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By Not Challenging the Tea Party, the White House Makes It Stronger

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There's reason to believe that the White House held back on helping struggling homeowners because it was afraid of a Tea Party backlash. That was exactly the wrong response, politically as well as economically. Bolder and more effective action would have weakened the anxiety and frustration driving that movement. By fearing the Tea Party, the Administration has only made it stronger.

Home Alone

There have been more than three million foreclosures since 2008, a figure that may soon reach six million. Real estate has lost nearly $7 trillion in value since 2006. Homeowners owe their banks nearly $1 trillion for real estate value that no longer exists. More than 16 million homes, or 28% of all those with mortgages, are underwater.

And home values keep on falling. As real estate analysis group Case Shiller reports, "National home prices hit a new low" in the first quarter of this year. Housing values are now down to their 2002 levels, which is probably bad news for anyone who's bought their home in the last nine years.

A well-organized relief program for these homeowners could generate billions of dollars in consumer spending -- spending that's desperately needed to create jobs and economic growth. It would also slow down the plunge in real estate values that's holding down wages, aggravating the unemployment crisis, and destroying communities across the country.

Yet the White House has done almost nothing to help the millions of households who are struggling with excessive debt for evaporated real estate values. After Wall Street received a trillion-dollar rescue from Treasury and the Fed, they were left alone to fend for themselves. Why?

Fear of a Tea Party Planet

A recent blog post by economist Jared Bernstein, former economic advisor to Vice President Biden, may hold a clue. Wrote Bernstein:

It's ... congenitally hard for politicians to get behind "a serious program of mortgage modification." Those who advocate for this ... are right, but they're also downplaying a very binding constraint ... People forget, but it was precisely this action -- giving mortgage relief to someone at risk of default and not to someone who was struggling to keep up their payments -- that birthed the Tea Party.

Yes, it's true that leaders must stand up to such views and do what's right for the economy... damn the torpedoes and all that. But those of us espousing such actions must respect, or at least acknowledge, that those torpedoes are not pointed at us.

It's important to understand that Jared Bernstein's one of the good guys. He understands the need to help homeowners, and he undoubtedly fought for better programs while he was serving in the Administration. He's echoing the White House view of the world when he says that people who propose better policies don't understand the limits of the politically possible.

That's precisely where the Administration has gone seriously wrong: in its assessment of the politically possible. The White House's fear of the Tea Party seems to have prevented it from taking the home-saving and job-creating actions that would have prevented the Tea Party from growing in numbers and influence. That's a tragic political miscalculation that could wind up damaging President Obama's legacy forever.

Culture Clash

No matters how many polls say otherwise, the Administration can't let go of the idea that the right policies are politically difficult, if not unachievable. From the outside it looks like the White House's organizational culture has adopted the belief that the right thing to do is never the politically effective thing. Maybe that's an artifact from time past, a time when "hippies" dreamed of impossible policies. Perhaps it's a holdover from the "Boomers-versus-Generation X" war that should have ended a decade ago.

Whatever the reason for it, this bias is disproved in one poll after another. Polling has repeatedly shown that voters across the political spectrum think the government should do more to create jobs and help the middle class. But the White House, locked in its obsolete paradigm, seems unable to distinguish between political symptoms like the rise of the Tea Party movement, and the political causes for them -- like the feelings of powerlessness and resentment toward big banks and big government that motivates most Tea Partiers.

Political moods are often contradictory. Tea Party followers may express outrage at government spending, for example, but more than 75% of them told pollsters last November that they're against cutting Social Security to balance the budget. What they're really angry about isn't government spending, but the sense that they have no say in their own financial future.

By mistaking political symptoms for political causes, the White House seems to keep digging itself into an ever-deepening hole.

Words against music

The Tea Party was originally an elitist movement, not a populist one. It began on the floor of the Chicago Mercantile Exchange when an arrogant and self-entitled CNBC announcer named Rick Santelli expressed outrage over a proposal to help underwater homeowners. Santelli, a former futures trader, had been a vice president with Drexel Burnham Lambert. That's the old Michael Millken firm, known for its sharklike culture, which went bankrupt after pleading "nolo contendre" to multiple felonies. Santelli embodies the greedy and narcissistic ethos that shattered the economy and is a typical member of the rich-banker class most Tea Partiers despise.

In a rage Santelli led mercantile traders, fellow members of his morally challenged tribe, in a televised chant against letting the government help "losers" save their mortgages. That body of "losers" was made up of millions of taxpayers who had already paid billions to rescue the big banks -- saving Santelli, those traders, and their six figure in the process. It took slick Republican salesmanship and Koch Brothers-funded PR to turn this elitist tantrum into anything resembling a populist movement. The White House seems to have believed that any real action to save homeowners would enrage Tea Partiers so much that the damage would be irreparable.

But is that a smart reading of the political mood, then or now? Like Walt Whitman, each Tea Partier contains multitudes. He or she is at once a populist, an elitist, a rebel, a government hater, an entitlements lover ... Would the average Tea Partier really embrace Santelli and his moneyed minions? A recent poll, conducted for the National Association of Home Builders, offers a glimpse into how the public might react to a stronger aid program for struggling homeowners. The poll, by Lake Research Partners, showed that 73% of likely voters support tax deductions for home ownership. That includes 71% of Republicans and 68% of independents.

While that's not an perfect proxy for voter reaction to a strong homeowner rescue program, it provides some sense of how voters (including Republicans) feel about having the Federal government help homeowners financially: They like it. Add to that the fact that millions of voters are also underwater homeowners -- 16 million homes hold a lot of them -- and a program like that begins to look like a political winner.

This country is discouraged, angry, and frightened. That's the mood that the Tea Party has successfully tapped. The words of the Tea Party song were written by millionaires, but the frustrations behind it comes from millions of frightened households.

Calling the Tune

Administration insiders are fond of reminding people that the right economic programs -- mortgage relief, jobs programs, stronger financial reform -- can't get through Congress right now. But they've drawn the wrong conclusion from that. Voters from left to right told the Lake pollsters that they were less likely to vote for candidates who want to eliminate the mortgage interest deductions, by a margin of more than two to one (57%/26%). It's more important than ever that they propose these programs, even if they're eventually rejected in Congress, so that the public can see who's fighting for them -- and who's fighting against them.

As the songwriter and guitarist Bobby Womack once said, "Sometimes you gotta lose to win." By staying on the sidelines, the White House is letting the other side win the messaging war. And by holding back on actions that could lead to economic relief -- tangible relief that millions of voters can see and feel -- the Administration is deepening the economic gloom that could doom its chances next November. They've been responding to the literal content of the Tea Party message, rather than the mood behind it, and that's a huge tactical mistake.

In another post, Mr. Bernstein quotes singer/satirist Tom Lehrer while discussing the difficulty of pushing a jobs program: "Though (they) may have won all the battles, we had all the good songs." But sometimes the best way to win a battle is to start with a good song. By staying silent for too long, the White House has let pampered and privileged people like Rick Santelli and the Koch Brothers define the agenda.

It's time to stop paying attention to the words and start listening to the music. It's time to pick your own song instead of letting others choose it for you. And in the debate over the housing crisis, it's time the Tea Party's wealthy backers stopped calling the tune.

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