(WASHINGTON) Former President Donald Trump has drawn scrutiny in recent weeks for an escalation of rhetoric threatening political opponents with retribution if he's elected to a second term. The comments have triggered alarm from some officials who served with him the first time around, such as former Chief of Staff John Kelly.
Earlier this month, Trump described Democratic Reps. Adam Schiff and Nancy Pelosi each as "an enemy from within."
“These are bad people. We have a lot of bad people. But when you look at ‘Shifty Schiff’ and some of the others, yeah, they are, to me, the enemy from within,” Trump told Fox News on Oct. 20.
While Trump’s comments prompted a renewed focus on the issue of democracy, a Gallup poll earlier this month showed that the economy still ranks as the top issue of concern for voters.
However, a strong separation between issues of democracy and the economy is misguided, some academics who study the tie between political systems and economic performance told ABC News.
"People interested in making a large investment will be less likely to do it unless they can curry favor with the president himself," Thomas Pepinsky, a professor of government and public policy at Cornell University, told ABC News. "There will be some who stand to benefit but the average American will lose."
If Trump makes good on his threats to crack down on political adversaries, media outlets and some government agencies, he risks spooking investors, saddling businesses with uncertainty and driving away workers, experts said. That in turn could diminish economic growth, increase the likelihood of an economic downturn and harm the finances of everyday people, they added.
The impact may prove to be minimal in the short term but could grow substantially over time, some experts said, while also acknowledging the difficulty of predicting to what extent existing checks and balances might constrain Trump.
“If Trump suddenly threatens the rule of law, you won’t have an immediate recession,” Daron Acemoglu, a professor of economics at the Massachusetts Institute of Technology and co-author of the book “Why Nations Fail,” told ABC News.
“But you get a huge amount of uncertainty and that has economic implications,” Acemoglu added. “If companies favored by Trump can expect to get a special deal and others can’t compete, that’s a slippery slope.”
Stephen Moore, an economic advisor to Trump, rebuked the notion that democracy would weaken during a second Trump term. Instead, he added, the economy would perform well, just as it did over Trump's first term.
"I’d be much more prone to look at his track record in office than speculation about how he might undermine democracy," Moore told ABC News. "We had a booming economy."
"If Trump wins, I think the markets will react in a very, very positive way," Moore added.
In response to ABC News' request for comment, the Trump campaign shared a statement from a representative of the Republican National Committee (RNC).
"Kamala is a continuation of Biden's failed economic policies, and they've left our economy in shambles. Kamala Harris broke America’s economy, our national security, and world peace, but President Trump will fix it through his America first policies," RNC spokesperson Anna Kelly told ABC News.
Trump has threatened to use the Department of Justice to prosecute political opponents, including Vice President Kamala Harris. Harris "should be impeached and prosecuted," Trump said at a rally last month. He also has suggested rescinding the licenses of media outlets that he dislikes.
Trump continues to make false claims in denying the outcome of the 2020 presidential election and has repeatedly attempted to sow doubt regarding the validity of the impending one, should he lose.
The potential erosion of government and civic institutions under a Trump presidency could cause investors to second-guess whether they want to do business in the U.S., the experts said. Trump has hinted at taking away some of the independence of the Federal Reserve, which could introduce further uncertainty surrounding the nation’s interest rates. Meanwhile, the experts added, Trump may treat more favorably companies that stay in good standing with his administration, putting other entities at a disadvantage even if they’re more competitive.
“It would simply create a huge amount of uncertainty about which rules apply and who they apply to,” Steven Hahn, a professor of history at New York University and author of “Illiberal America: A History,” told ABC News. “It would just have enormous consequences for the economic life of the country.”
Uncertain U.S. politics have already negatively affected the nation's financial foundation, according to some financial measures. Last year, the rating agency Fitch Ratings downgraded U.S. credit for the second time in the nation's history, citing the ballooning U.S. debt load and a weakening of governance, as well as the Jan. 6 attack on the U.S. Capitol, as factors in their decision.
After studying more than 50 populist leaders going back to 1900, German researchers Manuel Funke, Moritz Schularick and Christoph Trebesch found that after a populist leader took office, a nation’s economy grew at a 10% slower pace over the ensuing 15 years than it would have otherwise, according to an article published in the American Economic Review in December.
A separate study in 2019 found that democratization boosted a nation’s gross domestic product by about 20% over the long run, according to researchers at the Massachusetts Institute of Technology and Columbia University, among others.
“The evidence is pretty clear,” Vanessa Williamson, a senior fellow in governance studies at the left-leaning Brookings Institution, told ABC News. “Democracy is pretty good for an economy, and authoritarian regimes do worse than they otherwise would.”
There are exceptions, however. India, one of the world’s fastest-growing economies, has seen its ranking in the global Democracy Index fall since Prime Minister Narendra Modi took office in 2014. The Chinese economy grew rapidly over the past three decades under authoritarian rule, though that economic expansion has slowed in recent years.
“Sometimes undemocratic countries have had amazing growth, but those examples are rare,” Williamson said.
What's unknown, of course, is whether Trump, if elected, would implement his proposed agenda. Also unknown is to what extent such actions could or would be resisted by others, including Congress, the courts and other institutions.
"Even if Republicans win Congress, they won't have 60 votes in the Senate," Moore, the economic advisor to Trump, said, pointing to the threshold of support necessary to overcome a Senate filibuster.
Some experts also acknowledged that the economy performed fairly well under Trump during his first term, despite his administration taking steps that those experts perceived as testing democratic norms.
“Trump’s first term was chaotic, disorganized and bad for some institutions, but I fear his second term would be worse,” Acemoglu said.
In theory, the market itself could act as a check on Trump’s plans, experts said. A negative market response helped unseat then-UK Prime Minister Liz Truss In 2022.
Fiscal plans put forward by Truss caused the nation’s currency to plummet in value while bond yields spiked. Within weeks of her taking office, and amid heated criticism from both her opponents and members of her own party, Truss resigned.
A dramatic market reaction could limit Trump’s plans, but he could instead prioritize the consolidation of power, in turn diminishing the impact of a financial response, Pepinsky said.
“For most politicians, they change course if the market signals to them that something won’t work,” Pepinsky added. “Trump isn’t a normal politician.”