Donald Trump fired Steve Bannon but he praised him on his way out of the White House. He acknowledged that Bannon's populist rhetoric helped him to defeat Hillary Clinton. Now that Bannon is back to Breitbart News he can resume his populist rhetoric that had been muted by his critics in the White House. Trump discovered that some aspects of Bannon's Alt-Right agenda were harmful to his presidency when he incorporated them into his disastrous Charlotteville press conference. Paul Krugman argues that Trump never had a chance to get a populist economic agenda through a Republican Congress and he never gave it much of a chance. He allowed Republicans to repeal the taxes in Obamacare, that were primarily paid by wealthy Americans. The loss of tax revenue would have increased the federal budget deficit unless it was coupled with spending cuts. Republicans always hated Medicaid, so their replacement bill made drastic cuts to Medicaid. That did no go over well with the public, and a single vote from a Republican senator defeated a healthcare bill that would have been disastrous for Trump's populist base.
Trump and the Republican Congress are now working tax policy. The current version of the plan is consistent with traditional Republican ideology. It includes tax cuts for corporations and for wealthy Americans. There will be modest cuts for the middle class which will be used to sweeten the tax cuts for the wealthy. They will also argue that the tax cuts will pay for themselves by growing the economy and the tax base. That story goes back to Ronald Reagan. It is not economic populism, and will be easy to attack by Democrats who are familiar with the story and its failures.
It is important to understand the need for Republicans to restore the Reagan agenda. In 1980 the top 1% paid 33% of their income in taxes. Under Reagan it dropped to 25% but it returned to 33% by 2013. Only 7% of Americans were covered by Medicaid in 1980. 21% are covered by Medicaid today.
Trump sold his economic populism to many Americans because changes have occurred in the economy that have been harmful. Globalization and technology have been part of the problem but there is more to that story. Real wages for truck drivers are around 33% lower today than they were in the 1970's most of that loss occurred in the 1980's under Reagan. There is a shortage of truck drivers but that has not driven up wages. The wage loss was driven by government agencies that reduced the bargaining power of truck drivers through unions. Firms that were not unionized were also more competitive than unionized firms which had to cut wages or go out of business. Government agencies have a powerful impact on labor markets which under the radar.
Deregulation of the financial industry also had an important impact on wages and the economy. New products were developed which increased profits and wages. When the new products, made possible by deregulation, led to financial crisis everyone suffered from the consequences.
Krugman's conclusion is that Trump's legislative agenda, which is the reverse of economic populism, may be defeated but he still controls powerful federal agencies which are busy changing regulations that will be harmful for most of the Americans who voted for him and for the middle class.