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Do We Know the Answers To Our Economic Problems?

Partisan obstructionism and incompetence are inadequate explanations for structural problems that have developed over decades.

I’ve been following a thread today about how the Democratic Party can get their mojo back, in which everybody agrees that the key is to do more to actually help working class (but actually working) voters.

The thread started with Harold Meyerson complaining that the Democrats have been depending on demographics – the “coalition of the ascendant” – for victory, and that the 2014 elections should prove once and for all that this is insufficient. Unless they can deliver broad-based prosperity, they are going to lose:

Sixty-three percent of respondents told pollsters they believed that the U.S. economic system generally favors the wealthy, while just 32 percent said that it is fair to most. And a wave of ballot measures to raise state or city minimum wages carried wherever they were put before voters — from deepest-blue San Francisco and Oakland to solid-red Nebraska, South Dakota, Arkansas and Alaska.

Yet Democrats were singularly unable to take advantage of such unarguably populist sentiments. Never mind their failure to win in red states or hold the Senate. They failed to turn out their voters, or persuade the hitherto persuadable, in such blue bastions as Maryland, Massachusetts and Illinois, where they lost governors’ races. Even in the people’s republic of Vermont, the incumbent Democratic governor won so narrowly that the race will be tossed to the legislature (as Vermont law requires when no gubernatorial candidate breaks 50 percent). If current margins hold, there will be just 18 Democratic governors in January, and just eight in the 31 states that don’t border the Atlantic or Pacific.

Tuesday’s verdict makes clear that the Democrats cannot win by demographics alone.

Noam Scheiber agrees, and adds that, in his view, there’s nothing basically standing in the way of re-jiggering the Democratic message. They don’t need to abandon social liberalism, just emphasize economic populism more. And they don’t need to worry that economic populism will alienate their more upscale, college-educated demographics, because said populism is increasingly acceptable in those quarters:

The white working class is increasingly open to social liberalism, or at least not put off by it. As Ruy Teixeira and John Halpin observed this summer, 54 percent of the white working class born after 1980 think gays and lesbians should have the right to marry, according to data assembled from the 2012 election. (This tolerance diminishes as people get older, but even middle-aged working class voters are relatively open-minded on this issue.)

Teixeira and Halpin also cite a recent Center for American Progress poll that asked people about their views on racial and ethnic diversity. In that poll, 64 percent of white working class voters (overall, not just Millennials) agreed that “Americans will learn more from one another and be enriched by exposure to many different cultures.” Sixty-two percent agreed that “diverse workplaces and schools will help make American businesses more innovative and competitive.” A slight majority even agreed that “the entry of new people into the American workforce will increase our tax base and help support our retiree population.”

For their part, college grads are increasingly sympathetic toward economic populism, according to recent polling from Pew. The percentage of college grads who believe “[t]here is too much power concentrated in the hands of a few big companies” has jumped 16 points since it bottomed out in the mid-1990s at 59 percent. The percentage who believe “corporations make too much profit” has jumped eight points since its low of 42 percent in the late ‘90s. The percentage who believe “Wall Street makes an important contribution to the American economy” has dropped 12 points since 2009 (when Pew first asked the question), to 66 percent.

Long story short, there’s a coalition available to Democrats that knits together working class minorities and college-educated voters and slices heavily into the GOP’s margins among the white working class. (As Teixeira and Halpin point out, Democrats don’t need a majority of the white working class to hold their own in the midterms. They just need to stop getting crushed.) The basis of the coalition isn’t a retreat from social progressivism, but making economic populism the party’s centerpiece, as opposed to the mix of mildly progressive economic policies (marginally higher taxes on the wealthy, marginally tougher regulation of Wall Street) and staunchly progressive social policies that define the party today. The politics of this approach work not just because populism is a “message” that a majority of voters want to hear. But because, unlike the status quo, it can actually improve their economic prospects, as Harold Meyerson recently pointed out.

Finally, Kevin Drum throws a bit of cold water by gently suggesting that the Democrats’ problem isn’t just failing to deliver on promises of prosperity, but declining expectations specifically turn working class voters against the prime beneficiaries of the welfare state:

I agree that social liberalism isn’t quite the deal killer it used to be. Scheiber and Teixera are right about that. It’s still an issue—especially gun control, which remains more potent than a lot of liberals like to acknowledge—but it’s fading somewhat in areas like abortion and gay marriage. . . .

But if that’s the case, why does the WWC continue to loathe Democrats so badly? I think the answer is as old as the discussion itself: They hate welfare. There was a hope among some Democrats that Bill Clinton’s 1996 welfare reform would remove this millstone from around Democrats’ necks, and for a few years during the dotcom boom it probably did. The combination of tougher work rules and a booming economy made it a less contentious topic.

