On the eve of Donald Trump’s second inauguration, the nature of America’s “post-neoliberal” transition is in doubt. This transition saw the partial and halting emergence of a cross-partisan consensus that America needed to combat the hardships wrought by globalization with trade and industrial policies that prioritize left-behind workers and communities.
Now, however, elements of both parties have begun to reassert free-market orthodoxies. The congressional fracas over December’s stopgap spending bill recalled the brinksmanship of the Tea Party era, illustrating once more that the GOP is easily paralyzed by old debates over “small” vs. “big” government. Meanwhile, the Democrats, after four years of struggling to sell Bidenism to the public, are divided over how to be an effective opposition party, with some urging a return to the entrepreneurial ethos and fiscal restraint of the Clinton era.
“The emerging standoff promises to empower anti-populist factions in both parties.”
Though the next four years will in some ways be marked by intense partisanship, the emerging standoff promises to empower anti-populist factions in both parties. In fact, the Democrats’ defeat in November has created an opening for the libertarian right and neoliberal establishment to regain control over policymaking. Notwithstanding Trump’s intent to raise tariffs across the board—itself a source of deep anxiety in Washington—the tentative accord between Democrats and Republicans on the need for a national industrial strategy that generates high-wage jobs appears to be foundering. Instead of a transformative political realignment, Trump’s comeback heralds a variation on the corporate-elitist politics that gave rise to 21st-century populism in the first place.
Consider the plight of those Republicans who are adamant that pro-worker conservatism can deliver. Scott Bessent and Howard Lutnick, Trump’s respective picks to lead the Treasury and Commerce departments, are conventional Wall Street men who edged out Robert Lighthizer, Trump’s former trade ambassador and a key architect of the post-neoliberal “new Washington Consensus,” for the administration’s top economic posts. That outcome has already dampened expectations that Trump will “de-couple” America from China and pursue a more autarkic course.
In the Senate, meanwhile, heterodox and labor-friendly Republicans are few and far between. Sen. John Thune (R-SD), the new Senate majority leader, rose through the ranks as a Bush-era free-trader in the mold of Mitch McConnell, and the party’s Farm Belt contingent is just as leery as Wall Street of anything that might upset international markets. While Sen. Josh Hawley (R-MO), arguably the GOP’s most iconoclastic populist, has won some praise from the anti-monopoly movement and Teamster leader Sean O’Brien for assailing corporate malpractice, he is an outsider in a caucus still in thrall to the Chamber of Commerce and regional magnates.
Among House Republicans, the outlook for populist economics is similarly poor. The reform-minded “Main Street Caucus,” the party’s main vehicle for local development, is divided over strategic protectionism and only weakly drawn to antitrust measures. Only a few Republican members support the PRO Act. Most others are committed to the usual mix of tax cuts and budget cuts, even as many represent districts that are benefiting from the Inflation Reduction Act and other industrial policies.
The odds of a metamorphosis this year are low. Witness the rudderless tenure of House speaker Mike Johnson, who was forced to recant his statement just before the election that the GOP would “probably” repeal the bipartisan CHIPS and Science Act—a bill which has spurred investment in advanced manufacturing in Rust Belt districts. Though the reign of Paul Ryan, John Boehner, and Eric Cantor may seem a distant memory, the Republican leadership is still failing to grasp the material concerns of its growing blue-collar base. Voters clearly want action that tackles the loss of economic security and the crisis of development, and while they sometimes hold contradictory views about government’s role in economic affairs, their anger and despondency are why we are in this volatile moment.
Alas, the revenge of neoliberalism has been a long time coming. Incensed by Biden’s antitrust appointees and beefed-up labor regulations, several tech executives and venture capitalists threw their support behind Trump’s 2024 campaign. Outside of Lighthizer’s portfolio, Trump’s first-term priorities hadn’t fundamentally broken with Republicans’ laissez-faire doctrine; the possibility of a more populist second term, they evidently reasoned, could be easily quashed. As Compact founder and former editor Sohrab Ahmari warned this past summer, Silicon Valley’s sway over Trump world promised to dilute any purposeful fusion of Jacksonian and Hamiltonian ideas in today’s GOP.
Sure enough, Trump, in defiance of his base, has blithely agreed with Elon Musk and other tech moguls on the benefits of H-1B visas for skilled immigrants. This betrays populist rhetoric about investing in American labor and signals a retreat from the restrictions on H-1Bs that Trump pursued in his first term. An agenda that championed American workers would overhaul a program that discriminates against them and compels them to train their foreign replacements, not expand it. But as Trump endorses the views of Big Tech, it has fallen to Bernie Sanders to point out H-1Bs are part of the same exploitative playbook that led to NAFTA, the China shock, and rampant outsourcing.
