If our political leaders want to prevent a second coming of Donald J. Trump Sr. (R-Florida); or the success of another Trump-style demagogue, they need to tackle economic insecurity.
Economic insecurity is an environment in which people live one failure, or misfortune, away from poverty. For example, all the “middle-class” families that live a few missed paychecks away from foreclosure, eviction, and bankruptcy.
Economic insecurity is not poverty, but life on the verge of poverty. Many economically insecure people live a “middle-class” or even an “upper-class” lifestyle.
However, they lack the money to pay for it. Their neighbors think these people are successful. Yet in private those individuals live in fear of the repoman, the tax collector, and the eviction notice.
America’s Economic Insecurity
Tens of millions of Americans live in economic insecurity. Around 39% of American adults admit they would have trouble covering a $400 emergency expense in 2018, the Saint Louis Federal Reserve estimates.
In detail, 12% of Americans admit they could not pay a $400 emergency expense at all. Furthermore, 16% of Americans admitted they would have to pay a $400 emergency expense with a credit card.
Another 10% of Americans admit they would have to borrow more money from a relative to get $400. Finally, around 6% of Americans admit the only way could raise $400 is to sell something.
How Economic Insecurity Created Trump
There is evidence economic insecurity drives people to Trumpism.
A Washington Post analysis estimates that 60% of the people facing charges related to the 6 January U.S. Capitol riot had money troubles. A public records search shows many rioters had bankruptcies, eviction notices, foreclosures, unpaid debts, liens, and unpaid taxes on their records.
Notably, The Post found the charged rioters had an 18% bankruptcy rate. That bankruptcy rate is double the national average, Post writer Todd C. Frankel claims. Plus around 20% of the charged insurrectionists almost lost their homes because of financial troubles at some point.
I think these numbers show economic insecurity can drive some people to demagogic leaders, radical politics, and violence. I suspect one reason extremism attracts these people is that they live in constant fear.
For example, people in money trouble fear answering the phone because they could speak to a debt collector seeking money they do not have. Similarly, when you are broke, you look out the window each morning to make sure the repoman didn’t take your car.
The High Costs of Economic Insecurity
Moreover, fear of the loss of the trappings of middle-class success drives economic insecurity. Driving a new car, shopping at Whole Foods, and living in a nice neighborhood, and wearing designer fashions, for example.
Many American base their status and self-esteem on the toys in their driveway. The boat, SUV, ATV, motorcycle, snowmobile, jet ski, etc. The financially insecure live with the fear that the repoman could come for those toys at anytime.
Thus, there are tens of millions of Americans who live in fear of losing everything they value and their social status. The fear is acute because many Americans now see horrendous poverty every day, which increases the hysteria.
For example, the broke Realtor who drives past the beggars with the ”I’ll work for food signs,” the line at the food bank, and the homeless encampment each day. In the back of her mind, that woman thinks, “in a few weeks that could be me out there.”
How Economic Insecurity Makes People Susceptible to Trump
The level of hysteria that lifestyle creates makes some people susceptible to a demagogue such as Trump.
“Fear is the path to the dark side. Fear leads to anger. Anger leads to hate. Hate leads to suffering.” – Master Yoda.
The demagoguery becomes far more attractive when it offers scapegoats for your problems. For instance, the Jews, the Chinese, Muslims, blacks, Hispanics, whatever. Trump’s blatant racism, conspiracy theory mongering, and xenophobia is part of his attraction.
Economic insecurity causes hatred and violence because insecure people feel powerless. Violence and hatred create an illusion of power and security. When you are broke, you want to lash out at somebody. Demagogues such as Trump offer a target to strike at usually a person of a different race, or religion.
How Government can Fight Economic Insecurity
Government cannot change the values or attitudes that cause economic insecurity; such as rampant materialism. Values and attitudes are problems for philosophers and the clergy, not politicians.
However, I think good policy could decrease economic insecurity by alleviating poverty. In particular, we could strengthen the welfare safety net to keep Americans from falling into extreme poverty such as homelessness.
Furthermore, we could eliminate some financial conditions that lead to economic insecurity. For instance, we could make bankruptcy easier, eliminate student loan debt, make college free, and ensure access to healthcare.
