History shows one key policy could hit Trump hardest of all

Count on one thing: If Mark Twain, the famed American author of Tom Sawyer and Huckleberry Finn, were alive today, he would certainly have written a novel about U.S. President Donald Trump. After all, Twain's 1873 novel, The Gilded Age: A Tale of Today, distinctly caught a 19th-century version of our Trumpian moment, tariffs and all.

“They want me to go in with them on the sly,” says Colonel Sellers, the antihero of that novel. Lowering his voice to a conspiratorial whisper, the colonel explains to his wide-eyed dinner guest how they would “buy a 113 wild cat banks in Ohio, Indiana, Kentucky, Illinois, and Missouri… and then all of sudden… Whiz! the stock of every one of those wildcats would spin… profit on the speculation not a dollar less than 40 millions!”

With Twain’s uncanny insight into the American character, his novel presaged the quarter-century to follow so accurately that, in the end, it lent its name to “the Gilded Age,” that era of rapid industrialization and rising robber-baron fortunes. Ripped from two centuries of Puritan moral moorings by an “inflamed desire for sudden wealth,” the novel’s archetypal American families are caught in a “fever of speculation” that sends them scrambling across the continent in a frenzied search for jackpot profits.

With money then breeding its own morality, the era’s capitalist excess naturally begat Trumpian-style corruption. When unpaid wages stopped the construction of his railroad out West, Twain’s character Colonel Sellers sent the project’s chief engineer to the head office in New York City to find out what had happened to the missing money.

“The matter is simple enough,” the company’s president explained matter-of-factly to the astonished engineer. “A Congressional appropriation costs money. A majority of the House Committee, say $10,000 apiece — $40,000; a majority of the Senate Committee, the same each — say $40,000; a little extra to one or two chairmen of two such committees, say $10,000 each — $20,000; and there’s $100,000 of the money gone.”

Beneath the spectacle of soaring stock prices, spreading railroad networks, smoking steel mills, powerful trust monopolies, and conspicuous consumption by the country’s ever-increasing number of millionaires, Twain discerned a deep underlying insecurity to be the very essence of what became known as the Gilded Age. “It is a time,” he wrote, “when one’s spirit is subdued and sad, one knows not why; when the past seems a storm-swept desolation, life a vanity and a burden, and the future but a way to death.”

Looking at contemporary America through Twain’s somber vision can teach us something significant about our own time that has so far eluded the mainstream media — particularly the profound political implications of President Trump’s wild global tariff regime. Those duties on foreign imports will not just raise prices and stoke inflation, as the media has indeed been telling us, but all too crucially undercut the fiscal foundations of a middle-class American society that we’ve known for more than a century, creating a new Gilded Age of rising private fortunes — in our time, billionaires — and deepening social inequality.

And with Donald Trump in mind, let’s take a little trip through a history that’s anything but Tom Sawyeresque.

Cycles of change

Give Twain full credit: When writing that novel, he also intuited that the economic juggernaut driving his Gilded Age would come crashing down in what proved to be the devastating panic of 1893. The country had indeed suffered 11 previous panics, most of them regional or relatively short-lived. This one would be different. As New York banks held fire sales of assets to meet a cash crunch, some 340 banks nationwide simply suspended operations, while industrial output shrank by 15%, and unemployment hit an unprecedented 19%. Adding to the difficulties of workers, the McKinley Tariff of 1890, named after then-representative (and not yet president) William McKinley, had imposed record-high duties of 50% on imports and so raised the price of many basic consumer goods, which should sound all too familiar in the age of Trump. The panic then became a full-blown, four-year depression that sent thousands of the unemployed, then called Coxey’s Army, marching on Washington to demand redress from Congress.

Not only was that panic an economic crisis of unprecedented severity, but it was also the first in a boom-and-bust cycle that has marked America’s unbridled capitalism up to the present moment — with each boom producing spectacular private wealth and each bust fostering abject public misery and mass reform movements. Like Icarus of Greek legend, whose wings of wax carried him too close to the sun, the U.S. economy sometimes flies so high that its wax wings melt. The ensuing crash is so searing, immiserating so many for so long, that it can inspire sustained movements for change.

The severity of the protracted 1893 depression that ended the Gilded Age sparked myriad calls for social change and lead to the Progressive Era during which labor unions organized workers, the National Association for the Advancement of Colored People started its struggle for civil rights, and women marched for suffrage. Investigative reporters called “muckrakers” also began publishing exposés of financial power and political corruption in mass-circulation magazines like McClure’s and Collier’s Weekly, thereby setting an agenda for political reform. In major cities, middle-class reformers opened settlement houses for poor immigrants, enacted housing codes to ban cold-water tenements, and set up free public schools. At the state level, progressives like Wisconsin Gov. Robert La Follette battled the railroad monopolies that gouged farmers desperate to get their crops to market.

