When President Reagan was elected back in 1980, he ushered in an era of small government
conservativism. "In this present crisis, government is not the solution to our problem.
Government is the problem." "The era of big government is over." "If we want America's
job creators to do what they do best, we need to get government out of the way." "Freedom
and free enterprise are what create jobs, not government." "We need to cut spending
now. So please, send us some spending cuts." "Free markets work; the president's cut taxes,
he's rolled back regulations." Yep, that's right, the prevailing belief was that governments should
stay out of the economy as much as possible. Even the 2008 financial crisis and the massive
state bailouts that followed that didn't shake that core belief about how the American economy
should be run. But is the Covid pandemic and the economic crisis it's caused set to change that?
"Breaking news: A record shattering 6.6 million Americans filed for unemployment benefits last
week." "Americans are doing what they've been told, businesses are shuttered people are staying
indoors." "There's just kind of been a struggle ever since the pandemic hit for me to keep a
roof over our heads." "The reality is, we're not going to get the kind of help from the federal
government that I think all of us need." So where does that leave the millions of Americans, mostly
old school republicans, who still believe in small government conservativism? - Well I am going
to be researching my third party options. Ramesh Ponnuru is with the American Enterprise Institute,
a Washington-based think tank whose stated mission is, amongst other things,
to defend the idea of limited government. Neither the republicans nor the democrats do it for him so
he's looking further afield. - There are small independent candidacies whether it's,
you know, the libertarians or the greens, the American Solidarity party, and these function
really as kind of protest votes, where one is declaring himself in favour of a different kind
of politics altogether, without thinking that candidate is actually going to win the election.
I vote in Virginia, which is a state that is practically guaranteed to go for Biden, and
so that does create a certain degree of freedom. - So who do small government conservatives, you know
the traditional republicans, who do they vote for? - Well I think that most small government
conservatives will vote for Trump anyway because he has been an anti-regulatory president,
an anti-tax president, and the democrats are proposing so much spending that the contrast
still works out in the Republicans favour, but I think it's a very pessimistic time for small
government conservatives that there isn't really a champion. - They haven't got a home basically have
they? - No, not at this moment. Of course, that can change and there will I'm sure be attempts
by Republicans who are more traditional to try to wrest control of the party back
after the election, particularly if Trump loses. - So what is the dividing line do you think between
the two parties now? - It's a period of flux and so it's hard to say, but I do think that
we continue to have a politics that is polarised around the social issues. You see Republicans who
are fleeing Trump most are the more socially moderate Republicans, and the Democrats
who have come to the Republican party under Trump have tended to be more culturally conservative,
so the division's not so much over economics any more, and that's one of the reasons why
you don't have the kind of small government / big government divide that you used to
have in American politics. - Right now, there's a deadlock in Washington over what level of support
to continue providing for people during the pandemic. Why is there this deadlock? Coming
up to the elections, you'd imagine that the government would be quite keen to keep voters on
side? - Well there are Republicans who are under the impression that the economy is recovering
quite nicely and that Democrats want to bail out irresponsible Democratic state governments,
and there are Democrats who think that the Republican proposals are too stingy.
Now, this seems like the sort of thing that would lend itself to a compromise in the middle, and yet
our political system at the moment does not appear to be generating that compromise.
You know, nothing in our political system at the moment seems to be rewarding people for working
together. - What does that mean for the elections, if nothing moves on this and this deadlock is
not resolved in Washington? Is it dangerous for President Trump to go into the elections without
being able to promise support for people who are still struggling in the midst of the pandemic and
havoc it's wreaked on the economy? - So if no deal is reached, the Republicans will go
into the election saying that they tried but that the Democrats obstructed them,
and that is a message that I think will work for Republican-leaning voters. I'm not sure it's going
to be enough for people who are not particularly partisan and are just unhappy about their
situation, unless of course the Republicans are lucky and all of us are lucky and there
really is a very strong economic recovery over the next two months. One thing that people
are getting confused by is just the seesaw pattern of the economy. We are now in a situation I think
where you can have very strong positive numbers that still mean we've got a very weak economy,
and I think that's such an unusual situation, it's one that's been hard for people to adjust to.
