cetera, et cetera. So I would say the picture is more – the Republicans need to be the party of the working class.

They haven’t achieved that, and that’s the problem. Trump got them closer than Mitt Romney’s or the Bob Dole’s of earlier elections. But they’re not there yet, and it’s a problem.

Going forward, it’s interesting to think about what factions aside from the Trump portion of the party really exists. So you mentioned Romney. You’ve got Romney, Cassidy, just a handful of Republicans that have really stood up amidst impeachment and said, look, we have a moral core here. We’re representing a more traditional kind of conservatism. We are going to try and bring back this sense of public service, of conservative small C prudent Republicanism. They’re not doing so well. I mean, they’re really not.

I think they’re a small part of any possible future conservative coalition in this country. I think the point that pundits on both left and right have made, that the Republican Party has sunk into zombie Reaganism. A lot of the party, the establishment wing of the party, is just singing from this 40-year-old hymnal that the voters aren’t singing along to.

That’s interesting because I have always thought that if even pre-Trump, one of the reasons why the Republicans were beginning to falter is that they don’t have a post laissez-faire, Chicago School unifying theory of economic policy. Now you can argue if the Democrats do or not. But certainly…

They won the presidential election. Right. They don’t have to search their souls quite as hard as the GOP does.

Well, at least, I mean, they may have to be searching by midterm or post-midterm, depending on how it goes, which is not that far away. But it’s interesting because that brings up that need for a new economic theory to underpin policy. Actually brings up another faction the party, which is, I always think of them as the sort of patriotic nationalists. So this is the Hawley’s, Rubio, some of the candidates that say, hey, OK maybe Elizabeth Warren’s got a point about industrial policy. Maybe we need to connect the dots.

There is no way forward for the Republican Party if they don’t take income inequality seriously. And the posture has been, the zombie Reaganism posture is if we just let the market alone, it will solve this income inequality problem. And I don’t think anybody buys that anymore.

Yeah.

And now you have a party that got absolutely smoked among young voters, absolutely smoked among first time voters. And a lot of these people are looking at houses they cannot afford, and not great job prospects, and heavy student debts, and they want to hear a story about what is going to be done for the have-nots here. You can disagree with the Trump story told. But he told a story, which is your job is being stolen by China. Your job is being stolen by an immigrant.

You and I are probably not inclined to believe that. But it’s the story. And it’s not a story like, oh, the market will just figure this out. If we can just lower taxes, everything will be fine. I just don’t think that’s, I think what we’re learning is that story doesn’t fly. And frankly, it hasn’t flown for a long time.

I have a market question to you that this could potentially impact how Republicans position themselves, particularly as we get to the midterm, which is going to be very, very telling. It’s going to be close. It’s going to be tight. But the market could change dramatically by then. We know there’s froth. The US policymakers right now are trying to pull off some real economic growth at the same time that they’re firefighting a pandemic, rising debt. We’ve got concerns about the Fed and Treasury working too tightly together. What happens in the next 12 to 16 months that could impact the midterms do you think?

Well, we have all of the ingredients for a significant correction, which means not only extremely high asset valuations. We have not only high prices but prices that are rising at an accelerating pace. And we have nut job behaviour, whether it’s GameStop, or Bitcoin, or Tesla. Those are the kind of Holy Trinity of times to worry. Now the other thing that you and I have probably both learned in our investing lives is that timing the market is hard.

Yeah, don’t remind me of that, Rob. I pulled out of US equities two years ago. It’s a very sore topic.

Yeah, but the point is that conditions are ripe for a correction. And if we have one, it will change the electoral calculus immediately and dramatically. It is not true that the president is responsible for the stock market. But it doesn’t matter that it’s not true. Everybody thinks that it is. Obama wasn’t responsible for his great stock market. Trump wasn’t responsible for his great stock market. And Biden might not be responsible for his terrible stock market. But that is a reality that could save the Republicans’ bacon.

That’s why I think ultimately that someone like Rubio is probably going to be the future of the party, if there is a post-Trump future, it’s going to come from someone like that, that actually has policy ideas that are not too far off what some on the left would like to see. I mean, personally, I’ve written this. I think that we’re going to need a major government-pushed, if not government-funded, government underwritten in terms of rules of the road infrastructure programme. We’re going to need to retool for a world in which supply chains are probably going to be somewhat shorter, asset prices are going to be somewhat lower.

We’re going to need to do some major retraining. How you’re going to sell that amidst all the usual vested interests of the party and corporate lobbyists that are swarming around Washington remains to be seen. But we will leave that topic, lobbying perhaps, for another time. Thanks for being here with me.

It’s been a pleasure, Rana.