Shapiro and Tomain’s new book highlights political and economic constraints on the incoming Trump Administration’s ability to achieve its goals.
On the cusp of a second Trump Administration and amid extensive popular anxiety in the aftermath of the COVID-19 pandemic and associated inflation, Republicans have achieved control of all three branches of government. President Donald J. Trump and his soon-to-be-governing team are promising to upend basic assumptions of American governance that have existed since at least the early 20th century and in some cases even earlier. President Trump promises to gut regulation of business, end birthright citizenship, vastly expand authority to deport undocumented immigrants and tax imports, reorient administrative agencies around political loyalty rather than technical expertise, and slash both social spending and top marginal income tax rates. In How Government Built America, Sidney A. Shapiro and Joseph P. Tomain suggest that such ambitions will face significant headwinds, especially if President Trump’s policies do not deliver broadly diffused economic benefits.
Shapiro and Tomain provide a rapid-fire overview of key moments in the evolution of American political economy and the social boundaries of political citizenship, framed by the last half century’s intensifying political assaults on the role of government in shaping economic life. Defenders of a vigorous state that at once promotes economic innovation and redresses the negative social impacts of capitalist enterprise, Shapiro and Tomain repackage several longstanding themes in American political, policy, and legal history, focusing especially on moments when prevailing approaches to political economy markedly shifted. Unsurprisingly, given the challenges of encapsulating over two centuries of complex developments in a short book, they also skirt some important aspects of American governance.
Shapiro and Tomain remind us that markets do not exist separately from law and policy. Instead, in the language of economic sociology, modern markets are constituted by law and policy. Law and policy can allow for coordination of economic activity, whether through determination of the boundaries of property and contracts, legal definitions of key economic actors such as “employers,” “employees,” “consumers,” “partners,” and “investors,” or specification of standards for goods and services. Government investment is crucial for providing public goods, such as education, scientific research, transportation, communications, national security, and energy infrastructure. These investments amplify economic possibilities and often create markets.
Government regulation, whether through licensing, rulemaking, constraints on fares, rates, fees, ongoing monitoring, or outright prohibition, can foster general confidence in crucial aspects of capitalism, such as the stability of the banking system. By the same token, regulation can temper the harms that firms may create for competitors, workers, consumers, or residents of the areas in which they conduct business. Regulation, however, can also create and perpetuate the worst injustices, most terribly through the history of slavery and segregation, but also through legally sanctioned discrimination against women, immigrants, the disabled, or sexual minorities. Through social insurance programs, such as Social Security and Medicare, and social spending programs, such as the GI Bill, Obamacare, and student loans, the “welfare state” limits the impact of social inequality and simultaneously provides a floor for macroeconomic demand.
Another conceptual touchstone of Shapiro and Tomain’s book concerns the impetus for significant shifts in the broad orientation of government policy, such as occurred during the Civil War, the Progressive Era, the New Deal, the Great Society, and the more recent era of deregulation. Echoing much historical scholarship, Shapiro and Tomain underscore the significance of socioeconomic developments that undercut core values enshrined in America’s founding, and especially the ability of individuals and social groups to find meaningful avenues of economic opportunity and political voice. They also point to the role of reform-minded journalists and intellectuals in reframing concerns in light of shifting social conditions and influencing policy agendas, whether they sought to expand the role of government or constrain it. And they further show that advocacy coalitions have most often achieved success when amplified by social movements and issue-oriented NGOs and think tanks, and when crisis events served as policy shocks, such as dramatic plane crashes in the 1920s, birth defects from thalidomide in the 1950s, oil spills and river fires in the late 1960s, and oil shocks in the 1970s. Each of these latter two points, though, might have received more attention as enduring features of American politics.
In How Government Built America, Shapiro and Tomaine devote particular attention to the last half-century, when calls for constraining the state in economic policy gained significant traction. Shapiro and Tomain appropriately highlight the growing suspicion of government in the 1960s and 1970s, as figures such as economist George Stigler on the right and consumer advocate Ralph Nader on the left critiqued the cozy relationships between incumbent firms and government agencies. This emerging consensus at once led progressives to enact more sweeping regulation around workplace safety, environmental protection, and consumer issues, fueled the impulse for more democratic input into administrative decision-making, and reinforced the general distrust in government unleashed by the Vietnam War. In the midst of the economic stagnation of the 1970s and important shifts in technology that shifted the nature of markets, perceptions of government overreach fed a deregulatory impulse, which President Jimmy Carter began in 1970s. In some contexts, deregulation received strong bipartisan support.
