I am a FDR moderate. I write this as a FDR moderate. Amongst Democratic elite circles in DC, populism is tantamount to signing a pack with the devil. But, as I wrote yesterday, there are three types of populism- right, left and middle.LINK
Here, I would like to argue that middle class populism can be a source of restoring the Democratic momentum that existed in 2008 and restoring the promise of the American dream to the American middle class that has been destroyed over the last 30 years. I wish to flesh middle class populism out here as an idea whose time has come.
If you find the term middle class populism a turn off, I would suggest using another term that may make your feel better. That term is "middle class capitalism." My argument is simple: The type of capitalism we have been practicing is geared toward the wealthy rather than the voters who did or did not show up MA on Tuesday. Each of these voters is responding to the same problem: The middle class squeeze. Focusing on deficits will not solve what ails the middle class. Jobs and industrial policy will.
I mentioned this in the prior diary,but this middle class squeeze bares repeating:
"Can you imagine an America without a strong middle class? If you can, would it still be America as we know it?
Today, one in five Americans is unemployed, underemployed or just plain out of work. One in nine families can't make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down, and threatens to put ten million homeowners out on the street.
Families have survived the ups and downs of economic booms and busts for a long time, but the fall-behind during the busts has gotten worse while the surge-ahead during the booms has stalled out. In the boom of the 1960s, for example, median family income jumped by 33% (adjusted for inflation). But the boom of the 2000s resulted in an almost-imperceptible 1.6% increase for the typical family. While Wall Street executives and others who owned lots of stock celebrated how good the recovery was for them, middle class families were left empty-handed.
The crisis facing the middle class started more than a generation ago. Even as productivity rose, the wages of the average fully-employed male have been flat since the 1970s."
LINK
This is not my first conversation about how the middle class was systematically squeezed over the last 30 years:
"The bailout of the banking industry was the result of decades of Reagan policy making carried out by both Democratic and Republican neoliberals that shifted risk from corporations to the American public. It is only the tip of iceberg. This shifting of risk is the flip side of the coin to wage stagnation and deflation that acts to increase the debt and loses of the American people...
To understand, why this is the case requires an understanding of what risk is. This is not an easy task. However, to have a working definition, let's just say that risk is the chance in any given transaction for one to be a winner or a loser. It is the concept of working the odds. What are the odds that you will obtain a job that will cover your debt from college? What are the odds that you will have enough money to pay for health care premiums and save money? What are odds of bank failure if they are too big to fail?
If you want to understand what is happening in American capitalism, the point is that corporations have been putting their finger on the scale through government policy to shift the odds in their favor against you. It is not that there can not still be winners amongst the American people. It is that the finger on the scale makes that increasingly unlikely. That finger on the scale increases cost for you even as it stagnates or deflates your wage. Thus, making savings less likely.
For example, extremely high premiums, means the risk of no savings. The cost of education combined with stagnant wages means that the chances of you finding a job to pay your debt are decreased. Who should be responsible for the risk of mortgages that were not well conceived? The banks or you? Or both? Who is in the best position to ascertain risk? Banks or you? Which side should government favor? Banks or you when it comes to requiring a market where players are actively considering risk? These are all questions lost in Reaganism...
This risk comes up in many ways. Some are obvious such as those that I already describe, and some, are not so obvious. For example, take NAFTA, the North American Free Trade Agreement, and similar global policy making, this is an example of subtle (and some might argue not so subtle) risk shifting from the corporation to the American people. These policies subject American workers to the risk of corporations shopping around for countries with the the most favorable labor and environmental laws when the workers are attempting to negotiate with their employers. What does American labor obtain in return for this shifting of risk? Lower wages due to the worker wanting not take the chance that they will ship the jobs abroad.
Most shifting of risk is so invisible that we do not even think of them as such. Who realizes that our lack of a diversified economy in favor of consumer based economics shifts the risk to us because we are more subject to the upheavals of the business cycle of booms and recessions? Who thinks about how the relative strength of consumer protection laws affects risk? Who realize that tort reform shifts risk to us? Do you think about the lack of energy diversification and its impact on your ability to not be impacted by oil cartels? Who thinks about how risk of war increases, and thus, the necessary increase of debt, caused by the need for greater foreign entanglement? These are, of course, liberal arguments.