This year has already seen some of the best and some of the worst economic numbers in US history,
and it's important not to lose sight of the big picture, which is that this is an economy
that has sustained very serious damage. Ramesh Ponnuru of the American Enterprise Institute.
All of which means that Bill Clinton's famous catchphrase "it's the economy, stupid" may not
fly this time round. But given the sheer number of people who've lost their jobs since Covid hit, and
the businesses that have had to be shuttered or closed down, why isn't the economy a bigger deal
right now? A Gallup poll in August showed just 12 percent of Americans thought it the most important
problem facing the country. It's something the economist James Galbraith at the University of
Texas in Austin has been thinking about. - We've got 30 to 40 million people who are out of work,
so it's surprising that in this election it's not a bigger deal than it is. - And to what extent is
that because perhaps the full economic effect of the pandemic hasn't really been felt yet? - Well
I think that is a major reason. We had in April a major influx of income support for people,
we had the 600 a week unemployment insurance, we have the payroll protection program,
we have the stimulus checks. That assistance has now expired and so we're going to see people
coming into distress in the months ahead. It doesn't take a lot of foresight to see that,
but that hasn't happened yet. - But that's going to hit, then, in the next couple of months,
I mean if this next package that was supposed to support people has not come through congress and
the senate yet, then that's going to hit now isn't it? - It is going to hit; the other problem that's
going to hit is that for the moment the ban on evictions and foreclosures remains in force, but
when that eventually expires then the conflict is going to arise between people who've got massively
accumulated arrears on rents and mortgages that they don't have the resources to cover. - What's
the difference at the moment between what President Trump and what Joe Biden is proposing
in terms of dealing with any economic fallout? - Well my impression is that the administration has
now taken the view that once a vaccine's in place that the economy will simply come back on its own
and I think that's not going to develop that way. Vice-President Biden and his team, they're
basically taking their cues from the experience of 2008-2009, and their view is that they can provide
the economy with a certain extra boost, a stimulus in the short run, but they're going to have to
then retrench over a period of years following and I think that also while it's a better program
than the administration's, it's also not going to solve the issues that we're going to face, because
fundamentally the economy is entering a kind of structural crisis and many different aspects of it
are simply not going to respond to the treatment as well as they did after 2009. - So what exactly
is different this time around? Could you spell out what the differences are? - OK, so first is in
the advanced sectors, the American economy serves the world, and the major example of that is civil
aviation aircraft industry. You can put money into Boeing to keep it afloat, but you can't revive its
market that way, because that's a worldwide market and if people are not traveling, airlines are not
going to be buying new planes. You can think about the oil industry, which you may or may not like,
it costs about $60 a barrel to lift oil in Texas in the Permian Basin, and the world price is $37
right now, so it's not going to be making it over the long run on those terms. Then think about
things like office building construction. We've learned that a great many of those functions can
be performed by people working at home so those offices are not going to be filled and people
are not going to be building new ones. All of these things are just long-term problems that
are not going to go away simply on the basis of a stimulus program. And then you think about
where the jobs are in the economy. It's not in the manufacturing sectors, it's in services,
and those jobs are very very interdependent, that is to say, my willingness to buy your service
depends upon my having an income which means you have to be willing to buy mine. There are two
issues here: One is the pandemic itself has really cut into that sector, restaurants and bars and
lots of things are closed, and things that are open can't operate at capacity, which means
they can't cover their costs. There's the second problem, which is that millions of people who are
in these jobs are aware that their situation is precarious so they're going to be cutting back on
their use of other people's services. They have to have confidence that the whole situation
is going to return to normal, and it's very clear that it's not going to return to normal.
