Socialism or MAGA: America's political centre is hollowing out

US political debate is increasingly defined by two extremes: MAGA economic nationalism on one side, democratic socialism on the other. The ground in between is steadily emptying. “Heading into the midterm elections, the centre ground on economic policy has worn very thin,” says Thorsten Fischer, Managing Director and Head of Portfolio Management at Moventum AM. At the same time, Washington is intervening ever more heavily in the economy. For investors, this means that economic indicators alone no longer tell the whole story.

The political centre is widely regarded as a stabilising force. As early as 1930, the sociologist Theodor Geiger described it as the “bearer of a balancing function”. Much like the Earth’s core, the centre acts as a magnetic anchor that holds the whole together. That makes the growing polarisation in the US ahead of the midterms even more troubling, not least because both political fringes favour greater state influence over business.

This is reflected in the decline of economic freedom in the United States. In the Heritage Foundation’s index, which ranks 184 countries, the US now sits in only 22nd place despite a recovery this year. That puts it behind the Czech Republic and just ahead of Germany, a country so often criticised as over-regulated. In the V-Dem index, which measures state control of the economy, the US slipped from second to 16th place in 2025, a fall of 14 places in a single year. “That is a clear sign of growing government intervention in the US economy,” says Fischer.

For decades, the Republicans stood for economic liberalism and deregulation. But they, too, have abandoned the classic free-trade course. Tariffs, industrial policy, export controls, government stakes in companies and pressure on the central bank now define the nationalist MAGA agenda under the banner of “America First”. Companies are being pushed to put business considerations second and to align their investments and strategies more closely with the administration’s political priorities.

The Democratic Party, for its part, is moving further to the left on economic policy. Among the party’s base, calls for tighter regulation, redistribution and more social spending are gaining ground, a message that resonates particularly well with younger voters. This is strengthening the influence of left-wing groups such as the Democratic Socialists of America over the party’s future direction.

“The reasons behind this shift are understandable,” says Fischer. High wealth inequality and the rising cost of living have increased the desire for a stronger safety net, as have economic uncertainty and fears about the impact of artificial intelligence. Yet there is a contradiction at the heart of it: “Although trust in government is at historic lows, both camps are calling for more state influence over the economy.”

Whether from the right or the left, economic policy is leading to more state intervention. The two camps may use different tools, Fischer notes, but both are moving away from traditional free-market liberalism and driving each other further towards the extremes. Stronger economic nationalism on the Republican side fuels left-wing counter movements, and vice versa. As a result, many voters find themselves forced to choose between two interventionist economic models.

“For investors, the biggest concern is likely to be the disappearance of a market-oriented centre in the US,” says Fischer. Whatever the outcome of the election, the state’s influence on the US economy looks set to grow structurally. Whether companies succeed or fail increasingly depends on government industrial steering, regulation, tariffs and subsidy programmes. “The market is becoming more and more political,” says Fischer. The deepening divide between the two camps on tax policy and investment conditions is adding to the uncertainty. “For investors, political analysis is becoming increasingly important alongside classic fundamentals, as economic policy decisions are having an ever more direct impact on company valuations and capital flows.”