In the latter part of the book, Shapiro and Tomain provide an incisive balance sheet of deregulatory policy since the Carter Administration. Shapiro and Tomain note that the removal of fare and rate setting in transportation and energy markets, including the refocusing of antitrust policy around analysis of consumer welfare, often reduced consumer costs. These shifts, however, also encouraged the growing concentration of corporate power, as with the eventual consolidation of financial, media, and IT behemoths. The most recent few decades have also witnessed some important counter-movements, as with Obamacare’s reconfiguration of health insurance markets, the Dodd-Frank Act, which reregulated the financial sector after the 2008 financial crisis, and the Biden Administration’s massive infrastructure investments to jumpstart high-tech manufacturing and accelerate the transition to renewable energy. Shapiro and Tomain also take pains to document the longstanding effectiveness of many government bureaucrats, their frequent ingenuity in harvesting data to inform decision-making, and their commitment to serving every administration, regardless of political orientation. And they point out that efforts to dramatically reverse existing regulations, such as in the first Trump Administration, often failed due to weak factual justifications for action.
For all of its virtues, this brief volume does have some notable shortcomings. The abbreviated discussion of the 19th century lacks early contexts for more vigorous national policy enactments, such as the emergence of steamboat and mail fraud regulation, and occasional bursts of bankruptcy legislation. Shapiro and Tomain might have noted the distinctiveness of the American path in responding to the problem of natural monopoly in transport and utilities, which in Europe and elsewhere resulted in strategies of public ownership. They also might have stressed important ironies in their narrative. The turn to general incorporation statutes, for example, represented an attack on the capacity of powerful insiders to obtain special privileges from state legislatures, but paved the way for the emergence of truly massive corporations that had the resources to reshape legal doctrines and legislative outcomes to their liking.
Shapiro and Tomain, moreover, mostly ignore the consistent policy preference for disclosure regimes as a way to address asymmetries of information in financial or consumer markets, or the post-1970s tendency to use market mechanisms to achieve reduction in environmental harms, either through trading markets in pollution rights or performance standards designed to encourage technological innovation. They have little to say about the significant role of private self-regulation and quasi-public governance in arenas such as securities regulation, accounting, insurance rate setting, and nuclear safety, which often served to deflect calls for more stringent public regulation. They might have engaged more with contexts during the recent age of deregulation in which American policymakers opted for a very light touch with emerging technologies such as the internet, so as not to encourage offshoring. All of these patterns underscore American inclinations to address regulatory challenges without compromising core aspects of capitalist enterprise.
What insights does this narrative of American policymaking suggest about the potential course of the Trump Administration? Efforts to “deconstruct the administrative state” will benefit from an impending generational turnover, since, as Shapiro and Tomain observe, an unusually large fraction of the current federal workforce is nearing retirement. As they also stress, the half-century focus of conservative elites on remaking the U.S. Supreme Court has entrenched a majority that has expanded the zone of presidential immunity and made clear its intentions to roll back significant individual rights, including the right to vote and the right to abortion. In addition, the Roberts Court has demonstrated great skepticism about the regulatory power of agencies. In last year’s term, the Court overturned “Chevron deference”—the longstanding principle that when congressional intent is unclear, regulatory decision-making by the executive branch deserve judicial deference. It further limited the capacity of agencies to enforce their rules through administrative process. Media concentration, moreover, has in the minds of many observers skewed news coverage in conservative directions—a dynamic that could have shaped a chapter on Rupert Murdoch’s America.
And yet, How Government Made America also makes clear that the history of American political economy has had a dialectical character. The Republican Party enjoys slim majorities in both houses of Congress, and Democratic-controlled state governments have signaled their intention to oppose President Trump’s policies at every turn. In the United States, movements generally beget counter-movements, and it is hard to envision the professed Trump Administration agenda delivering lower inflation, stronger economic growth, or a significant decline in economic inequality. As such, there may well be sizeable roadblocks to enacting key pieces of that agenda, as well as political reverberations for the elements that do reshape statutes, regulations, and enforcement postures.
This essay is part of a series, titled “Looking Back on How Government Made America.”
