Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


What is happening with the Republicans?

Never in my life time have I seen a political party as divided as the Republicans are today. Some of the GOP’s most powerful influential figures boycotted its convention; entire delegations walked out of the same affair, and there seems to be a highly organized and well-financed movement to build Libertarian Gary Johnson up as a conservative alternative to Donald Trump.

So what is going on here; why are the Republicans destroying themselves and their party. Part of the blame can be placed upon Trump, after all some aspects of his personality; the casual racism, the bluster, lack of ethics, the childish theatrics, anti-intellectualism and blatant hypocrisy, offend many voters. Yet parties have been able to unite around equally repellent figures in the past; including Richard Nixon and Bill Clinton.

Trump is not the cause he is merely an opportunist, who took advantage of a deep political divide that was already there. The divide has actually existed for years; perhaps decades, but it only became obvious in the past few months.

This divide is not the conflict between the “Party Establishment” and the rank and file; that Trump and his apologists are continually trumpeting. No, those groups are as deeply divided as the rest of the Grand Old Party. The real divisions are along ideological and political lines and they have their roots in our changing economy.


The Real Division in the GOP: The Economy

The major cause of the Republican crackup is found in a reality that its’ leaders have failed to stock of. The reality is:

The Republican leadership and agenda are no longer serving the economic interests of the party’s rank and file. What’s truly interesting is that this rank and file is not the crowds of factory workers we see at the Trump rallies.

Many Republican leaders including former President George W. Bush; and Speaker of the House Paul Ryan (R-Wisconsin), have advanced “reform” plans that would effectively dismantle Social Security and Medicare. This ignores the obvious fact that a large percentage; if not a majority, of the GOP’s aging voters depend on those programs for their very existence.

It is no coincidence that Trump’s greatest support is found among the Silent Generation (people in their 70s and 80s), and the Baby Boomers (those between ages 51 and 69). Trump; a strong supporter of Social Security and Medicare, plays best to those who either rely on those programs or soon will.

The average age of a Republican voter was 52 in 2014, the Pew Research Center found. The average age of a Republican male voter was 57. Numbers that provide part of the key to Trump’s success.[1]

Indeed polls indicate that Donald has little appeal to younger voters, some polling indicates that Gary Johnson has more support among Millennials (people under 35). A Pew Research Center Poll found that among voters under 30; 21% backed Trump and 22% were in favor of Johnson. Trump has even advanced plans to tax the rich to provide more money for Social Security.

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Social Security is a huge issue because 42.5 million people; 13% of the population, depend on it for retirement income. Another 11 million depend on disability payments from Social Security. That adds up to a lot of voters, to whom Social Security and Medicare are the only issues. Something, Donald gets even if many Republicans do not.

Nor is it a coincidence that the same voters handily rejected candidates perceived as anti-entitlement in the Republican presidential primary. Two strong contenders that went down to defeat were Minnesota Governor Scott Walker; a fiscal conservative known for union busting, and George W.’s brother Jeb Bush.

The Economic Divide Tearing Republicans Apart

The divide extends beyond entitlements, to the current economy in much of the nation’s heartland. Data from the Pew Research Center indicates the situation in many American communities is as follows:

  • The working class has been laid low by economic changes; with five million manufacturing jobs lost in the last 15 years.


  • The middle class is in full retreat with lower incomes and less money. Pew found that the median income of all Americans was 8% lower in 2014 than it was in 1999. When adjusted for inflation the average middle class family’s income in 2014 was $5,000 lower than it was in 1999.[2]


  • To make matters worse in 1971, the middle class was receiving 62% of the nation’s aggregate income. By 2014, the middle class was earning just 43% or less than half the nation’s aggregate income, the Pew Income Study Found.[3] No wonder Trump’s nostalgia driven campaign and Make America Great Again are so popular.


  • The upper middle class is barely hanging on, its position is intact but incomes are shrinking. Those people saw their household drop by $13,217 in 15 years from $186,424 in 1999 to $173,207 in 2014.[4] They are still far from the food bank, but they see their position steadily eroding.


  • The fastest growing class in America is the rich. In 1971 4% of American adults were in households in the highest income bracket, in 2015 9% of Americans were.[5]

People have lost ground out there, and they’ve noticed even if Republican leaders have not.  Part of the divide is that many if not most of the Republican leaders come from the growing upper class that benefits from the current status quo. The gap is widening because some of those who lost the most ground are the GOP’s real base.