And the third problem is that people's debt payments, their rent, their mortgage, the
utility bill the phone bill, their student debt, their health care debt, all of that continues to
pile up and ultimately there's going to have to be a reckoning with this enormous structure of debt,
or we're going to have waves of bankruptcies, foreclosures, evictions that greatly exceed those
that we saw in the 2009 debacle, and the situation will be very different because then you could
make an argument - people did make an argument - well, those people shouldn't have taken out the
mortgages in the first place, and you can't make that argument in a public health crisis. People
are staying at home and foregoing their incomes in order to protect everybody else, if you say OK, at
the end of the day you're going to lose your home, that's going to lead to a situation where there's
really hell to pay in the economy in the society if we go down that route. - You're basically
saying, throwing money at this problem is not going to resolve anything? You need a strategy,
you need something detailed, I mean that's something that Joe Biden has put forward, he's
been speaking about a Green New Deal, something that would re-engineer the whole American economy
to address climate change doesn't that address some of these issues? - Well the Green New Deal,
I hope that Biden does embrace it, I don't think he's embraced it very clearly at this point,
it would in fact repurpose a great many of the most advanced and competitive
resources of the American economy has, to do something that's socially useful,
but those jobs that we're thinking about, transforming the energy system for example,
they're outdoor jobs, they're important jobs, but you're not going to bring the economy to full
employment on that basis, and that's why you need to have, on the one hand, a job guarantee so that
people can say, OK, look, even if I'm not going to be employed in what I've customarily been doing,
I can find work at a decent wage doing something useful, and then you need some system in which
the service sector can continue to operate, some help with businesses to cover their fixed costs,
because a profit-oriented system works pretty well in an ordinary expansion, it won't work
when everybody is trying to cut back on their use of these services. - Can you see that happening,
though? Can you see any government from January next year being in a position where they can
put in place that level of intervention in the economy? I mean it's just unprecedented in America
isn't it, it's just anathema to the way American economy has been run? Not at all unprecedented,
I can point to three historical periods - In 1861, at the start of the civil war,
1933 the start of the new deal, 1941-42 the start of the Second World War - in which the country
really was called to restructure itself to meet an enormous challenge, and did. Obviously, it's
a struggle when you're facing with a political class which is divided between those who want
to do nothing and those who think it's adequate just to cut taxes and raise spending in order
to kickstart the private economy. If they think that's adequate, they're going to be disappointed,
and if they're disappointed, maybe they'll change their thinking and get in front of this. Economist
James Galbraith. So is America ripe for a new way of thinking about how the economy should
be managed? Julia Azari is professor of political science at Marquette University in the US. - It's
hard to predict, because people did expect that out of an Obama government that this would be
exactly as you said, kind of a sea-change, kind of a move away from the Reagan era ,and it wasn't
entirely. I think a lot of people are kind of skeptical of Biden as that kind of transformative
leader because he's been politics for so long, he's so affiliated with the establishment. - But
do you think this election could potentially be as significant to say Reagan's election in 1980, or
the election of Franklin Roosevelt and the new deal back in 1932? - I think there's a
possibility for that, and that's where I started sort of thinking about well what matters beyond
the president, because I don't know that those types of figures are always obvious at the outset.
FDR is especially instructive here, because he really wasn't an ideologue, you know,
he really wasn't a firebrand for fundamentally rethinking the economy. He was someone who
took a lot of different kinds of advice and took office in a time of profound crisis,
and ended up really reshaping the institutions and the way that people thought about politics and the
role of the government and the economy. Even then, even in the 1930s, there was significant pushback,
and there were limits on what Roosevelt could do to really reshape those institutions,
and I think now there's even more, and there are a lot of forces in American politics that are
very powerful, and a lot of organised interests that aren't committed to kind of fundamentally
reshaping the economy. At the same time I think there's going to be tremendous political pressure
around the environment, racial justice, and also around student debt, which is a huge factor for
younger people. But I think that it will look more like these kinds of policy adjustments in what
appear to be discrete issue areas, than the sort of ideological sea-change of the Reagan-Thatcher
years. Ultimately though, what matters is what the voters have to say, and and whether the way they
realign will force any change through. - What do you make of that, and who are the voters who are
most interesting to watch in this election? - Yeah so that's a really fascinating question
and I think it's tricky, because the electorate in the United States is so divided, by race,
by region, by age, I think that if I had to guess who the most interesting voters to watch will be,
it would be people in very competitive states who voted for Trump last time. And then I
think what everyone will be looking at is the suburbs, particularly college-educated women
in the suburbs, looking at how this gender and diploma divide might deepen in American politics
to create a more durable democratic majority that has not emerged over the last couple of decades.
Julia Azari of Marquette University in Wisconsin. Well it certainly promises to be a momentous
election. Voters across the political spectrum in America agree that many things in the country
are broken. The question is, who should do the fixing? Today's producer was Laurence Knight.