The coming political realignment of the Democrats and Republicans

Who are the real advocates for the working- and middle-classes? Is it a new generation of populist GOP leaders? Or the Democratic Party?

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Amidst all the turmoil and hand wringing over tariffs, wild stock market swings, shutdowns of federal agencies, DOGE blundering, insider dealing and corruption, renditioning of immigrants without due process, financing genocide in Gaza and cozying up to dictators, something even more momentous appears to be happening: a major realignment in key ideological positionings and policies of the Republican and Democratic parties.

This happens periodically in US politics. The forces of the political economy, intertwined with certain cultural shifts, reach an inflection point and suddenly – boom! -- like the powerful tension that has been building along a seismic fault -- the energy explodes and a major shift happens. Usually the swing starts with a significant electoral loss, such as Goldwater in ‘64 that eventually brought forward Ronald Reagan in 1980, or Bush rolling Dukakis which launched the Democratic Leadership Council and finally Bill Clinton in 1992.

So here we go again. And the point of the spear this time is an unlikely agent -- none other than Republican US Senator Josh Hawley from Missouri. Hawley is a strange combo of right and left politics. Kind of like an elephant combined with a donkey combined with a polar bear. And yet his views may augur the future of the Republican Party.

Many people view the Republican and Democratic parties as ideological monoliths, run by hardcore partisans and implacably positioned against each other. But in fact, both parties have their internal divisions, influenced by various outside organizations. In the GOP, an intra-party battle is brewing between an economic populist wing and its more pro-labor positions, and a traditional libertarian wing with its pro-free market, fiscally conservative stances.

Recently Senator Hawley made headlines by calling on the Labor Department to investigate Tyson Foods, the largest meat company in America and a big GOP donor, following allegations by a whistleblower that it illegally employs child labor. Child labor decreased in the US from 2000 through 2015, but from 2015 to 2022, under both the Trump and Biden administrations, the number of minors employed in violation of child labor laws surged by 283%.

When have Republicans ever cared about child labor? In fact, the GOP’s Project 2025 right-wing manifesto promotes child labor. Bizarrely, Project 2025 seeks to amend what is known as “hazard-order regulations” to permit teenagers to work in dangerous jobs. “Some young adults,” claims P2025, “show an interest in inherently dangerous jobs” but “current rules forbid many young people.” Sounding almost medieval, the Project 2025 visionaries would loosen these regulations to allow teenagers to “work in more dangerous occupations.”

Yet there’s Senator Hawley, pushing back against his GOP colleagues. Hawley also cast a vote recently to protect consumers from bank overdraft fees, introduced a bill to cap out-of-pocket insulin costs at $25 per month, has walked union picket lines, and has publicly opposed cuts to Medicaid, all positions that one might normally assign to a Democrat than a Republican. He even has expressed skepticism about extending the huge corporate tax cuts from Trump’s first term, saying they amount to “taxing the poor to give to the rich.”

What’s going on here? Is Senator Hawley the same archconservative from Missouri who was elected in 2019 at the age of 39 as the Senate’s youngest member, and until recently was best known for calling out “wokeness,” being “100% pro-life,” and for raising his fist in solidarity with the insurrectionists of January 6?

Increasingly within the GOP, Hawley is not alone in championing “the little guy and gal” on working class issues. Vice President JD Vance, in his bombastic style, has highlighted the plight of the white working class that he detailed in his bestselling book Hillbilly Elegy. Senator Tom Cotton of Arkansas has proposed increasing the minimum wage, long the bane of mainstream libertarian Republicans. Senator Roger Marshall of Kansas has worked with Democrats like progressive Senator Elizabeth Warren to reduce credit card fees. Says Marshall, sounding like Democratic Senator Bernie Sanders or Rep. Alexandria Ocasio-Cortez, “I prioritize Main Street over Wall Street.”

These Republicans are more economic populists than deficit hawks, and many have embraced a role for private sector unions, even as Republicans invited Teamsters president Sean O’Brien to speak at their RNC presidential convention in 2024.

Traditional libertarian Republicans strike back

But other Republicans of a more traditional “cut taxes and government spending” brand are pushing back. In the month-long budget battles in the House, old guard leaders like Rep. Chip Roy from Texas and the House Freedom Caucus prioritized reducing government debt and cutting taxes on the wealthy. And they are fine with cutting Medicaid and Social Security to pay for it. Some of the most vociferous deficit hawks, inspired by Reagan-onomics, want to see budget cuts go even further.

The battle within the GOP has played out over the current Congressional budget bill, which just yesterday passed the House (it still needs to pass the Senate, where it faces an uncertain future). House Republicans have combined a massive $3.8 trillion tax cut with massive budget cuts (that still aren’t enough) to pay for it. According to the Center on Budget and Policy Priorities, people making over $1 million per year will benefit from about $90,000 in tax cuts while poor to middle income Americans will receive only $90 to $1290 in tax cuts, even as they will net lose due to cuts in government services. In fact, the total $105 billion tax cut going to the handful of households making over $1 million exceeds the total cut going to the 127 million households making under $100,000.

To pay for it, fiscally radical Republicans voted to slash Medicaid, food stamps/SNAP, student loan spending and clean energy programs. Piling on, they are imposing strict work requirements for Medicaid recipients that the Congressional Budget Office estimates will cause about 10 million Americans to lose their healthcare by the end of this decade, once the work requirements fully kick in. And because you can’t rob Peter to pay Paul, and the budget cuts are too small to pay for the tax cuts, the House budget will add as much as $4 trillion to the current national debt of $36 trillion, so not an insignificant amount.

