It had to happen this way. In the wake of a self-described electoral "shellacking," President Obama's first crucial test will be deciding whether he'll hold his ground on extending the Bush tax cuts only for the working and middle class, or whether he'll cave to Republican demands that they go to the wealthiest Americans, too. On Fox News Sunday, Eric Cantor said there's no room for compromise; the GOP opposes "decoupling" breaks for the rich from breaks for the rest of us.
The smart money may be on Obama caving to the GOP, as he did when Republicans demanded a smaller-than-needed stimulus, healthcare reform without a public option or curbs on industry profits, financial reform without a ban on banks' gambling with federally insured money -- and then delivered few or no votes for the watered-down result, anyway. I still believe Obama can stick to his guns, realizing that he's living through a depressing hazing ritual for Democratic presidents -- being stuck cleaning up after a Republican bacchanal -- and refuse to budge.
Why? Because the alternative -- Obama caving -- is unthinkable, politically. It would extend the last 30 years of class warfare -- the rich against the rest of us -- indefinitely. It would doom the Democrats for the foreseeable future. And it could throw the country back into the recession from which it's barely recovered, since paying more money to the uber-rich would make spending on jobs or any other kind of recovery measures almost impossible.
Democrats could be doomed either way. Almost a week after the election, the blame game for the party's losses in the House and Senate rages on. Conservative party leaders like Evan Bayh blame Obama for going too far with his agenda; progressives say he didn't go far enough. I happen to side with progressives, yet bickering over the complicated dynamics that tilted 435 House races, dozens of Senate and gubernatorial contests and literally thousands of state and local races one way or the other seems like a waste of time. We have to keep our eye on the big picture: Democrats have been caving to Republicans on crucial economic issues since the days of Jimmy Carter, and their electoral weakness is directly tied to those cave-ins.
Let's face it: Democrats got kind of lucky in 2006 and 2008. Republican incompetence and cronyism, a protracted, unpopular war and, finally, a terrifying economic meltdown gave the party control first of Congress and then of the White House. But the roots of the party's 2010 unraveling, paradoxically, can be traced to its successes in those previous two elections. First, the decision to recruit conservative Blue Dog Democrats in relatively red districts gave the party its majorities -- but they were majorities in name only. There was never a governing coalition behind the Obama agenda. Republicans were near-unanimous in opposing it, giving Blue Dogs a virtual veto. And even after they thwarted their party leaders' agenda, or tried to, forcing destructive compromise on the stimulus and/or voting against healthcare reform, more than half the Blue Dog caucus lost to actual Republicans last week, anyway. (It seems that given the choice, voters ultimately prefer real Republicans to Democrats who act like them.) I'm not arguing, by the way, that progressive Democrats could have won those districts (though in some cases, it's possible). I just think the victory of conservative Democrats in 2006 and 2008 obscured how hard it was going to be to move the country forward after the economic and political carnage suffered by everyone but the wealthy over the last 30 years.
Maybe more important, the Democrats' incredible fundraising success in the last decade, especially in 2008, was clearly crucial to their winning the White House and Congress. But their growing coziness with corporate America muddled their message and made the party unable to sincerely champion the victims of the Wall Street meltdown -- even after that disaster helped hand them the White House in 2008. Remember, President Obama outraised John McCain with the so-called FIRE sector -- finance, insurance and real estate; the folks who torched our economy -- by 40 percent. Could we really expect him to turn around and campaign against them, and then rein them in adequately? And yet, because the Democrats didn't, voters elected a Republican majority that will be led by John Boehner, who told the American Bankers Association that they must stand up to the "little punk staffers" who were working on regulatory fixes to the banking mess.
I've been mulling all of this for a while, belatedly reading Jacob Hacker and Paul Pierson's "Winner-Take-All Politics: How Washington Made the Rich Richer -- and Turned Its Back on the Middle Class," starting it before and then finishing it after the depressing election. It's a must-read book that was embraced by progressive Wonkistan when it came out in September but mostly ignored by the mainstream media -- no reviews in the New York Times and Washington Post, for instance, though it was hailed by Times columnist Bob Herbert and tepidly praised (but mostly criticized) by the Post's Steven Pearlstein. That's sad, because the book broke down what was at stake in 2010 and will be at stake in 2012 better than anything I've read. Let me try to do it justice belatedly, and maybe we'll have a better November two years from now.