Meanwhile, the incoming administration’s promises to unshackle innovation and entrepreneurship seem bound to succumb to cronyism and conflicts of interest, given the wide-ranging business interests of Elon Musk, Trump’s pick along with Vivek Ramaswamy to lead the Department of Government of Efficiency (DOGE). Nonetheless, some Democrats have recently acknowledged the need for cutting red tape and wasteful spending, including Rep. Ro Khanna (D-CA), Gov. Jared Polis of Colorado, and The New York Times’s Ezra Klein. The housing shortage and slow roll out of clean energy projects, in particular, have compelled progressives to scrutinize regulations that fetter crucial infrastructure. Still, many Americans, and not just Democrats, are wary of DOGE’s potential scope and the deregulatory zeal uniting tech and finance. Slashing government is plainly not a solution to regional inequality, the skilled trades shortage, or the cost-of-living crisis afflicting working families.
In the wake of Kamala Harris’s defeat, economic progressives might have hoped that the partial breakthroughs of the Biden era had laid the groundwork for a constructive period in opposition. A resolute party of the center-left would regroup by confronting the problems that fatally undermined Bidenism, while challenging Republicans to live up to their populist “mandate.” Most Democrats, however, seem hesitant about countering the Trump-Musk alliance with a vision that is more in tune with the needs and preferences of the actually existing multiracial working-class.
Instead, there are early signs the party elite and its allies are attempting to update the Third Way politics of Bill Clinton—the very legacy that accelerated industrial decline and gave rise to Trumpism. Polis, a dark horse contender for the 2028 presidential nomination, has emerged as an enigmatic “pro-growth” reformer focused on purchasing power, economic opportunity, and bodily freedom. On top of qualified praise for Robert F. Kennedy, Jr., Trump’s pick to head Health and Human Services, Polis recently staged a photo op in which he took a table saw, à la Argentina’s Javier Milei, to old executive orders. While some of what Polis says chimes with the anti-monopoly movement, other positions, particularly his opposition to solar panel tariffs, are emblematic of the Democratic Party’s retreat from industrial policy. Kamala Harris, after all, made opposition to tariffs a centerpiece of her campaign—as clear a signal as any that the party elite believes left-populists in the vein of Ohio’s Sherrod Brown are an endangered species.
Even Democrats who supported Biden’s overarching goals have hinted at a more parsimonious policy mix. Rep. Jake Auchincloss (D-MA) captured his party’s conflicted outlook when he told Inside Trade last February that he was for “domestic investment” in education and infrastructure but opposed industrial policy that led to “protectionism.” To his credit, Auchincloss underscored the importance of deepening ties with the Global South to offset China’s monopolization of international trade. But progressives’ ambivalence toward strategic protectionism avoids confronting the steep challenges America faces. Policies to revive industry and stop the harm caused by China’s extreme trade surpluses are, as economist Michael Pettis writes, fundamentally different from America’s overuse of tariffs in the 1920s and 1930s.
Future Democratic leaders ought to be clear about the stakes. Unfortunately, influential pundits like Matthew Yglesias are pushing Democrats to denounce tariffs, rather than lay out a labor-centric, pro-development path between reflexive protectionism and hyper-globalization. The contrast with Trump 2.0 offered by Clintonites, Obama protégés, and aspiring presidential candidates such as Gavin Newsom—with their invocations of free-trade principles and JFK-style multilateralism—is insufficient to rebuild the Democratic coalition. And it fails to exploit the GOP’s chief handicap: that it struggles to govern, let alone govern well.
A vague appeal to “affordability” and “opportunity” may nevertheless suit the Democratic establishment and the brahmin left (which are increasingly identical). Doing so would preserve the status quo and tamp down would-be insurgents such as Reps. Chris DeLuzio (D-PA) and Pat Ryan (D-NY) who seek to advance the post-neoliberal paradigm. Their attempt to revive the Rooseveltian tradition threatens the status of neoliberals who prefer globalization and means-tested aid to a muscular “pre-distributive” approach to the general welfare. Historically, the party’s protectionist wing has also been more communitarian and averse to lax borders and cultural radicalism. Its resurgence would thus force left-wing progressives to choose between identity politics and a credible majoritarian vision—a decision they are loath to make.
In the short-term, the civil war brewing within the Democratic coalition is likely to be contained. Democrats are under pressure to unite against Trump and paper over their own divisions, particularly on trade, antitrust enforcement, immigration, and foreign policy. Some even seem relieved to no longer be the party in power. In turn, Democrats may abandon ideas on the scale of the original Build Back Better plan, depending on how voters respond to GOP rule. After the wreckage of Covid and the stress of inflation and high interest rates, it is entirely possible that a pared-down approach to political economy is what the median voter wants.
Yet a politics of small ambitions cannot meet America’s immense challenges. Affordable goods and services are not the product of altruistic firms. Nor are rising living standards, safe working conditions, and decent social programs the fruit of good intentions. They require agile leaders and intelligent policies to govern and shape the market—as well as the resolve to fight predation.
Building a healthy economy, however, also requires sacrificing a maximalist notion of choice for greater solidarity. If working-class Americans are desperate for plentiful cheap things, it is because the tides of globalization have given them no credible alternative. Their skills and talents have been derided, and they have been told by elites for two generations that their expectations for a dignified life of decent comforts are greedy and unrealistic. If democratic capitalism has any future, the Democratic Party must grasp the imperative to actually build the economic resilience and security it has repeatedly promised but failed to deliver.
Anything short of that, amid the social crisis we face, courts disaster.