Will the GOP populists in the Senate advocating for the little guy stop all this from happening? Or will their rhetoric turn out to be little more than “populist washing” to win votes from American workers?

A younger generation of Republicans take the lead

A common characteristic of the GOP’s economic populist leaders is that most of them are from a younger generation. And this intellectual shift can partly be traced to the emerging impact of a 40-something economist, Oren Cass, and his influential “new conservative” organization American Compass. Cass is not so wedded to the libertarian free market brand of traditional Republicans. He also has a more benign view of labor unions and government regulation to harness markets. William Galston from the center-left Brookings Institute calls Cass’s book The Once and Future Worker a “welcome common ground for policy debates across partisan and ideological lines.”

Among other non-traditionally conservative ideas, Cass promotes a US version of German-style codetermination, in which worker representation on corporate boards of directors allows workers to flex more economic power beyond what labor unions provide. Union leaders in the US have found co-determination to be threatening to their stewardship, but labor unions in Germany are more powerful than their US counterparts, illustrating that such a structure can be a win-win toward labor-management cooperation on critical issues like working conditions, wages, benefits, productivity and employer-employee communication and agenda-setting. Despite this potential, the Democrats won’t even go there.

Economic populist Republicans also have proposed a broadening of workers’ access to Employee Stock Ownership Plans (ESOPs), which allow employees to become worker-owners in their business of employment and receive compensation beyond wages and benefits. First proposed by corporate attorney Louis O. Kelso in the 1970s, today 14 million U.S. worker-owners are covered by over 6000 ESOPs, almost as many workers as are members of labor unions, putting $127 billion annually into these employees’ bank accounts. It’s been a quietly small but decades-long bipartisan success story, dubbed “universal capitalism,” yet few have heard of it. It puzzles me that neither Democrats nor Republicans have done more in recent years to scale up this policy.

Setting apart Cass, Hawley and other emerging GOP leaders from their older counterparts is that they came of age not during the laissez-faire economic policies of the Reagan era but during the financial crisis of 2008. “A key driver for us,” Cass says, “is the fundamental insight that free markets aren’t delivering on the things we care about the most.” Says Hawley, “Donald Trump’s election showed this: If the Republican Party is going to be a true majority party, we have to be pro-worker.”

Republicans sounding like Democrats

This is the type of rhetoric and policies that used to distinguish Democrats from Republicans. While Democrats have always believed themselves to be heralds for the working class, in fact many working Americans have been frustrated that Democrats have not delivered more substance with their promises. In a “winner take all” two-party system, if you get disgusted with one political party and want to go shopping with your vote, there’s only one party left to pick (unless you don’t mind tossing away your vote on a third-party candidate with no chance of winning).

No question, the 2024 election showed there is a restlessness in the electorate, particularly among previously reliable Democratic constituencies like men of color and young people. Oren Cass has become a bit of a go-to media sage, here interviewed by Ezra Klein and writing opeds for the New York Times, there appearing on CNN, CNBC’s Squawk Box, PBS, even the Jon Stewart show, with his impish brand of inquiring fun. Cass maintains that a blending of political identities is occurring that will play out over the next decade or so. This shift may herald a dramatic realignment in American politics in which large numbers of middle-and working-class workers and young people – previously part of the Democratic coalition – will move to the right, as the new Republican Party’s populism triangulates into the Democrats’ electoral base.

Where is President Trump in all this? On the one hand, Trump also shows streaks of being an economic populist, at least rhetorically. In the past he has promised to champion “the little guy” struggling to make ends meet, and never to cut Medicaid and Social Security (even as House Republicans attempt to do just that). But in his policies, Trump has pivoted from such campaign rhetoric to more traditional GOP stances such as massive tax cuts that will mostly benefit the wealthy, paid for by budget and benefits cuts that will come out of the pockets of the non-wealthy.

Rudderless Democrats

Going forward, which political party will speak most effectively on behalf of middle- and working-class Americans? The answer to that question is no longer so clear. It remains to be seen whether the new GOP leadership has enough influence to pivot the Republican ship in a different policy direction, or whether the populist washing is little more than a bit of honey to attract the worker bees.

Meanwhile, the Democrats under President Joe Biden, and then VP Kamala Harris as his replacement candidate, have lost a lot of credibility among working people – regardless of race -- as a result of their failures to deliver over issues like the cost-of-living, wages, immigration and housing. I detect an ongoing lack of awareness on the center-left over how much Democrats’ positions have hurt their support among much of their previously reliable voter base. The Republicans didn’t really win the last election, the Democrats lost it, with Harris winning many fewer votes than Biden in 2020, even in her home state of California. There is little enthusiasm these days for the Democratic brand.

Nor is there much evidence of the rise of a new leadership within Democratic circles capable of repivoting the party in a badly needed new direction. On the economy, why don’t Democrats try some innovation like co-determination and scaling more ESOPs? Or how about championing other Kelsonian financing vehicles like GSOPs and CSOPs (General Stock Ownership Plan and Consumer Stock Ownership Plan) which in a time of dwindling government resources could be deployed to help fund affordable housing, public transportation, renewable energy and college education without dipping so much into the public tax coffers?

Democrats are truly stuck to the flypaper of old ideas. At this point the Democratic strategy seems to be to sit back passively and hope that an inept and increasingly corrupt Trump administration implodes, and then win back at least the House by being “not Republicans.” These are “winner take” elections, after all, where “if you lose, I win.” But waiting for the American electorate to be disgusted enough to vote Democrat again is kind of pathetic. That’s not the same as presenting a positive vision for the future, or projecting a vision on specific issues or an overarching governing philosophy, that is likely to mobilize a coherent majority.

Steven Hill @StevenHill1776 bsky.social @StevenHill1776