The constitutional settlement that once governed the United States has broken down. The world that we knew is gone. The second Trump Administration is working their hardest to forge a new settlement: an ugly settlement, based on personal authoritarian power and MAGA culture war.
Is Trump II a structural result of a breakdown, or is Trump himself a singular and contingent cause of breakdown? At this point it hardly matters. Something has broken. The world that we were born in no longer exists. It is the task of this essay to ask what broke and what Trump II is trying to put in its place.
But what broke is not any singular thing. The constitutional settlement that governed America from the end of the Volcker Shock in 1982 to the re-election of Donald Trump in 2024 encompassed three profound domains: politics, economics, and culture. Most commentators today are like the blind men and the elephant: legal commentators see legal crises, social commentators cultural crises, economic commentators economic crises. But there is only one elephant.
You can call it neoliberalism, if you like. I call it the Long '90s.
The asset economy
Let us begin with the economic component of the constitutional settlement of the Long '90s; it's as good a place as any. This settlement is sometimes called neoliberalism, but that suggests an obsession with deregulation—and is therefore profoundly misleading. The Long '90s was defined by the asset economy.
After the crisis of stagflation and the pain of the Volcker Shock, macroeconomic policy was reoriented away from maintaining full employment and towards managing inflation. The downside was depressed wage growth and depressed overall economic growth. In the period 1950-1980, per capita output grew at 2% per year; in the period 1980 to 2012, that shrunk to 1.3% per year (120). A seemingly small difference—but such differences compound dramatically over the course of decades.
The decrease in income growth was softened by an increase in asset growth—in particular housing, but not just housing. The steady, faster-than-inflation, faster-than-wages growth of home equity increased the wealth of Americans. Between 1980 and 2022, nominal wages increased 410%. In that same period, house prices increased 576%. Our homes became our retirement accounts, and thus needing to save less out of our incomes for retirement, we spent and consumed more.