How to Alleviate Economic Insecurity
Some measures that could ease economic insecurity include:
- A universal basic income similar to Andrew Yang’s Freedom Dividend. The Freedom Dividend would pay every American $1,000 a month. A Freedom Dividend could provide a safety net that keeps Americans from falling into extreme poverty. It could help Americans cover unforeseen expenses and save money. One problem with our current means-tested benefits is that they are no help to most middle-class people.
- Make bankruptcy easier so fewer Americans have to worry up about losing everything if they cannot pay debts. VoxEU CEPR estimates that the tightening of bankruptcy laws in 2005 caused 800,000 mortgage defaults and 250,000 foreclosures during the 2007-2008 Financial Crisis.
- Implement Medicare for All (Single-Payer Health Insurance). Under Single-Payer Health Insurance, the government provides health insurance to all citizens regardless of income. The advantage to Single-Payer is that nobody lacks the means to pay for necessary healthcare. Medical expenses are one of the principal causes of economic insecurity. A 2007 Harvard study* claims unpaid medical bills drove 62.1% of all U.S. bankruptcies.
- Implement U.S. Senator Bernie Sanders’ (I-Vermont) free college plan. Under Sanders’ scheme, the federal government pays all tuition at public universities and colleges. I think the Sanders’ plan could eliminate two of the biggest causes of financial insecurity for the middle class. Those causes are student loan debt and the need to save money for the kids’ college. Both of which severely restrict the lifestyles of many Americans.
- Cancel Student Loan Debts. Value Penguin estimates 44.7 million Americans owed $1.52 trillion in student loan debt in January 2021. Student loan debt is a major cause of economic insecurity because Student Loan Hero estimates that 11.1% of student loans were 90 days or more delinquent or in default in January 2020.
- Eliminating student loan debt will ease economic insecurity because the average debt in the United States $32,731 in 2021. Furthermore, Student Loan Hero estimates the average student loan debt payment is $300 a month. Hence Student Loan Debt cancellation could cut millions of Americans’ monthly expenses by $300.
- Increase Social Security Payments. The Social Security Administration (SSA) estimates the average Social Security benefit was $1,472.17 a month in January 2021.
- I calculate that works out to an annual income of $17,666.04 a year. In comparison, the US Department of Health & Human Services places the poverty line for a two-person household at $17,420 a year.
- Thus the 35% of Americans who admit to having no retirement savings in a January 2020 FinanceBuzz survey will spend their golden years in poverty. I think fear of old-age poverty is one reason so many older Americans support Trump.
- A potential solution to this fear could be a base Social Security payment of $2,000 a month for all Americans. Another solution could be a Freedom Dividend.
- Raise the Minimum Wage. One driver of economic insecurity is America’s horrendous minimum wage. The US Department of Labor set the federal Minimum wage at $7.25 an hour in 2020. I calculate a minimum wage job will pay an annual salary of $13,920 year. Comparatively, the US Department of Health & Human Services places the poverty line for an individual at $12,880 a year.
- Consequently, the emergency or fallback jobs available to ordinary Americans pay poverty-level wages which creates economic insecurity. Thus, millions of Americans fear poverty if their business fails or they lose their current jobs. One solution to this problem is to pay an inflation-adjusted minimum wage.
- The Center for Economic and Policy Resources (CEPR) claims the minimum wage kept pace with inflation until 1968. The CEPR claims the minimum wage could be $24 an hour if it kept pace with inflation. I estimate a $24 minimum wage offers a $46,080 annual salary, or something close to a middle-class income.
- I think the low minimum-wage drives insecurity and explains the support for Trump among whites without a college degree. To explain, many of the whites without a college degree are self-employed people; such as contractors, who live the fear of being stuck in a “minimum wage job” and poverty, if their business fails. Pew Research estimates 79% of 2016 Trump voters had no college degree.*
Economic insecurity made worse by terrible government policies such as the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) drove the mob that stormed the Capitol. Thus, you can call the Capitol Insurrection the dangerous policies of past Congresses coming home to roost.
If our leaders do not want to legislate from a fortress surrounded by armed soldiers, they need to address economic insecurity. There will be more violence, more mobs, and more demagogues if America does not tackle the problem of economic insecurity.
Moreover, if Americans want to prevent the second coming of Trump; or the rise of a similar demagogue, we need they need to acknowledge the reality of economic insecurity and deal with it.