How much will US democracy weaken under Trump?
I assess a 65% probability that the U.S. will fall below 7.60 on the Economist Intelligence Unit Democracy Index at least once between 2025–2028 under the Trump administration — more likely than not, but far from a foregone conclusion.
Analysis
**Stage 1 — Blind analysis (ignore market prices):**
The EIU Democracy Index is a composite of five domains (electoral process and pluralism; civil liberties; functioning of government; political participation; political culture). To push the U.S. below 7.60 requires measurable, sustained deterioration across one or more of those domains by the EIU’s annual scoring process. Recent signals (elevated policy uncertainty, weaker consumer confidence, public clashes between the executive and other institutions) increase the risk of downgrades in *functioning of government* and *civil liberties*, but those are indirect indicators. Historically, the EIU moves scores when visible institutional changes occur — explicit legal changes that curtail checks and balances, sustained violations of civil liberties, widespread restrictions on media or opposition, or clear failures in electoral administration.
Given the pattern of the Trump administration’s early actions and rhetoric since 2025 (aggressive executive action, tariff shocks, heightened political polarization, and repeated attacks on trust in institutions), there is a plausible path to a meaningful EIU downgrade by 2026–2028. The 7.60 threshold is not an extreme collapse; it is reachable if the EIU perceives a material weakening of judicial independence, significant limits on civil liberties (for example, broad new surveillance or protest restrictions), or a breakdown in the normal functioning and checks of government. However, inertial forces make a large cut less certain: courts, state-level officials, civil-society institutions, and many federal agencies have resisted extreme measures in past crises. The EIU also tends to apply conservative, rules-based scoring rather than reacting solely to rhetoric.
Weighing these forces, I put the independent probability at **65%**: more likely than not that by the end of the 2025–2028 administration period some combination of executive conduct, institutional erosion, or election-administration failures will push the EIU below 7.60, but there remains substantial chance institutions hold enough to keep the score above that threshold.
**Stage 2 — Market calibration (look at current prices and explain differences):**
The market currently prices *Yes* at ~90%. That level implies near certainty; it either assumes that (a) EIU scoring is highly sensitive to political rhetoric and short-term instability, or (b) market participants assign high probability to one or more discrete, high-impact events (massive clampdown, legal changes undermining courts, or violent systemic breakdown around 2028) that would compel a decisive EIU downgrade. Several plausible reasons the market is this high: news attention and narrative momentum around Trump-era risks (recency bias); heavy hedging/tail-risk buying by funds worried about democratic erosion; or automated models that convert measures of polarization and policy uncertainty into large democracy-score declines.
I judge the market overpriced for two reasons. First, the EIU’s methodology and historical behavior show moderate-to-high inertia — annual scores typically move several tenths only after sustained, concrete changes. Second, robust institutional pushback from courts and state actors has repeatedly blunted the most extreme executive actions in prior cycles; absent clear legal or legislative changes that materially reduce checks-and-balances or civil liberties, the EIU is more likely to downgrade incrementally than to register a big drop to below 7.60. That said, the market’s high price is a useful signal about perceived tail risks: if a credible, large-scale institutional shock occurs (e.g., annulled state elections, mass removal of judges, widely enacted emergency powers), the EIU would likely move quickly and the market would be correct.
Net calibration: I keep my independent probability at **65%**. I view the market’s 90% as overstating near-term certainty and likely reflecting risk-averse positioning and headline-driven extrapolation rather than the EIU’s historically measured scoring process. If you hold market shares, that suggests a potential value trade: shorting some of the *Yes* exposure could be profitable if you believe the EIU will require more concrete institutional changes to downgrade under 7.60.
Arguments
For
- Recent increases in policy uncertainty and visible confrontations between the executive branch and other institutions increase the chance the EIU deems the 'functioning of government' weaker.
- Repeated rhetoric undermining confidence in elections and institutions can translate into measurable declines in political culture and electoral process subindices if followed by concrete actions (e.g., pressure on election officials).
- Sustained restrictions or hostile actions toward media, protests, or civil-society actors would erode the civil liberties subscore rapidly and push the composite below 7.60.
- The 2028 election itself is a high-risk flashpoint: contested results, legal maneuvering, or major breakdowns in administration could trigger a sharp, negative EIU reassessment in the relevant annual report.
Against
- The EIU typically needs sustained, demonstrable institutional changes to revise scores substantially; short-term volatility or rhetoric alone is unlikely to produce a <7.60 score.
- Federal courts, many state-level officials, and professional bureaucracies have historically resisted extreme unilateral executive actions; these institutional buffers reduce the probability of very large deterioration.
- Civil liberties and political participation are broad categories; isolated incidents or scandals rarely move the composite enough to cross the 7.60 threshold without cumulative, multi-domain evidence.
- Economic fallout alone (recession, inflation) does not directly translate to EIU democracy-score declines unless it precipitates governance failures or emergency-rule responses that curtail liberties.
Key drivers
- Executive actions (use of emergency powers, executive orders, pardons, and administrative firings) that materially weaken checks and balances
- Judicial independence and willingness of federal courts to block or tolerate executive excesses
- Election administration and contested electoral outcomes in 2026/2028 that could produce perceived failures of the electoral process
- Civil liberties developments (media freedoms, protest restrictions, surveillance, press harassment) that the EIU can document
- EAU/EIU reporting timing and methodology inertia (annual scoring cadence and thresholding behavior)
Risk factors
- Measurement and timing lag — the EIU updates annually and demands sustained evidence, so ephemeral crises may not change the score
- State-level heterogeneity — robust state institutions can offset federal-level erosion in EIU assessments
- Unexpected countervailing actions (bipartisan congressional pushback, Supreme Court interventions) that restore functional governance
- Market overreaction driven by headline risk and defensive positioning rather than changes in underlying metrics
Scenarios
Best case
The worst-case institutional erosion happens: a sequence of decisive actions (e.g., sustained removal or sidelining of independent judges, major constraints on press freedom, or clearly manipulated electoral administration) convinces the EIU to downgrade the U.S. below 7.60 in an annual report. This could be catalyzed by an intensely contested 2028 electoral cycle or explicit emergency powers that are broadly viewed as systemic overreach.
Most likely
A measurable but not catastrophic deterioration: sustained executive assertiveness and periodic erosive actions reduce the U.S. Democracy Index by several tenths. The score hovers near the threshold and may cross 7.60 in one year if the EIU weighs a particularly negative set of events heavily, but the decline is incremental and contentious rather than abrupt.
Worst case
Institutions hold comparatively well: courts block the most extreme measures, state and local officials preserve election integrity, and civil-society actors continue to operate freely. Any damage is limited and transient, and the EIU keeps the U.S. above 7.60 through 2028. In this scenario, market participants who priced near-certainty on a downgrade lose if the EIU maintains a higher score.
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