Meanwhile, at the national level in 1913, Democratic reformers in Congress slashed the country’s high tariffs (long a regressive tax on working-class consumers), replacing them with a progressive income tax whose top rate was then 7 percent on incomes over $500,000. Since the federal government had long used tariffs as its prime source of revenue, Progressive era legislators fully grasped just how fundamentally regressive they were, and fought successfully to cut the tariff rate from President McKinley’s 29 percent in 1899 to just 6 percent by 1917. Typically, the import duties that refiners in Brooklyn and Philadelphia paid on raw Cuban sugar would be passed on to consumers as higher prices. And clearly, the cost of a cup of sugar then took a far more significant slice out of a worker’s wages than it did from the kitchen budget of a millionaire’s chef. Requiring those who had the least to pay the most was a glaring economic injustice that would inspire progressive reformers to fight tariffs with an impassioned intensity that seems almost incomprehensible today.

Roaring '20s

But all that momentum for change stalled when, in 1917, the United States entered World War I and then segued to a postwar decade of speculative frenzy. At war’s end in 1918, Forbes magazine published its first ranking of the country’s richest men, with oil baron John D. Rockefeller then America’s first and only billionaire, followed by 29 millionaires (whose fortunes, corrected for inflation, would make them billionaires today) — industrial tycoons like Andrew Carnegie (steel), J. Ogden Armour (meat packing), Henry Ford (autos), Daniel Guggenheim (mining), and Pierre Du Pont II (chemicals).

After the stock market started roaring in the 1920s, however, it minted hundreds of new millionaires, while sales of cars, telephones, radios, and appliances boomed. Between 1921 and 1929, the Dow Jones Industrial Average for shares on the New York Stock Exchange surged by 600%.

As a parallel tide of political repression swept the country, American Legion veterans broke up socialist rallies, a young J. Edgar Hoover rounded up radicals for deportation, and bloody race riots swept Chicago and Washington, D.C. While Republican conservatives took control of Congress and the White House, a revived Ku Klux Klan ran the legislatures of a half-dozen states, lobbied Congress to enact immigration restrictions, and presided over some 400 lynchings of African-Americans.

Depression decade

The stock market that came in like a roaring lion at the start of the 1920s went out like a bleating lamb at decade’s end. On Black Monday, October 28, 1929, it suddenly dropped 13%, lost another 12% on Black Tuesday, and kept sliding into the summer of 1932, losing 90% of its value in a fall so steep it wouldn’t reach that peak again until 1954.

By the time President Franklin Delano Roosevelt, or FDR, was inaugurated in 1933, the nation was in dire straits. About 25 percent of the workforce, or some 13 million people, were unemployed — with thousands of “hobos” riding the rails, long lines snaking outside soup kitchens, and shanty towns (dubbed “Hoovervilles” after the indifferent president who had preceded FDR) huddled outside cities large and small. In the industrial northeast, factories shut down. In the Great Plains, thousands abandoned their farms in the country’s “dust bowl” and headed for California.

So deep and desperate was the Great Depression that President Roosevelt had ample public support to enact a “New Deal” of unprecedented socioeconomic reforms, creating nothing less than the modern federal government. To provide work for the unemployed, FDR formed the Civilian Conservation Corps and the Works Progress Administration that mobilized nearly 9 million people to build 8,000 parks, 75,000 bridges, and 650,000 miles of roads. Private sector workers won the right to form unions and strike under the National Labor Relations Board, largely ending the union-busting and goon violence of decades past. Since the country had no form of retirement savings, FDR formed the Social Security Administration in 1935 (which currently sends benefits to 66 million Americans).

To fully electrify the economy, the New Deal dotted the U.S. with massive hydroelectric projects like the Fort Peck Dam and delivered cheap power to farms through the Rural Electrification Administration. To make air travel affordable, the Roosevelt administration built 800 airports nationwide, notably LaGuardia Airport in New York City.

To end the bank runs that periodically wiped out customers’ deposits, his Banking Act of 1933 created the Federal Deposit Insurance Corporation to enforce restrictions on banking speculation, and a year later formed the Securities and Exchange Commission to protect ordinary investors from fraud.

