Last week's brutal week has Democrats all angsty, and the concern isn't misplaced. But given what a terrible candidate Mitt Romney is, there is still a path to victory, so we need to settle down, take a deep breath, and figure it out. One thing is for sure, though: the path does not lie through a garden of economic happy talk.
The news about the devastating 39 percent decline in median household wealth from 2007-10 is another reminder of the depth of economic misery created by the collapse of the housing bubble. It comes on top of another recent study that said that the previous estimate of underwater homeowners comprising a quarter of the housing market, already a stunningly high number, was actually underestimated -- that the number underwater is actually closer to a third of homeowners. Given how closely tied middle-class assets are to the value of their homes, these two studies are bookends of the same phenomena, a self-reinforcing vicious cycle that appears to be going nowhere fast. Between the housing black hole in this country, the Hobbesian choice in Europe between a deep recession and an economic collapse, and the slowing of both China's and India's economies, surprising doses of good economic numbers in the coming months are not going to save the president's re-election chances, and references to things getting better will not fly.
This undeniable economic reality shows starkly why a conventional-wisdom approach to politics right now will backfire. I wrote on Monday about the new Democracy Corps memo on the focus groups they had done with swing voters. Check out the comments from these people, who have been in the middle class their whole lives but are now just hanging on by their fingernails, and it will break your heart. The combination of economic pressures facing these kinds of Americans is close to overwhelming: family job losses, young people unable to find their first full-time job, wage cuts, rising out-of-pocket health care costs, declining housing costs, college tuition inflation, groceries and gas prices going up, credit card and housing and student loan debt. The list goes on and on, and formerly comfortable families are getting more and more desperate. On most of these items, there doesn't seem to be much upward progress either -- and if there is, most people sure aren't feeling it. What they are feeling is that the U.S. is in the fifth year of its Japan-style lost decade.
Voters are in a foul mood about all this, but I get no sense in the polling and focus group research I am seeing that they have a simplistic view of what is going on -- most voters outside of hard-core Republicans are not inclined to automatically blame Obama just because he is the incumbent. Instead, a lot of voters blame both parties for not doing enough, know we have a deep long-term problem on our hands, and blame Wall Street and wealthy special interests as much or more than the two parties. Swing voters aren't inclined to trust government to solve the problem because they think government is bought off by special interests, but when they hear about Republican economic, tax, and budget policies, they reject them.
This is complicated stuff, and anyone who is confidently telling you they know how this will all shake out in the November election is either fooling themselves or has a bridge somewhere in Brooklyn to sell you. This election, for all its steep challenges for the party in the White House, is still a crapshoot. The conventional wisdom is that Democrats can't win in a tough economy getting tougher, but given voters' impressive sophistication about the nature of our economic challenges (a considerably higher sophistication than among D.C. elites), they understand that this not Obama's fault and that climbing out of our economic hole is a long-term deal. So there is a path to Democratic victory, but it isn't the path of conventional wisdom and D.C. punditry. What it will take for a Democratic victory this fall is an economic message that shows Obama is not out of touch with what is happening to the middle class in this country, and that makes clear he is going to fight for them on the things that matter most.
If I were Obama's speechwriter for his economics speech Thursday morning, I'd be including some language like this:
"Starting about 30 years ago, this country changed direction in terms of its economic policies. Strengthening and expanding the great American middle class stopped being our nation's number one policy priority. We began shifting our manufacturing jobs overseas, and went from having the world's largest trade surplus to having the world's largest trade deficit. We lowered our investment in our roads and bridges and highways and water systems, and in our R&D that had produced the products that changed the world. We didn't bother balancing our budgets because we chose instead to give the wealthy huge tax cuts. We allowed more and more concentration of wealth at the top, more stagnation of wages for everyday workers, and we deregulated the big Wall Street banks so they grew in size and power.
For the last five years, the chickens have come home to roost. The result has been the biggest economic crisis since the Great Depression, massive federal deficits, a terrible housing collapse, bad unemployment and no wage growth. Too many middle-class Americans are being mercilessly squeezed by wages not going up, the price of their house going down, and the price of necessities going up, and are hanging on by the skin of their teeth to their homes and their way of life.
With no help from this do-nothing Republican Congress, we have worked hard to battle these trends, and will not rest until every American has a decent job and there is a new flowering of the American entrepreneurial spirit. But what Mitt Romney and the Republicans want to do is to return to the policies that made this economic hole so deep -- and keep digging. When Romney was a business executive, he had no problems loading companies up with debt, laying off workers and cutting their benefits, and out-sourcing jobs so that he and his fellow executives could walk away with the profits. But we cannot afford those kinds of policies for America. We can't afford more debt along with more layoffs for teachers, cops, and firefighters, and cuts in care for seniors and student loans -- so that millionaires can get huge new tax cuts.
How do we get out of this hole we are in? By understanding that America's middle class is at a make or break moment, and fighting for them in everything we do. We need to hold Wall Street accountable and say no to the wealthy special interests that are wrecking our economy and our democracy. We need to raise taxes on the wealthiest Americans so that we can afford to invest in what matters for America's future -- our education, our infrastructure and our future. Most of all, we need to say yes to more and better jobs with good wages and benefits."
Obama needs to show that he knows what people are feeling in this economy, and that he will fight for the middle class in his second term. If he does that, he still has a path to victory.