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"Winner-Take-All Politics" delivers its message in neon-bright numbers, but they are numbers all the same. The charts depicting the increasing gap between the uber-rich and the rest of us will blow your mind -- if you like charts. The narrative is lively, yet wonky. If you want to get its wisdom, you're going to have to sit still for some statistics. Here's what I thought was most important:
- The richest 1 percent of Americans now take in almost a quarter of national income, up from about 8 percent during the Carter administration.
- Their after-tax income rose 256 percent in that same time, while the middle fifth of the country saw its after-tax income grow by about 20 percent.
- In roughly the same period, the percent by which taxes and government benefits reduced inequality dropped by a quarter.
- Had national income grown the way it did in the generation after World War II, that middle fifth would have earned $12,300 more income; the top 1 percent would have earned almost $700,000 less.
While those depressing numbers tell one kind of story, what's most important is the story of the political forces that created those economic outcomes. Hacker and Pierson describe a "30-year war," and it's a class war, but they show the way it featured Democrats fighting on the wrong side, against the FDR-New Deal coalition, way too much of the time. Where Rick Perlstein's fantastic and influential "Nixonland" places the start of that war in the Nixon administration -- and certainly Nixon's politics of resentment, picking off the angry white working class, created the cultural conditions for what was to come -- "Winner-Take-All Politics" argues that the Democrats' troubles, and cave-ins, really began with Jimmy Carter. The Nixon administration was actually the high-water mark for the New Deal and Great Society: Social spending was higher than even under Lyndon Johnson, and of course the Republican president presided over the creation of the Environmental Protection Agency and the Occupational Safety and Health Administration, the passage of the Clean Water Act; though he bashed welfare, his family assistance proposal was progressive, and his healthcare reform proposals, rejected by Democrats who wanted more, were arguably better than the historic compromise hammered out under Obama.
Enter Jimmy Carter, a Southern upstart who'd been soured on the labor movement during the devastating intra-party squabbles of 1972, a good-government reformer who was decent on civil rights but had no defined class agenda. He took office when Democrats also controlled the House and the Senate -- and he got almost nothing of the Democratic agenda accomplished. Labor law reform, full employment, an Office of Consumer Representation; all either failed or were compromised beyond effectiveness. Partly that was thanks to the rise of a new big business lobby in Washington, and partly it was thanks to Democrats' being ideologically rudderless. Despite Nixon's resounding crash in the wreckage of Watergate, they were running scared on defense and on the economy.
Yes, Obama also took office with rare (in modern times) Democratic majorities in the House and Senate, but Carter comparisons are mostly unfair; he has already accomplished far more legislatively. Still, his sweeping victories were compromised, and to complain about that isn't being petty and ideological; those compromises hampered his achievements' effectiveness, which hurt Democrats politically. The sad truth is, despite a brief mirage of 60 Democratic votes in the Senate, Obama never had 60 votes; he had Joe Lieberman plus conservative Dems like Ben Nelson, Blanche Lincoln and Mary Landrieu. They could, and did, stop any substantive reform they or their corporate sponsors didn't like.
The result was the shellacking of 2010. Voters angry at the Wall Street bailout elected a House GOP majority committed to undoing key provisions of financial reform. Voters worried about the deficit elected Republicans who've pledged to blow it open by another $700 billion by extending the Bush tax cuts to the wealthy. Maybe the saddest fact of the 2010 results is an exit poll cited by Rick Perlstein: Of likely voters, two-thirds believed Obama had raised their taxes, when in fact, he'd lowered them. They believed the lies told by Rush Limbaugh and Fox News, lies that were barely challenged by the MSM and inadequately countered by President Obama, because "the essence of Obamaism as an ideology is that it is Uncivil to Call Out Liars."
Perlstein notes ominously: "When one side breaks the social contract, and the other side makes a virtue of never calling them out on it, the liar always wins. When it becomes 'uncivil' to call out liars, lying becomes free."