As the New Deal raised the tax rate for the top income bracket from 79 percent to a historic high of 94 percent by 1945, the share of all U.S. income earned by the richest 1 percent fell from a peak of 24 percent in 1928 to just 10 percent after World War II and would remain there until 1980. That change would be foundational for the middle-class democracy that many still regard as archetypally American.

In sum, by the time the New Deal was done in 1945, the Roosevelt administration had brought high-flying U.S. capitalism down to Earth, with regulations that curbed speculative excess, while preventing spectacular crashes.

A new Gilded Age

As the Cold War drew to a close during the 1980s, President Ronald Reagan advanced a conservative agenda of tax cuts and deregulation, sparking the start of a new Gilded Age that, over the next 30-plus years, would produce a level of economic inequality not seen for nearly a century. That era also coincided with a succession of financial crises that could have sparked serious economic depressions had they not been constrained by the regulatory mechanisms the New Deal had put in place.

By slashing the tax rate on the highest incomes from 70 percent to just 28 percent, President Reagan catalyzed a steady climb in private wealth that would continue unchecked for decades to come. By 2007, the richest 1 percent were already earning 24 percent of the nation’s income, putting them right back where they had been in the 1920s.

Just as railroads were the iconic industry of the original Gilded Age, so the Internet and its corporate spin-offs became the prime driver of our current era of excess. The release of software developer programs like Mosaic combined with a sharp increase in U.S. households with a personal computer — from just 15 percent in 1990 to 35 percent by 1997 — became the prime ingredients for the “dot-com bubble” of the late 1990s. Growing numbers of Americans started shopping at Amazon.com, searching on Google, and booking travel online at Expedia.

As the Telecommunications Act of 1996 opened up the broadcast spectrum and the Taxpayer Relief Act of 1997 cut capital gains taxes on stock transactions, the Nasdaq stock exchange, which features tech listings, rose by 400 percent in a five-year frenzy of speculative trading for almost any stock with “.com” in its name. Adding fuel to that blazing fire, in 1999 the White House of President Bill Clinton encouraged Congress to repeal the New Deal’s Banking Act of 1933, allowing financial speculation through the merger of retail and investment banking.

In March 2000, the dot-com bubble finally burst, and the Nasdaq stock index started a sustained fall that virtually wiped out the previous decade’s gains. Over the next two years, markets were also shaken by serious scandals after company officers falsified returns to feed the market frenzy, bankrupting a half-dozen major corporations, including WorldCom, the country’s second-largest telephone company; Enron, a top energy corporation with revenues of $100 billion; and Adelphia, a prominent cable television provider with over two million subscribers. To correct what one leading law firm called “a broader culture of greed and deception that had taken root in the corporate world,” Congress passed the Sarbanes-Oxley Act in 2002 that tightened financial regulations to protect investors from systemic fraud.

Nonetheless, an even greater panic soon followed. Freed from the New Deal Banking Act’s restraint on speculation, investment banks began engaging in predatory lending of subprime mortgages and aggressive marketing of mortgage-backed securities, producing a profit-taking craze that came crashing down in the Great Recession of 2007-2009. As the country’s fourth-largest investment bank, Lehman Brothers, collapsed and its fifth-largest, Bear Sterns, was liquidated in a “fire sale,” the financial system trembled at the brink of collapse. Recognizing the seriousness of the crisis, Congress quickly authorized corporate bailouts funded by a $700 billion appropriation under the Troubled Asset Relief Program. By the time the Great Recession ended in mid-2009, unemployment had doubled to 10% and the Dow Jones Average had fallen by 50%. But the country had indeed been spared another Great Depression.

The advent of Trump

During those 30 years of boom and bust, however, one trend remained remarkably steady: The rich just kept getting richer. The number of global billionaires listed byForbes magazine would increase tenfold from 291 in 1992 to 2,781 in 2024, with a total wealth of $14.2 trillion. During the 2016 presidential campaign, Forbes includedDonald Trump among them, estimating his wealth at $4.5 billion.

In past periods of conservative Republican rule, Congress and the White House served the interests of the richest 1 percent, whether industrialists or Internet tycoons. But in 2016, for the very first time, the American people put a genuine billionaire in the White House and, to nobody’s surprise, he soon made it clear that his only consistent concern was serving the interests of his peers.

In the first year of his first term, in fact, Trump enacted the 2017 tax cuts that The New York Timescalled “the most sweeping tax overhaul in decades.” By cutting the corporate tax rate from 39 percent to 21 percent, reducing the top individual income tax rate from 39.6 percent to 37 percent, and doubling the size of estates exempt from being taxed to $11.2 million, those Trump tax cuts, economists found, produced a marked increase in “after-tax income for high-income households.” Indeed, the bottom 20 percent of wage earners saved just $60 each, while the upper 1 percent gained $51,000 each and the top 0.1 percent at least $193,000.

