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Jerome Karabel

Jerome Karabel

Posted: October 31, 2010 09:43 PM

Having been swept to office on an extraordinary wave of popular enthusiasm a mere 22 months ago, President Barack Obama and the Democrats now face a defeat of historic proportions. The exact magnitude of this defeat remains uncertain, but it seems likely that Democrats will lose between 50 and 60 seats in the House and seven or eight seats in the Senate. These losses go well beyond what is typical for a mid-term election in a president's first term in office; in the twelve such elections since 1934, the president's party has lost an average of 22 seats in the House and between one and two in the Senate.

To be sure, President Obama came into office during the worst economic downturn since the Depression, and we should expect substantial losses in such an economic environment. But losses of the magnitude that the Democrats will suffer on November 2 were not inevitable, a point underlined by the much better performance of President Reagan and the Republicans in the mid-term election of 1982. Facing the highest unemployment rate in over 40 years -- 10.4 percent in October 1982 (compared to 9.6 percent in October 2010) -- the Republicans lost just 26 seats in the House and actually gained a seat in the Senate. How Reagan, whose policies progressives understandably abhor, managed to do this under grim economic circumstances is a revealing case study in contrast to the Obama administration.

In his inaugural address, Reagan left no doubt as to where he placed blame for the economic crisis then facing the country: it was rooted in the growth of government and the liberal philosophy that underpinned it. "In the present crisis, he declared, "government is not the solution to our problem; government is the problem." The solution to the crisis, he argued, was to "curb the size and influence of the Federal establishment," to "reawaken the industrial giant", and to "cut government spending and to lighten our punitive tax burden." "These will be our first priorities", he declared, and "in these principles there will be no compromise."

Compare this speech to President Obama's inaugural address. While acknowledging that the country was in the midst of a grave economic crisis, he did not dwell on it, nor did he offer a clear roadmap of the way out. Responsibility for the crisis was diffused; there was a passing reference to "greed and irresponsibility on the part of some" (who remain unnamed), but the emphasis was put on "our collective inability to make hard choices." On the crucial philosophical issue of the government as an instrument of the common good, President Obama failed to stake out a coherent position grounded in principle, instead embracing a resolutely non-ideological position: "The question we ask today is not whether our government is too big or too small, but whether it works."

The roots of the debacle that awaits the Democrats on November 2 -- the "original sin", if you will -- reside in the cozy relationship that the Obama administration established with Wall Street even before taking office. Amidst a tremendous wave of justified popular anger at the bankers and financiers responsible for throwing the country into the worst economic crisis in 80 years, Obama turned to two men deeply implicated in the very policies that produced the crisis -- Timothy Geithner and Lawrence Summers -- to serve as his Secretary of Treasury and chief economic advisor, respectively. Can anyone imagine Ronald Reagan turning to two individuals so closely tied to the failed policies of the past as the public faces of his administration's plan for exiting the crisis?

And on January 12, 2009 -- eight days before taking office -- President-elect Obama formally asked President Bush to request funding from Congress for the Troubled Assets Relief Program (better known as TARP). Given TARP's vast unpopularity - - this decision, especially given the lack of conditions attached to the receipt of such vast sums of taxpayer money -- reinforced the sense that the wealthy would continue to receive special treatment even in administration that had come to office under the banner of "change".

Obama was right to immediately seek a stimulus package to address the economic crisis, and he got it through Congress with impressive speed. But by accepting a far smaller stimulus than his own economic advisers favored, he and his fellow Democrats were to pay a steep price. Those who defend Obama's decision to accept a relatively small stimulus laced with unproductive tax cuts claim, with some justification, that the votes were not there to pass a stronger package. But Obama, who then enjoyed tremendous popular support, could have chosen to wage a highly visible fight for a much bigger stimulus -- one designed to advance a broader narrative for addressing the crisis by embarking on a long-overdue program to rebuild our nation's decaying infrastructure as a way of reviving the economy and restoring our competitiveness. If he had won this fight, the resulting stimulus would have brought the unemployment rate well below its current level, drastically improving the political climate in which Democrats now find themselves. (This, by the way, is what is wrong with "objective models" that take economic conditions as an unalterable given and use these conditions to predict elections.) And if he had lost this battle, he could have later signed legislation similar to the stimulus bill that ultimately passed while making clear that the Republicans bore responsibility for the failure to give the economy a boost commensurate with the depth of the crisis.

