Can the Dems cash in?

Robert Kuttner, co-editor of the American Prospect, is the author of "The Squandering of America: How the Failure of our Politics Undermines our Prosperity."

The sub-prime mortgage crisis and worsening credit card debt are only intensifying a longer-term trend of economic distress for most Americans. This reversal of fortune, which began in the 1970s, includes dwindling prospects for good employment, severe cutbacks in employer-provided health insurance, less reliable company pensions and family incomes that lag inflation, except for the rich.

All these trends have accelerated during the Bush administration. Many economic forecasters are predicting an election-year recession -- seemingly a windfall for the opposition party. Yet it’s not at all clear that the Democrats will pin the economic distress squarely on the policies of the Republican administration or offer a politically convincing alternative to them.

Why not?

There are four main reasons.

Uncertain trumpets and ideological mush. Since Jimmy Carter was president, Democrats have been split into two factions. Populists attack the political influence of organized business and seek to once again harness capitalism to deliver broad prosperity. By contrast, “New Democrats” offer a faint echo of moderate Republicans. Their slogan might as well be: “We don’t much like government either, but we can run it better.”


The result has been a mixed message that doesn’t persuade voters to take Democrats seriously as the party of ordinary Americans. Bill Clinton ran in 1992 as a populist -- “People who work hard and play by the rules shouldn’t be poor” -- but he governed as a New Democrat centrist.

In the last two presidential elections, Al Gore and John F. Kerry tacked back and forth between offering a whiff of class warfare and a bloodless centrism -- trying to please both wings of the party. When Kerry decried “Benedict Arnold CEOs” who export American jobs, he was warned by some of his big donors to stop using the phrase, and he did.

Financial captivity. Democrats are increasingly dependent on Wall Street and big business for contributions, especially at the presidential level, and this has blunted their appeal to ordinary voters. In the 1990s, many congressional Democrats supported the financial deregulation that helped lay the foundation for the Enron debacle and, more recently, the sub-prime loan mess. The current financial meltdown ought to be a perfect issue to distinguish Democrats from Republicans. But just enough prominent Democrats -- such as New York Sen. Charles E. Schumer -- have their fingerprints on deregulation to prevent the issue from gaining more partisan traction.

In congressional races less dependent on immense sums of campaign cash, a more progressive politics is possible. All six Democrats who took Senate seats from Republicans in 2006 ran as economic populists. In Ohio, Sherrod Brown easily won, not by tacking to the center but as a full-throated progressive. In Virginia, Jim Webb began by running on his defense credentials and then, after listening to Virginia voters, ended up sounding like Franklin D. Roosevelt.

Deficit disorder. Under Clinton, budget balancing was taken to an extreme, hailed as a public virtue and credited for reducing interest rates and sparking the 1990s boom. Yes, the deficits under Ronald Reagan and George H.W. Bush were out of control and certainly needed reining in. But the Democratic obsession with budget balancing undermines support for domestic spending programs that play to Democrats’ strength.

Ironically, economic growth in the 1990s had little to do with balancing the budget. In a global economy, low interest rates are not directly tied to domestic balanced budgets because capital markets are international. The recovery reflected productivity increases -- mainly from the increasing use of computers in the workplace -- that had been incubating for more than a decade. According to Federal Reserve studies, the red-hot economy of the late 1990s was mostly the consequence of a stock market bubble that created paper wealth and made people feel richer and spend more.


Pay-go paralysis. By embracing pay-as-you-go budget rules -- no new spending unless it’s offset either by tax increases or spending cuts -- Democrats have denied themselves the ability to offer robust spending measures that might signal practical help for economically distressed Americans. Since taking back Congress in 2006, for instance, they have put their legislative stamp on nothing truly dramatic. Raising the federal minimum wage was important, but it hardly addresses the spreading economic distress in the country.

Together, these four serial disorders have combined to leave the Democrats as a party offering weak remedies and mixed messages to working Americans. To reverse the 30-year trend of increasing economic inequality and insecurity -- and to repair the deep damage to the financial system -- FDR-scale remedies and his style of ideological clarity will be required: serious public regulation and serious public outlays.

Unfortunately, the leading Democratic presidential contenders have yet to offer any such sweeping measures. Barack Obama has positioned himself as the candidate with a great life story who rises above partisan divides. But he has stumbled on the two key pocketbook issues of Social Security and health insurance.

Obama bought the much exaggerated story about Social Security’s coming insolvency, and he proposed payroll tax increases not just on the rich but on the upper middle class as well. His health insurance plan fails to insure everyone, and he uses a language of “mandates,” a word that connotes governmental coercion rather than governmental help. He is capable of talking like a bold progressive, but his senior economic advisors -- University of Chicago professor Austan Goolsbee and Harvard’s David Cutler -- are both economic centrists.

At least rhetorically, Hillary Clinton has lately been sounding more like FDR. “The oil companies, the drug companies, the health insurance companies, have had seven years of a president who stands up for them,” she said after winning the New Hampshire primary. “It’s time we had a president who stands up for all of you.” Last week, she proposed a modest anti-recession package of $70 billion to stimulate the economy. But it doesn’t come close to the kind of program that would transform the structural insecurity facing the middle class.

The House Democratic leadership is also reportedly working on an economic recovery package that would propose new spending in the range of $75 billion to $100 billion and possibly some tax relief for the middle class, as well as mandatory mortgage foreclosure relief. That too is not bad for starters, but it’s not enough either to fire the public’s imagination or to fix what’s broken.


One of the most misleading cliches of politics is the advice that when your opponent is doing himself in, just get out of the way. Democrats will not win a resounding mandate by backing into the presidency. In the absence of truly big ideas that promise change at more than a rhetorical level, voters are just as likely to back the candidate who offers tax cuts.