The Corner

Economy & Business

Whoever Is Elected, the Next President Will Face Significant Challenges

On Tuesday night (or maybe a few days after that) we will finally be able to talk about something other than this awful election season. No matter who wins, the new president will face real challenges. Here are a few:

1. A lack of trust in government and all institutions. According to Gallup, the average citizen’s confidence in American institutions is 32 percent — close to historic low. Gallup explains that:

Americans’ confidence in the nation’s major institutions continues to lag below historical averages, with two institutions — newspapers and organized religion — dropping to record lows this year. The overall average of Americans expressing “a great deal” or “quite a lot” of confidence in 14 institutions is below 33% for the third straight year.

Here is a striking chart:

Many institutions have lost ground between 2006 and 2016 — but none as much as Congress, which went from 19 percent to 9 percent.

Indeed, trust in the federal government is awfully low. According to Pew:

The public’s trust in the federal government continues to be at historically low levels. Only 19% of Americans today say they can trust the government in Washington to do what is right “just about always” (3%) or “most of the time” (16%).

Fewer than three-in-ten Americans have expressed trust in the federal government in every major national poll conducted since July 2007 — the longest period of low trust in government in more than 50 years. In 1958, when the American National Election Study first asked this question, 73% said they could trust the government just about always or most of the time.

The lack of trust is lower for Republicans than Democrats — but it’s not as if the Democrats are booming with confidence in government. Pew again:

26 percent of Democrats and Democratic leaners say they can trust the federal government nearly always or most of the time, compared with 11% of Republicans and Republican leaners.

Needless to say, no matter what you think of the FBI’s handling of the Clinton e-mail scandals, it hasn’t helped the trust we have in our governmental institutions.

2. Economic growth will be a great challenge, no matter who is in office. The Congressional Budget Office (CBO) recently released its 2016 Long-Term Budget Outlook about our worrisome fiscal situation. In all the data, no trend is more striking than the projection of an upper bound on real economic growth in the United States of 2.2 percent over the next 30 years. The average projected-annual-growth rate over the next decade, between 2016 and 2026, is expected to be even lower at 1.9 percent — and that unrealistically assumes that there will be no recession or slowdown over the next ten years. Slower growth means that incomes grow more slowly and efforts to reduce poverty become much harder.

If you wonder whether either major-party candidate has what it takes to get the economy moving again, check out the column by John Cochrane that spells out very clearly what we need.

3. Obamacare will be a huge challenge. If Hillary Clinton is the president she will have to deal with the fact that so many insurers are leaving the exchanges and that premiums are going up, while many people remain uninsured.

If Donald Trump is elected, he will face the challenge of getting Republicans to finally articulate and push forward a replacement for Obamacare. It’s a much bigger challenge than most imagine.

Ultimately, I think it remains the wrong way to think about fixing health care — as I have explained here, here, and here. Health insurance isn’t health care. Republicans should stop trying to meet a goal dictated by Democrats and finally commit to lifting all the regulatory and governmental barriers that have made health care immune to the type of technological revolutions we have seen in other areas.

4. The growth of entitlement spending. No matter what Hillary Clinton and Democrats say — and no matter what Trump has said — about not touching Social Security and Medicare, the growth of the entitlement state is going to be a challenge for anyone in office. When all federal revenue collected is only enough to pay for entitlement spending, it puts a lot of pressure on the rest of the budget.

5. The U.S. is losing the global-regulatory arbitrage. When forward-thinking companies engage in global-innovation arbitrage, America isn’t always a winner. My colleague Adam Thierer puts it the best:

Capital moves like quicksilver around the globe today as investors and entrepreneurs look for more hospitable tax and regulatory environments. The same is increasingly true for innovation. Innovators can, and increasingly will, move to those countries and continents that provide a legal and regulatory environment more hospitable to entrepreneurial activity.

As I wrote in my latest Reason column:

Regulatory uncertainty (when innovators can’t be sure what the rules will look like in the coming months and years) and regulatory burdens (when the rules that do get handed down make operations and compliance significantly more costly) both create powerful incentives for people to exercise their right to take their businesses to countries where the legal regime is friendlier.

Consider what’s happening in the examples above. U.S.-based companies such as Amazon have moved their drone research offshore to escape the zealous yet risk-averse regulators at the Federal Aviation Administration. Ignoring the pleading by innovators and consumers, the agency has banned the use of commercial drones under many circumstances and imposed inane regulations — like requiring that a drone operator be within sight of the device at all times unless granted a waiver — on the rest.

Meanwhile, whereas the U.S. won’t allow companies to experiment with disruptive technologies without first getting permission from the government, the U.K.’s leaders have communicated loud and clear that that country is open for business — and not just for drones, but also for driverless cars and other technologies to boot.

These are only a few of the challenges. But make no mistake: Whoever is in office will have to face them. And no matter who you are voting for, we Americans will be on the hook for any failure to address these challenges.

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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