But even a stronger stimulus bill would not have been enough to address the anxiety and anger that Americans were feeling about the economy in the early months of 2009. This was a critical period for Obama, whose approval ratings remained in the upper 60s into late April, and it was at this moment that he should have turned to Wall Street reform. With public rage at Wall Street then at high tide, the president could have argued convincingly that preventing another meltdown of the sort that almost shattered the global economic system just a few months earlier was an urgent necessity. In this atmosphere, the resulting legislation would almost surely have been stronger than the financial reform package that passed in the summer of 2010 and might well have attached conditions to the second part of TARP (such as requiring that bailed out banks make more loans to small businesses) that would have further stimulated the economy.

In any event, the financial reform package that ultimately passed is by far the most popular piece of legislation adopted since Obama took office; in September of this year, a Gallup poll showed that the public approved by a margin of 61 to 37 percent. Passing it early would have strengthened the political position of the Democrats for battles to come. But failing to make financial reform a priority coupled with the conspicuous failure of the Obama administration to prosecute any of the people responsible for the crimes (in stark contrast to much smaller savings and loan scandals of the 1980s), left many people with the gnawing sense that the president was more concerned about the interests of Wall Street than those of ordinary people. No wonder, then, that 76 percent of people polled by National Journal in 2010 believed that the government's response to the financial crisis had most benefited the wealthy and powerful.

Had Obama succeeded in passing financial reform legislation in the spring of 2009, he could have then turned to health care reform. But he would have done so from a position of greater political strength, having demonstrated his willingness to confront Wall Street while respecting the public's sense that the economy was the nation's top priority. Yet even in this scenario, the health care debate would have eroded Obama's popular support had he followed the same insider strategy that he ultimately decided to pursue: to strike secret deals with the pharmaceutical and health insurance industries while seeking nonexistent bipartisan support.

In pursuing health care reform, Obama seemed to forget that he had come to the White House with the help of the biggest grassroots mobilization since the 1960s. The troops who had done so much to elect him were ready to be called into action in the battle for genuine health care reform. But they were told, in effect, to stand down; in one particularly notorious episode, the White House sent out word that activists should stop pressuring wavering Senate Democrats to support more robust reform. Meanwhile, the process seemed to drag on forever, mobilizing the Republican opposition while increasingly demoralizing the Democratic Party's progressive base. When major, if flawed, reform finally did pass in March 2010, the Republicans had won the debate, with the majority of the public opposed at the very moment the legislation passed. Since then, opposition to Obama's health care reform -- whose major benefits do not go into effect until 2014 -- has, if anything, hardened.

A recent New York Times poll reveals the depth of the losses to the coalition that brought Obama to power. In stark contrast to 2008, Republican candidates now enjoy majority support among independents, women, college graduates, and suburbanites. Most

striking, however, is the massive erosion of support among families with incomes under $50,000 -- historically the foundation of the Democratic Party and the very group whose interests it is supposed to defend. Supporters of Obama by a whopping 22-point margin in 2008, members of these families now support Republicans by two percent -- an astonishing 24-point shift in less than two years.

The erosion of support for the Democrats among poor and working people is at the heart of what has gone wrong since Obama took office. Historically the defenders of average people, the Democratic Party has failed to earn their trust. Since the heady days of January 2009, people have seen unemployment rise from 7.7 to 9.6%, their credit card rates soar, their health insurance (if they are lucky enough to have it) premiums rocket, and foreclosures reach into the millions. According to the New York Times poll cited earlier, 62 percent of all Americans are "very or somewhat concerned" that someone in their household will be out of work over the next 12 months and 27 percent are concerned that they will "lose their home to foreclosure." Yet amidst this corrosive sense of public anxiety about their own economic prospects, Americans have seen the very people who caused the crisis not only go unpunished, but receive massive benefits from taxpayer monies while reaping huge bonuses and profits.

During his historic campaign for the presidency, Barack Obama provocatively suggested that "Ronald Reagan changed the trajectory of America in a way that ... Bill Clinton did not." Though this remark caused much aggravation among Clinton supporters, it had the ring of truth. For Ronald Reagan, like Franklin Roosevelt, transformed America not only by fundamentally shifting the direction of public policy, but also by changing the basic terms of political debate.

There is every reason to believe that Barack Obama, who in his first two years has undeniably has undeniably passed some significant legislation, would like to be remembered as a transformational president. But if he is to do so, he must do what Reagan and Roosevelt did before him: enunciate fundamental values and principles to which he is resolutely committed, develop policies rooted in these values and principles, and provide the American people with a clear roadmap showing where he wishes to lead them.