There are conservative ones as well that point to the problem with shifting risk. How free can investors truly be if corporate interest backed by government policy denies investors the ability to address the managers of the company's taking huge profits while companies are failing?"
LINK
I also discussed the issues of the middle class with U.S. falls behind Europe in Economic Mobility between Classes LINK
Middle class capitalism or populism is not a right or left construction. At first blush, this may seem like a push from the left, but in fact, there are many ideas that can be drawn from the right or right of center as from the left. The focus is not on ideology, but on whom the policies are meant to help.
Let's take a practical example such as the cap gains tax. I have previously advocated that cap gains should be restructured to favor middle class activities like starting small businesses. The point is, again, to whom are the benefits of policies to accrue?
There are, of course, left leaning issues to be discussed. For example, rethinking our trade ideology would be a good place to start. It is interesting that we continue to blindly follow free trade even as our trading partners do not seem the world from a similar view: Calls For Protectionist Retaliation Against China Rise LINK
It is at this point after reading the above article that one should realize we are following ideological beliefs rather than empiricism about how to help the American middle class. It is not like the questions about the declining American middle class are new LINK.
We now have two parties hellbent on aiding that decline through bad policies. I predict here that if the Democrats do not start to address middle class problems, the next decade will see a yo-yo for power between Republicans and Democrats. The Republicans have no solutions, but the Democrats must act to provide effective policies in the wake of this vacuum or empty rhetoric by right wing populists will take the place of sound economic policies that address the populist emotions rising in this country.
There are other economic issues that we can address to rebuild the American middle class such as industrial policy. However, this is only one of many issues. Others include reducing the costof education and securing the lending environment so that businesses can obtain loans without fear of Las Vegas type gambling by Wall Street.
All of this is about a mindset in DC. That mindset is elitist, whether it is from the GOP (that fakes populism) or Democrats who distrusts it. But, for Democrats, we must remain true to the party of FDR and LBJ. I leave with another quote, because it sums up my feelings:
"What happens if you refuse to lay the blame for the destruction of our economy on anyone--particularly the party, leaders, and ideology that were in power for the last 8 years and were responsible for it? What happens if you fail to "brand" what has happened as the Bush Depression or the Republican Depression or the natural result of the ideology of unregulated greed, the way FDR branded the Great Depression as Hoover's Depression and created a Democratic majority for 50 years and a new vision of what effective government can do? What happens when you fail to offer and continually reinforce a narrative about what has happened, who caused it, and how you're going to fix it that Americans understand, that makes them angry, that makes them hopeful, and that makes them committed to you and your policies during the tough times that will inevitably lie ahead?
The answer was obvious a year ago, and it is even more obvious today: Voters will come to blame you for not having solved a problem you didn't create, and you will allow the other side to create an alternative narrative for what's happened (government spending , deficits, big government, socialism) that will stick. And it will particularly stick if you make no efforts to prevent it from starting or sticking...
The White House has squandered the greatest opportunity to change both the country and the political landscape since Ronald Reagan. It should have started with a non-watered-down stimulus package big enough to stop the bleeding in the job market--and a smack-down of any Republican who dared to utter the word "deficit" after 8 years of reckless, unpaid Republican spending. It should have followed with stringent regulations on Wall Street and protection of homeowners and small businesses instead of with a jobs creation program inside the administration for failed bankers and failed regulators. A stimulus--including a jobs program--strong enough to prevent the hemorrhaging of 700,000 jobs a month and a muscular approach to the bad actors who had crashed the economy would have gotten the public firmly behind the President and the Democrats, demonstrating to the average voter that they have a choice between one party that's on their side and another that's not. Instead, the White House just blurred the lines between the parties so the average American couldn't tell the difference."
LINK
This speaks to the American people's desire to not be frozen in fear of the economic terror we face. Heed the words or not. Win or not. It will remain true.