WASHINGTON -- If you want to examine the gnarled roots of the Democrats' 2014 election-night mollywhopping, you should cast your mind back to the fall of 2008.
Let’s set the scene: The air is thick with the acrid stench of ruined financial institutions. Economic indicators portend something potentially apocalyptic in the offing. Multiple CNBC hosts are setting their faces on fire on live television. And at the White House, President George W. Bush has found himself in a room full of legislators, trying to come up with a plan to arrest the hellward descent of America’s economic handbasket.
At the time, a unique alliance of conservative Republicans and progressive Democrats in the House had stymied the effort, balking at Bush's plan to bail out big banks without also helping troubled homeowners. Without a major change in the political winds, Wall Street would collapse.
It was at that point that then-Sen. Barack Obama (D-Ill.), the Democratic nominee for president at the time, provided just that. He told reluctant Democrats that as president, he would pursue major foreclosure relief efforts, vowing to change bankruptcy laws to allow borrowers to discharge mortgage debts. These promises were enough to soothe the frayed nerves of Obama's colleagues on the left, though many Republicans remained unconvinced. A few days later, the bailout passed amid continued opposition from hard-line conservatives. Liberal Democrats saved the banks.
After Obama won the 2008 election, foreclosure aid became a major tenet of the incoming administration's economic agenda. In January 2009, when Obama wanted Congress to release the second round of bailout money, his top economic advisor, Larry Summers, wrote a letter to congressional Democrats. In the letter, Summers made a lot of firm commitments, promising both legal changes and lots of funding to fight foreclosures. Here’s the key part of that letter:
The Obama Administration will commit substantial resources of $50-100B to a sweeping effort to address the foreclosure crisis. We will implement smart, aggressive policies to reduce the number of preventable foreclosures by helping to reduce mortgage payments for economically stressed but responsible homeowners, while also reforming our bankruptcy laws and strengthening existing housing initiatives like Hope for Homeowners. Banks receiving support under the Emergency Economic Stabilization Act will be required to implement mortgage foreclosure mitigation programs.
But those promises were betrayed. The administration decided that changing bankruptcy laws, which would upset banks and bank-friendly politicians, wasn't worth a hit to their "political capital." To make matters worse, Obama and Treasury Secretary Timothy Geithner let big banks run the administration's mortgage modification program, converting a relief plan into an incubator for abuse.
This is all to say: When Republicans crow that the 2014 midterms were a referendum on Obama's failed policies, guess what? They're right, albeit unwittingly so. After all, these are also the failed policies of the GOP. Despite all of the gridlock and obstruction of the past six years, Washington continues to be dominated by a thoroughly bipartisan economic agenda -- one that favors the plight of wealthy elites well above the plight of ordinary human Americans. (You know, the very people that ponied up the boodle to fund all of these bailouts!) As the American economic ship was sinking into the icy deep, Obama and Senate Minority Leader Mitch McConnell (R-Ky.) hewed to a strict “bankers and brokers first” lifeboat policy. Then they squinched up their faces and talked about how it sure would have been nice if there had been some more lifeboats for everybody else.
Foreclosures were more than an optics problem. There's increasing evidence that housing help would have been among the most efficient ways to boost the overall economy, particularly a recent study from Atif Mian and Amir Sufi. The excuses that Obama's economic team has offered for not acting -- Summers' bemoaning the hit to "political capital" -- seem pretty stupid in light of the hit they took for bailing out Wall Street.
And Tuesday's exit polls suggest that this was at the heart of the Democratic rout. Almost two-thirds of voters said the American economic system favors the rich, while only a third said it is "fair to most Americans." The economy, as in every election since 2008, remained the top issue on voters' minds.
This wasn't a big problem for Democrats back in 2012, when the unifying theme of the election was a high-profile tilt between Obama and former Massachusetts Gov. Mitt Romney. It wasn’t a difficult trick to create an organized, coherent economic case against Mr. Bain Capital. Romney’s platform was demonstrably more slanted in favor of wealthy elites than Obama’s. All Obama had to do was define Romney as a wolf of Wall Street. He did, and he won.
But the 2014 battle between an Obama-led Democratic Party and McConnell didn’t offer the same easy-peasy, lemon-squeezy contrast. McConnell got away with overt and unprecedented obstructionism in the 2014 midterms in part because ... well, what can you say? Obama's economic platform just doesn't help very many people. Median household income is stuck at Clinton-era levels, while corporate profits are through the roof.
It’s worth noting, of course, that Obama hasn't exactly run the table on economic policy. Republicans have prevented him from raising the minimum wage, and they killed off extended unemployment benefits for the long-term jobless. Still, on a host of administrative fronts where the GOP has no power, Team Obama has been siding squarely with the wealthy against the downtrodden, and he’s forcing the rest of his party to make some kind of sense out of it.
But Democrats can hardly be blamed for not being able to sell some of this nonsense on the campaign trail.
Take, for instance, Obama's Education Department. The department has been turning a massive profit on student lending for years, as well as renewing lucrative contracts for abusive contractors that take advantage of former students. And while the department is raking in all this lucre, it's simultaneously pursuing aging seniors with defaulted student loans with the fury of Edmond Dantès -- and driving “tens of thousands of them into poverty” for no good reason.
Just last week, the Education Department gutted a proposal that would have reined in predatory for-profit colleges. In nearly every conceivable international venue, the Obama administration has pressed to protect high prescription drug prices charged by big pharmaceutical firms. During the various debt ceiling crises of 2011 and 2012, Obama repeatedly offered to cut Social Security, and to cut it in the manner that polling data deemed least popular. He was only thwarted by the political miscalculations of House Budget Committee Chairman Rep. Paul Ryan (R-Wis.).
And do you guys remember what happened with the Bush-era tax cuts? Well, during the period when Congress was resolving the "fiscal cliff," Obama enraged Senate Majority Leader Harry Reid (D-Nev.) by cutting a deal with McConnell to shield people making $250,000 to $399,999 from a modest tax hike. Reid’s position was understandable. Democrats held all the leverage and a clear path to repealing the Bush-era tax cuts for the wealthy. Obama got nothing in return for this valentine to fans of the tax cuts, aside from lower revenues to fund a Democratic agenda.
Voters may or may not be hyper-aware of all of these details. But they do feel the incoherence. They understand, feelingly, that the economy is still in the tank after six years with Obama as president. We are living in an Endless Recovery Summer in which the surf is always up but beach access is restricted for a lucky few.
Of course, there are two major Obama policies that could let Democrats legitimately claim to have done something significant for working people to the chagrin of entrenched corporate elites: Obamacare and the Dodd-Frank financial overhaul. But Democratic candidates basically spent the midterm cycle running away from both of these as fast as their little feet could carry them. In large part, this was because Obama had screwed them on both. The HealthCare.gov rollout was a political catastrophe, and the party of bailouts doesn't really want to talk about its relationship with Wall Street while the banks are raking in money in a weak economy.
It's not fair to pin the blame for the entire mess on Obama. The Democratic Party's economic agenda has been dominated by this kind of thinking since the late 1980s. Even stalwart liberals in Congress are often eager to chip away at Wall Street regulations.
But as the post-mortems start coming in, detailing the way Democrats faced a bad map, bad messaging and bad political management, remember this: They invested fairly seriously in a lot of bad policies, too. Bill came due.