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Can the Dems cash in?

Don't bet on it unless they start sounding a lot bolder on the economy.

January 13, 2008|Robert Kuttner | Robert Kuttner, co-editor of the American Prospect, is the author of "The Squandering of America: How the Failure of our Politics Undermines our Prosperity."

The sub-prime mortgage crisis and worsening credit card debt are only intensifying a longer-term trend of economic distress for most Americans. This reversal of fortune, which began in the 1970s, includes dwindling prospects for good employment, severe cutbacks in employer-provided health insurance, less reliable company pensions and family incomes that lag inflation, except for the rich.

All these trends have accelerated during the Bush administration. Many economic forecasters are predicting an election-year recession -- seemingly a windfall for the opposition party. Yet it's not at all clear that the Democrats will pin the economic distress squarely on the policies of the Republican administration or offer a politically convincing alternative to them.

Why not?

There are four main reasons.

Uncertain trumpets and ideological mush. Since Jimmy Carter was president, Democrats have been split into two factions. Populists attack the political influence of organized business and seek to once again harness capitalism to deliver broad prosperity. By contrast, "New Democrats" offer a faint echo of moderate Republicans. Their slogan might as well be: "We don't much like government either, but we can run it better."

The result has been a mixed message that doesn't persuade voters to take Democrats seriously as the party of ordinary Americans. Bill Clinton ran in 1992 as a populist -- "People who work hard and play by the rules shouldn't be poor" -- but he governed as a New Democrat centrist.

For The Record
Los Angeles Times Sunday, January 13, 2008 Home Edition Main News Part A Page 2 National Desk 1 inches; 46 words Type of Material: Correction
Democrats and the economy: An article in today's Opinion section by Robert Kuttner says that Barack Obama has "used the language of mandates" in talking about health insurance, connoting "governmental coercion rather than governmental help." In fact, it is Hillary Clinton who has used such language.

In the last two presidential elections, Al Gore and John F. Kerry tacked back and forth between offering a whiff of class warfare and a bloodless centrism -- trying to please both wings of the party. When Kerry decried "Benedict Arnold CEOs" who export American jobs, he was warned by some of his big donors to stop using the phrase, and he did.

Financial captivity. Democrats are increasingly dependent on Wall Street and big business for contributions, especially at the presidential level, and this has blunted their appeal to ordinary voters. In the 1990s, many congressional Democrats supported the financial deregulation that helped lay the foundation for the Enron debacle and, more recently, the sub-prime loan mess. The current financial meltdown ought to be a perfect issue to distinguish Democrats from Republicans. But just enough prominent Democrats -- such as New York Sen. Charles E. Schumer -- have their fingerprints on deregulation to prevent the issue from gaining more partisan traction.

In congressional races less dependent on immense sums of campaign cash, a more progressive politics is possible. All six Democrats who took Senate seats from Republicans in 2006 ran as economic populists. In Ohio, Sherrod Brown easily won, not by tacking to the center but as a full-throated progressive. In Virginia, Jim Webb began by running on his defense credentials and then, after listening to Virginia voters, ended up sounding like Franklin D. Roosevelt.

Deficit disorder. Under Clinton, budget balancing was taken to an extreme, hailed as a public virtue and credited for reducing interest rates and sparking the 1990s boom. Yes, the deficits under Ronald Reagan and George H.W. Bush were out of control and certainly needed reining in. But the Democratic obsession with budget balancing undermines support for domestic spending programs that play to Democrats' strength.

Ironically, economic growth in the 1990s had little to do with balancing the budget. In a global economy, low interest rates are not directly tied to domestic balanced budgets because capital markets are international. The recovery reflected productivity increases -- mainly from the increasing use of computers in the workplace -- that had been incubating for more than a decade. According to Federal Reserve studies, the red-hot economy of the late 1990s was mostly the consequence of a stock market bubble that created paper wealth and made people feel richer and spend more.

Pay-go paralysis. By embracing pay-as-you-go budget rules -- no new spending unless it's offset either by tax increases or spending cuts -- Democrats have denied themselves the ability to offer robust spending measures that might signal practical help for economically distressed Americans. Since taking back Congress in 2006, for instance, they have put their legislative stamp on nothing truly dramatic. Raising the federal minimum wage was important, but it hardly addresses the spreading economic distress in the country.

Together, these four serial disorders have combined to leave the Democrats as a party offering weak remedies and mixed messages to working Americans. To reverse the 30-year trend of increasing economic inequality and insecurity -- and to repair the deep damage to the financial system -- FDR-scale remedies and his style of ideological clarity will be required: serious public regulation and serious public outlays.

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