Yet even that landmark legislation would pale before the inequitable impact of Trump’s tax policies in his second term in office, which all too literally sought to overturn the fiscal foundations of the Progressive Era reforms that had shaped American middle-class society for more than a century. If we combine the social impact of his recent “Big Beautiful” budget bill, which extends the 2017 tax cuts, with his skyrocketing tariffs, Trump seems to be trying to undo the landmark tax legislation of 1913 by reducing or replacing the progressive income tax with tariff revenues that are really a regressive tax on the poor. When the budget’s tax cuts for the rich are combined with his escalating tariffs that are bound to raise prices for ordinary consumers, those twinned policies are guaranteed to produce a massive transfer of wealth to the wealthiest 1 percent of Americans, creating an ever steeper version of social inequality that is fast fostering a new Gilded Age (and the economic disasters that are bound to go with it).

Apart from his trade war with China, in his first term Trump actually had little impact on tariffs. By the time he left office in 2021, he had raised the average import duty only incrementally from 1.4 percent to 2.8 percent — a far cry from the record 50 percent rate of the 1890 McKinley Tariff, and so still an insignificant factor in both Federal revenues and the average American’s cost of living.

In his inaugural address last January, however, Trump praised his distant predecessor, saying, “President McKinley made our country very rich through tariffs and through talent — he was a natural businessman — and gave Teddy Roosevelt the money for many of the great things he did, including the Panama Canal.” In a Rose Garden ceremony on his April 2 “Liberation Day,” President Trump ordered record-high tariffs for all the world’s nations, with duties of 50 percent on imports from Lesotho and 84 percent on those from China. Then, in an interview with Fox News on April 15, the president suggested, “There is a chance that the money from tariffs could be so great that it would replace” the income tax. As the average import duty started climbing to 15 percent, his trade adviser Peter Navarro projected that Trump’s tariffs could raise $600 billion in revenues, or more than a third of the $1.6 trillion in individual income taxes the Internal Revenue Service collected in 2024.

During the four-month blitz of tariff orders that followed, the Trump White House has insisted on the fiction that other countries will simply pay those import duties. After proclaiming himself a “Tariff man,” during the 2024 election campaign Trump told his rallies that “a tariff is a tax on a foreign country … A lot of people like to say it’s a tax on us. No, no, no, it’s a tax on a foreign country.”

In May, when Walmart’s CEO exposed the transparent falsity of that statement by stating, “Higher tariffs will result in higher prices,” an apoplectic president told the company to “EAT THE TARIFFS.” In mid-July, when Trump announced another round of tariffs that were to reach a McKinleyesque level of 50 percent, a White House spokesman repeated that exculpatory falsehood, saying: “The Administration has consistently maintained that the cost of tariffs will be borne by foreign exporters who rely on access to the American economy.”

Rising resistance

With surprising speed, Americans are starting to see through such sophistry and resistance to the Trump administration is rising. Despite his repeated denials, a Gallup poll taken in April found that 89 percent of all Americans believe that “higher tariffs will result in… paying more for products.” And in late June, as Trump’s “Big Beautiful” budget bill neared legislative approval with massive cuts to health care for millions of Americans, a Quinnipiac University poll found 55 percent of the country opposed the bill and only 29 percent supported it.

Those polls reflected a growing opposition to Trump’s policies. In April, his then-ally Elon Muskpoured a record-breaking $25 million into the election for the Wisconsin state Supreme Court, but the opposing Democratic candidate still won a stunning double-digit victory. In June, five million Americans in 2,200 cities and towns across the country marched in anti-Trump “No Kings” rallies, which added up to the largest single day of mass demonstrations in U.S. history.

After only six months of Trump’s term, it is still not clear whether his erratic economic policies — disrupting supply chains, creating labor shortages from mass deportations, and inducing record inflation — will inflict sufficient social pain to inspire a sustained movement for change. But one thing is already quite clear: Without such mass protests and a determined democratic opposition at the ballot box, the Trump administration will persist with a tax and tariff policy aimed at creating the sorts of social inequity and economic privilege not seen since Mark Twain’s original Gilded Age. Consequently, the grim economic results down the line are painfully predictable.

• Alfred W. McCoy is professor of history at the University of Wisconsin-Madison and the author of "In the Shadows of the American Century: The Rise and Decline of U.S. Global Power".