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So what's the answer? "Winner-Take-All Politics" excels in its diagnosis but lags in prescription. That's just a measure of how hard divising an answer will be. Hacker and Pierson show how politics has become "organized combat," but it's almost totally one-sided. Business fought back against the counterculture and government growth of the '60s and early '70s; the number of companies with registered lobbyists in Washington grew from 175 in 1971 to nearly 2,500 in 1982. To compete with the not terribly liberal Brookings Institution, right wing fatcats created the American Enterprise Institute and Heritage Foundation, and by 1980, both were bigger than Brookings.
The Republican National Committee got fat off angry corporate donors and went to town politically; Democrats believed they had to compete in fundraising to compete electorally, and to do so, they became more like their pro-corporate rivals. We think of the Democratic Leadership Council backlash of the late '80s and '90s as being mainly about culture-war issues like crime and welfare and mounting a critique of "big government," but it was also a reaction by Southerners and business-friendly Democrats who wanted the party to join forces with the rich, not soak them. The party's coffers grew, but its allegiance to working people and the middle class declined.
Who was left to defend the interests of the non-rich? There hasn't been much in the way of institutional power on behalf of the middle and working class since unions began declining, also in the 1970s. Of course, the decline in union membership is both a cause and an effect of the Democrats' middle-class problem. Management worked hard to thwart unionization in the '70s, but organized labor likewise missed opportunities for growth, too often ignoring the aspirations of women and minority workers in favor of their white male base, even flirting with Nixon as the Democrats were beset by racial and cultural strife. The only gains for unions have come in the public sector, and that's politically problematic for Democrats, as it seems as though "our" tax dollars pay for worker protections and benefits that the rest of us don't enjoy.
The explosion of Democratic interest groups in the 1970s didn't solve the problem either. The activism on the fronts of environmentalism, and women's, minority and gay rights was important, but it didn't represent a movement that was about bread-and-butter economic concerns, or that broadly represented the interests of the non-rich, the way unions did.
Against that backdrop, there are few signs of hope that Democrats can build a power base to actually fight Republicans in "organized combat." Like famed organizer Marshall Ganz and techPresident's Micah Sifry, Hacker and Pierson see a missed opportunity in Organizing for America, the remnant of the mighty Obama for America juggernaut. The Democratic candidate put together a titanic e-mail list of 13 million names, 4 million donors and 2 million active volunteers, but the White House didn't have a strategy for keeping those forces in fighting trim. By some reports, they didn't want to. I remember starting to get a steadier stream of e-mail from OFA at the end of the healthcare reform debate, but by then, Democrats had lost the messaging war -- and being told to call and thank Nancy Pelosi, my congresswoman, for her hard work on the issue didn't seem like the most crucial thing a San Francisco Democrat could do. (But thank you, Speaker Pelosi! Especially because your hard work on the Obama agenda probably cost you your job!)
No doubt the White House is thinking hard again about how to activate the forces it marshaled in 2008, as it gears up for 2012. That's opportunism, sure -- the president wants to get reelected -- but it means there's opportunity. The only hope for a Democratic resurgence in the near-term is for Barack Obama, who still has enormous political capital, to decide what he stands for. Is he looking to reverse the dangerous trends of economic inequality that are corroding "Our Banana Republic," as Nicholas Kristof terms our new plutocracy? Or will he tinker around the edges, ceding to the wealthy the right to control the economy by controlling politics, rigging the game of taxation, labor law, business regulation and spending on social support, so the big winners keep on winning at the expense of most of the rest of us?
Overreaching by Republicans, cronyism and corruption; the orgy of tax cutting and deregulation that led to the Wall Street meltdown -- the conditions that led Obama and Democrats to control the White House and Congress were the kind of conditions that, in earlier generations, led to periods of political and social renewal, where reformers stood up to robber barons and capitalist overlords and made them cease the carnage. The Gilded Age gave us the Progressive Era; the Depression yielded the New Deal, and that approach to blunting capitalism's sharp edges and expanding opportunity persisted, ironically, through the Nixon administration. Obama and the Democrats had an epochal opportunity to change the terms of the political debate and begin another era of renewal in 2008, and they haven't managed it yet. They still have a chance, but the window is closing, and voters are losing faith that Democrats are up to solving the nation's problem. How Obama handles the GOP's tax challenge could determine his party's fortunes, and the country's, for many years to come.