But when the economy stagnates and life gets harder, people get meaner. That’s just human nature. And the economy has been stagnating for the working class for well over a decade—and then practically collapsing ever since 2008.

So who does the WWC take out its anger on? Largely, the answer is the poor. In particular, the undeserving poor. Liberals may hate this distinction, but it doesn’t matter if we hate it. Lots of ordinary people make this distinction as a matter of simple common sense, and the WWC makes it more than any. That’s because they’re closer to it. For them, the poor aren’t merely a set of statistics or a cause to be championed. They’re the folks next door who don’t do a lick of work but somehow keep getting government checks paid for by their tax dollars. For a lot of members of the WWC, this is personal in a way it just isn’t for the kind of people who read this blog.

And who is it that’s responsible for this infuriating flow of government money to the shiftless? Democrats. We fight to save food stamps. We fight for WIC. We fight for Medicaid expansion. We fight for Obamacare. We fight to move poor families into nearby housing.

This is a big problem because these are all things that benefit the poor but barely touch the working class. Does it matter that the working class barely pays for most of these programs in the first place, since their federal income taxes tend to be pretty low? Nope. They’re still paying taxes, and it seems like they never get anything for it. It’s always someone else.

I could throw a bunch of responses into the mix here. For example: Schreiber is clearly overestimating the appeal of economic populism to upscale Democratic voters. 66% still think Wall Street makes an important contribution to the economy? That’s not exactly pitchfork territory. Drum, meanwhile, gives away the store when he says, of a list of priorities that include food stamps and Medicaid and Obamacare, that “these are all things that benefit the poor but barely touch the working class.” Last I checked, large percentages of work-eligible SNAP recipients are actually working, many elderly people in need of nursing care avail themselves of Medicaid’s benefits, and Obamacare was supposed to improve insurance markets particularly for those vulnerable to losing their insurance, which very much includes big swathes of the working class.

But the real point is, I feel like everybody in this conversation is dancing around the most important question: is there somebody out there who knows what will actually work? It’s not hard to articulate what either Democrats or Republicans would need to do to win. Simply say: our top priority is getting unemployment down and wages up. Not our only priority, but our top priority. And then actually deliver on that top priority.

Delivering turns out to be a bit tough, though – for both parties. Let me first look at the Republican side of things. President Bush took office just as the American economy started to tip into recession. After the 9-11 attacks, he had wide popular support even as the economy dipped further. The midterms translated that support into stronger legislative backing. He had a Fed Chair from his own party who wanted to see him succeed. If there were some well-known silver bullet that would have delivered robust economic performance, even if it broke with Republican orthodoxy here or there, don’t you think he would have pushed for it? Remember, this is President who gave us No Child Left Behind, Medicare Part D, Sarbanes-Oxely and McCain-Feingold. These were all major departures from Republican orthodoxy. It’s just that none of them were measures aimed directly at getting unemployment down and wages up. And economic performance was pretty lackluster throughout the Bush Presidency.

Now, on the Democratic side, President Obama was elected with a huge majority right as America dipped not merely into a recession but into a near-depression in the wake of a historic financial crisis. He faced intense opposition from Republicans in Congress, yes, but does anyone doubt where the political momentum was? That if there were some well-known silver bullet to deliver robust economic performance, he could have steamrolled any opposition? He did manage to pass Obamacare, eventually; he did manage to pass a huge stimulus bill (though not as big a bill as his own advisors thought was necessary); he did manage to pass Dodd-Frank. But the recovery was slow and fitful and wages in particular took a haircut with the crisis and haven’t recovered at all since then. And other than legislating a rise in the minimum wage, there really hasn’t been anything in the Democratic playbook that speaks directly to this issue.

Demographic appeals are the last refuge of a party without solutions to the problems voters care about most. Both parties, when faced with the failure of their economic policies to deliver the kind of broad prosperity that would lead to large reelection margins, turned to demographic appeals to “turn out” their base for victory. That worked well enough for the GOP in 2004 and for the Democrats in 2012, but left each party respectively with nothing to run on in 2006 and 2014. At which point each party in turn got a thorough shellacking.

The problem is structural. Wages have stagnated for decades. Recoveries in employment have been painfully slow in each of the last three recessions. This has been true under united governments of both parties and under divided governments. The most parsimonious conclusion to draw is that the main policymakers in both parties genuinely don’t know how to solve this problem.

That doesn’t mean there are no solutions, of course. There may be solutions within the standard policymaking playbook, or solutions may require more radical changes to our political or economic system. But if the solutions are out there, they are not known – that is to say, they are not generally accepted as knowledge. Which means pushing them is not some kind of electoral magic. I have my own notions of what is needed. But I’m under no illusions that there’s some kind of consensus that my notions are right. I’m under no illusions that there’s any kind of consensus at all on how to tackle what is plainly a long-term structural problem affecting the entire developed world.

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