Meet the Real Trump Voters

Much of Trump’s support comes from what might be described as the Republican backbone; the party’s real base. This consists of the self-made upper middle class; the small businesspeople, the car dealers, the realtors, the insurance salesmen, the franchise owners and the Main Street professionals such as lawyers and accountants. These people have kept their social status but seen their economic status decline dramatically over the past 30 years.

The average household income for a Trump primary voter was $72,000 a year; well above the national average of $56,000, FiveThirtyEight writer Nate Silver noted. Donald’s real support is coming from the nervous upper middle class, not blue-collar workers.

Such people are sometimes more vulnerable to the changing economy than the working class. When a factory closes a worker can simply pack up and move to another town, or state. The man who has spent 30 years building up a car dealership or an insurance agency cannot; even though all of his customers might be gone, or worse can no longer able afford his products or services.


That is the man most attracted to Trump, the fellow who elevated himself to the country club by running a business across the street from the plant. Now the plant is closed; the workers (his customers) are gone, and his family’s socioeconomic status is threatened.

This small business owner or professional is the one most attracted to Trump’s trade policy; which involves a 45% tariff on Chinese made goods, not the guy who drives the forklift. After all; the guy who drives the forklift can simply take a job at the Amazon Fulfillment Center, if the plant closes.

Why the Upper Middle Class Likes Trump

The Donald’s Team clearly recognizes this it is why they added a plank called for the restoration of Glass-Steagall; the depression era law that forcibly separates investment and consuming banks, to the party platform. Such a law would break up the big monster banks such as JPMorgan Chase (NYSE: JPM) and Wells Fargo (NYSE: WFC); which many people on Main Street loathe.

A return to Glass-Steagall would not benefit the vast majority of middle and working class Americans. Indeed, it might harm them; by reducing the level of banking services and credit available, in many communities. Yet it might help small businesspeople by restoring smaller that are easier to manipulate.


When he announced Glass-Stengall’s potential return, Trump campaign manager Paul Monafort clearly stated the measure was designed to help “Main Street Banks.” Translation: Donald wants a return to the good old days when the bank president was your golfing buddy. A person who could be counted on to ignore your credit report or cash flow; or cover the occasional balanced check, because he went to your church and his kids played with your kids. Not some faceless corporate apparatchik in New York or Chicago; who might cut off your credit because of lack of cash flow.

It is not a coincidence that Trump’s rise; came after a spate of news stories indicated that smaller businesses were having a hard time getting bank loans. Less than 50% of small business people that applied for loans in the first half of 2014 got any money, a Federal Reserve survey discovered.[6] The financial system is not working for a lot of Americans, particularly small businesspeople.

The Trump movement can be seen as a revolt against the GOP’s economic agenda. Its support comes from the two groups threatened most by the new Republican economy; senior citizens and the upper middle class. The opposition is loudest among younger Republicans and intellectuals who like the new economy.

There’s also a regional aspect to this divide, the Never Trump movement, is strongest in states like Colorado; where the economy is prospering. The Colorado delegation actually walked out of the Republican national convention; rather than support, Trump despite a chorus of boos. The Donald’s support is strongest in the economically devastated rust belt states such as West Virginia and Pennsylvania.

That means the Republicans are moving away from the socially conservative, ideologically driven party they have been since Goldwater’s Day. Instead they are becoming a petit bourgeois party; similar to the British Conservatives, pragmatic, and devoted to narrow class interests. Like the British Conservatives; the new GOP will show little interest in cultural matters, and devote itself to advancing its members economic positions. A great many of today’s Republicans will not feel at home in such a movement.

Can this divide be bridged and perhaps healed? Only time will tell; but one thing is certain Donald Trump is not the man to bridge the gap, he’s far too abrasive a figure. It will take new leaders that understand the new reality to reunite and restore the Republican Party.

[1] Pew Research Center FactTank As GOP celebrates win, no sign of narrowing gender, age gaps Nov. 5, 2014.


[3] – the-many-ways-to-measure-economic-inequality/



[6] 7 Reasons Banks Not Lending to Small Businesses


Correction: an earlier version of this article stated Paul Ryan represented Minnesota. His district is actually in Wisconsin.