Is capital finally losing faith in Trump?

What has kept Donald Trump in the presidential race is his electoral base. It consists of white men, rural and small-town voters and small-business owners. The big bucks for the campaign come from a coterie of wealthy loyalists. This bloc will stick with Trump whatever he says or does.

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But the attitude of other groups that one might expect to be Trump’s natural supporters, such as big business, financial markets, a lobby like the chamber of commerce – “capital”, in other words – is far less clear cut. If anything, as Joe Biden’s lead has stabilised, so too has their optimism. With an eye to an impending shift of power, the Chamber of Commerce has endorsed a cluster of Democrats in tight House races, provoking outrage from the president. These unexpected alignments point to the scrambling of assumptions that is characteristic of the Trump era.

The GOP is normally the party of business. The president himself is a businessman. His administration has been stacked with plutocrats, CEOs and lobbyists. It has delivered tax cuts and deregulation. The tax-collecting IRS is a shell of its former self; the Environmental Protection Agency has been gutted, and financial regulations slashed. Trump has packed the courts with judges who will deliver judgments against labour rights, environmentalism protection and business regulation. If, as seemed possible at the beginning of this year, the US economy had stayed on course and the Dems had selected the leftwing Elizabeth Warren or Bernie Sanders as their candidate to run against Trump, the battle lines would have been clearly drawn.

But that is not what happened. The Democrats selected Biden, a centrist who as senator for Delaware between 1973 and 2009 represented one of the greatest tax havens in the western world during the height of financialisation. And then came the coronavirus shock and the most severe crisis that the US economy has suffered since the second world war.

The initial response of the Trump administration and Congress was less dysfunctional than one might have expected. The Cares Act was generous both to ordinary Americans and business. But since April the intractable corona-crisis has brought out the worst in Trump. The culture wars unleashed by Black Lives Matter protests have solidified Trump’s base, but they have not widened his appeal. And, as the public mood has shifted, business leaders have remembered the issues that made them leery of Trump in the first place.

In 2016, Trump struggled to gain endorsements. The Chamber of Commerce was neutral, backing neither Trump nor Clinton. It could not support a Republican candidate who was protectionist on trade, hostile to immigration and openly critical of the Fed chair, Janet Yellen.

Within hours of Trump’s victory on the night of 8 November 2016, that hesitancy was forgotten. Markets boomed. And Trump has delivered the goods in terms of tax breaks and regulatory giveaways. But on the strategic issues he has been every bit as disruptive as could have been imagined. His trade policy has been the most aggressive since the second world war. Relations with China, the big play of US business since the 1990s, are deteriorating into a cold war. Last year, Trump denounced his own Fed chair, the mild-mannered and cooperative Jerome Powell, suggesting he might be more dangerous than Xi Jinping. As recently as the second week of March the markets were jolted by rumours that Trump might be about to oust Powell. Meanwhile, Trump exploits the immigration issue for rabble-rousing purposes. American business is as keen as ever on cheap labour and the actual flow of newcomers has slowed to a historic low. The real issue – addressing the racist treatment of Latin American workers in the US – remains unaddressed.

On the climate emergency the attitude of American business has evolved more than one might have expected since 2016. Trump’s boast of reviving the coal industry is evidently absurd. Outright climate denial is no longer the order of the day, even for the likes of Exxon or Chevron. They now favour some kind of carbon tax. The smart money is on renewables as the cheap energy alternative.

If big business were the commanding political force that its critics sometimes imagine it to be, it would come out openly and state the obvious: Trump is a menace, he needs to go.

What stops them from doing so? They profess to fear the left. They talk up Alexandria Ocasio-Cortez, “the squad” and their socialist agenda. But that is nonsense. The actual threat is on the right.

First, in the 1990s, there were Pat Buchanan with his anti-globalisation “new nationalism” and Newt Gingrich and the Republican Revolution. Then, in 2008, there was Sarah Palin. In 2010, the Tea Party and the Freedom Caucus. Then there was Steve Bannon and Breitbart. Now there is QAnon. Again and again, the seam in the GOP coalition between big business interests and less aligned forms of nationalism, populism and xenophobia has torn open. The difference in 2020 is that it is the radicalised GOP base that has its man in the White House.

Having gerrymandered the electoral districts, the GOP doesn’t fear the Democrats but primary congressional selection challenges from its own side. This is what explains the behaviour of Mitch McConnell, the Senate majority leader, over the second round of Covid stimulus.

It is clear that the US economy desperately needs a second boost. In an election year you would think it would be in the GOP’s interest. Business is pleading for it. But McConnell has not thrown his weight behind Treasury Secretary’s Steven Mnuchin’s effort to cut a deal with Nancy Pelosi and the House Democrats. Unemployment may be a disaster, but for the congressional Republicans it is a far bigger threat to be viewed as disloyal by the rightwing base, Trump’s loyalists; and this would happen were he to negotiate a giant government stimulus with Pelosi.

That leaves the US, once the anchor of the western world, still the world’s largest economy, hanging in the balance. The greatest fear, of course, is of a disputed election, which would shake US institutions to their core. This is the risk that the markets have hedged against by buying the Vix, the so-called fear index. Normally, insuring yourself against future risks is more expensive than against risks in the near term. In 2020, it is the reverse. The price for insurance against volatility in the week after election day on 3 November has surged to all-time highs.

But there is another, no less serious risk. What if Biden does win the White House, but the GOP retains its grip on the Senate? When Obama came in, in the midst of the 2008-9 financial crisis, he had at least two years with a congressional majority. Given half a chance McConnell would strangle a Biden presidency in its cradle. The American economy, business and its working population would be the first victim.

There is also a third risk: an Obama rerun, in which the Democrats win majorities but pass a stimulus that addresses none of the fundamental issues in the economy, allowing outrageous inequalities to continue and failing to build the kind of constituency of lifelong Democrat voters that the New Deal was so effective at creating in the 1930s and 40s. This isn’t just a matter of suppressing the next wave of rightwing populism after Trump, but of widening and solidifying the Democratic bloc.

Nonetheless, assuming a Trump victory is now unlikely, the only safe outcome for the American economy, as well as the American constitution, is a Democrat clean sweep.

• Adam Tooze is a professor of history at Columbia University