How Economic Policies Can Restore Trust in Government

How Economic Policies Can Restore Trust in Government

Americans’ current lack of trust in their government may surprise few. Since the country’s inception, suspicion of federal overreach and the persecution of racial and ethnic minority groups have led many to be apprehensive towards authority. However, the current low level of trust in the federal government is unprecedented. Since 1964, Americans trusting the government to “do what is right” fell from 77 percent to 24 percent (Public Trust in Government, 2021). Despite strong economic growth, record job and wage gains, low unemployment (including the comprehensive U-6 unemployment rate), decreases in poverty, and rises in real disposable incomes, trust in government is low — evidenced by the aforementioned figure and President Biden’s low approval ratings (“Fareed Zakaria GPS,” 2022; U.S. Bureau of Labor Statistics, 2022). Although the recent positive economic indicators may have been partially offset by factors such as the emergence of high inflation and the expiration of the monthly Child Tax Credit leading to recent increases in child poverty, declining government trust over such a long period is unusual and the level is now lower than in many other developed countries (Van Dam, 2022; 3.7 Million More Children in Poverty in Jan 2022 without Monthly Child Tax Credit, 2022). 

Implications of Low Trust  

The US ranks seventeenth out of 38 OECD member nations in terms of trust in government (Trust in Government, 2020). Low trust in government hurts the country because it contributes to political polarization and hampers the ability of the nation to respond adequately to emerging challenges. Current levels of polarization in the US increase the risk of future violence and threaten democracy following an increasing number of violent political events in the past decade while authoritarianism becomes more palatable to the electorate (Hicklin-Coorey, 2021). In terms of response to emerging challenges, a new Lancet study found that, after examining many potential factors, citizens’ trust in government and in each other were the most statistically significant links to a country’s number of COVID-19 cases (“Fareed Zakaria GPS,” 2022). According to the study, there would have been 440 million fewer cases worldwide if citizens in every country had the same level of trust that the Danes do in government and the South Koreans do in their fellow countrymen (Bollyky et al., 2022). As a result, low trust in government costs lives due to both a higher likelihood of violence in the case of extreme political polarization and an unwillingness to follow lifesaving advice in the case of COVID-19. This trend will only continue with the challenges the US will have to face in the 21st century if policymakers do not step up and restore trust by responding to the public’s concerns. 

What Can Policies Do? 

Although there is no one-size-fits-all solution, economic policies aimed at reducing inequality, improving social mobility, and increasing government responsiveness and integrity through transparency and accountability are necessary first steps to restoring trust in government. Reducing inequality and improving social mobility can be done through strengthening the weak social safety net and making long-term human capital investments, such as in childcare, high-quality public education, and healthcare. These goals could be made possible through a tax reform package to raise revenue by targeting the wealthiest Americans and corporations, whose incomes have increased disproportionately, while minimizing distorting effects. This package could include making income taxes more progressive (for example by raising the capital gains tax rate), closing tax loopholes and expenditures benefiting the wealthy, introducing a global minimum tax to reduce tax avoidance, taxing inheritances by lowering the threshold for estate taxes, adopting a wealth tax on the ultra-wealthy, and increasing IRS funding to ensure the agency has the resources to focus audits on the wealthy rather than on lower income Americans (A Broken Social Elevator? How to Promote Social Mobility: Overview and Main Findings, 2018). 

However, these proposals may not restore trust on their own. Economic improvements may not restore trust if dominant-status groups feel that vehicles of change threaten their position. A 2018 study found that those who supported then-candidate Donald Trump in the 2016 election did so out of a fear of losing status, rather than being economically left behind (Mutz, 2018). While both factors likely played a role, these results indicate that reducing inequality through income transfers and improving social mobility alone may not restore trust unless the policies are designed to also give people dignity and opportunity that can overcome fear of change. Progress could be achieved through publicly-funded occupational training and active labor market policies, which may help restore trust not merely by transferring income but by providing opportunities to those who have lost work, giving a sense of dignity through their contribution to society (Case & Deaton, 2020, pp. 251–253). Policies to increase unionization would not only raise wages and improve working conditions, but would also make people feel included in a group that gives them more say in their future. 

Economic improvements may also not restore trust if the government is only responsive to rent-seekers. The OECD argues that “good policy design and economic recovery may not be sufficient to restore trust if citizens are suspicious of the policy-making process and perceive the distribution of costs and benefits as unfair” (OECD, 2013, p. 20). Given the current US political climate, improving government responsiveness and integrity is crucial because the top two reasons for lack of trust in government include corruption or fraud and wrong incentives driving policies (Restoring Trust in Government, n.d.). Lawmakers must pursue measures to get money out of politics, through avenues such as campaign finance and lobbying reforms aimed at reducing the influence of powerful concentrated interests and incentivizing politicians to be more responsive to the public good. The proposals in Congress to ban current members and their immediate family and staff from trading stocks are an overdue signal in the right direction. 

The critical aspect with these proposals is that the government must communicate the benefits of their policies in a transparent manner. In other words, it must be obvious and indisputable to everyone that they are better off due to government policies. If not, the problem of the “submerged state” occurs where the complicated nature of policy leaves the populace unaware that the government has improved their situation (Mettler, 2011). As a result, a large share of the population may still have low trust in the government and be hostile to the policies, even those who benefit from them. With this need for transparent communication in mind, the solutions outlined could begin to restore trust among each other and in government, thus easing polarization, improving the nation’s response to future challenges, and saving lives. 

Edited by Lola Cleaveland

Works Cited

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