The Next Big Change Moment: Who Will Win? The People Or The Banks?

Things are getting funky out there, with very big (big like the solar system big) changes in store for us. Five years from now, this country, and the world economic order, are going to be fundamentally changed from what they are today. We don’t

Things are getting funky out there, with very big (big like the solar system big) changes in store for us. Five years from now, this country, and the world economic order, are going to be fundamentally changed from what they are today. We don’t yet know how, but we are without a doubt in what I called in my book on American history a Big Change Moment. But before I go there, let me start with a word about our politics and how political dynamics will impact our Big Change Moment.

In politics, most things are unpredictable and highly variable (especially in wild times like these), but there are at least a couple of things that are truisms. They are what I’d call the two destinies: demographics is destiny, and economics is destiny.

On the demographics side of things, the campaign most likely to win is the one whose base voters are fired up to turn out to vote, and fired up to go out and persuade the swing voters. Looking at the demographic differences between the 2008 electorate and the 2010 electorate is a classic case in point. In 2008, the electorate was proportionally far younger, far less white, and far less married than they were in 2010. Young people, people of color, and unmarried people are far more likely than older, whiter, married people to vote Democratic. Guess who won in 2008, and who won in 2010?

If demographics is destiny, economics is doubly so. The party in the White House never does well unless the economy is either good or is clearly getting better from a previous low point (the only two incumbents in the last 100-plus years to win re-election in a weak economy were FDR and Harry Truman, who incidentally ran classic fighting populist campaigns). We are now on the brink of true economic crisis, with markets on the verge of melting down and Europe teetering on the edge of leading the world into an economic panic, but even if policymakers control the short-term damage and reassure the markets in the short term, the best case scenario right now is that the American economy will still be pretty close to dead in the water deep into next year. That means that President Obama has to make a choice in terms of how he runs his campaign next year.

One idea is to make the case that he is a reasonable centrist by being willing to cut lots of spending, meet the Republicans in “the middle” on a variety of issues, make the case that the economy is making progress/isn’t as bad as it seems and would have been a lot worse absent Obama policies, and then to focus on “winning the future.” The strategic focus would be to emphasize the choice between Obama and the far right philosophy of the modern Republican Party, tying whoever the Republican nominee is closely to Republicans in the House. Given the nuttiness of the Republican primary electorate, and the length their candidates will have to go in the Presidential primary to satisfy their base, whoever survives that process should look pretty extreme to moderate voters, so making this a choice between Obama and the Republican (as opposed to the election being a referendum on Obama) is critically important. In general, this tactical approach, with its carefully drawn traditional centrism, is clearly what the D.C. conventional wisdom crowd is advising Obama to do, and it would be a respectable strategy in a normal political year and/or where the economy was showing any signs of progress at all. But in a year where people are feeling worse about the economy than they were four years ago, this within-the-usual-lines strategy seems fundamentally wrong to me. The one part of it that definitely makes sense is making the election a choice, not a referendum, but I am convinced that the choice needs to be drawn differently.

The second choice is to show that you are fighting for the middle class by taking the steps you can take as President to stand up for them (and against the special interests crushing them), clearly contrast yourself with right wing Republican ideology by picking clear fights with them that unify your political coalition, and to lay out a bold new economic program that takes goes to the core of the crises besetting the economy right now. Stan Greenberg has outlined and thoroughly tested a message framework that moves significant numbers in the Democratic direction with a message that strongly takes on wealthy special interests on behalf of the middle class in big economic fights, and it is a message that works far better than the message I mentioned in the paragraph above, but this is also far more than just framing. The President has to show himself thoroughly on the side of working families, middle-class voters, and people struggling in this economy by taking their side in tangible fights on their behalf. The President is far more than Legislator-in-Chief, and he needs to be very visible in boldly using the power of the executive branch in these fights.

The executive branch is, in fact, far from helpless in terms of pursuing specific economic policies and regulations that would help spur economic growth. A great example is something they already did that got little coverage because of the default crisis: new Treasury regulations that helped unemployed homeowners slow the banks down in foreclosure fights. More regulations could be created to help homeowners out in their battles with the bankers, and more pressure on the big banks could be brought to bear in general by Treasury and other agencies to push them to do many more mortgage writedowns, which could put hundreds of dollars a month into the pockets of millions of middle class homeowners. Fannie and Freddie, which are controlled by the federal government, could be far more helpful in terms of those kinds of mortgage writedowns as well, and in general could be doing several different things to help stabilize the housing market. As with the new Treasury regulations to help unemployed homeowners, my point is proved by something Fannie and Freddie just did, adapting a new policy pushed by Jared Bernstein to take foreclosed properties off the market and turn them into rentals. There are all kinds of things the administration can do to help the housing market without needing new legislation, and everything they do in that regard is a huge boost to the overall economy.

Another thing they could do, as I and others have written about before, is to use the remaining money authorized in TARP to invest in businesses that want to hire new workers. There’s $475 billion sitting in that authorization that they could tap into, and given the desperate need for jobs, that is exactly what they should do. TARP is a very unpopular program, but it would become a lot more popular very quickly if it started investing in jobs rather than bailing out big banks.

Finally, they could do a lot more with executive orders to start promoting not only jobs, but good jobs. Many Presidents, from FDR to LBJ to Nixon and Reagan, made far more aggressive use of executive orders to promote their economic agenda, and using this power when Congress won’t help revive the economy is exactly what they ought to be doing. The best example I know of is a series of executive orders promised to labor unions during the 2008 campaign that would use the federal government’s procurement power to actually promote good paying jobs in a variety of different areas from food purchasing to manufacturing military goods to trucking and transportation. These executive orders have been developed and never acted on, and would help promote middle-class wages for middle-class jobs.

In clear, strong populist messaging and in concrete action by the executive branch, the Obama administration has a chance to show they are on the side of middle-class families, and those young and poor people trying to gain a foothold to climb the ladder into the middle class. With the economy in bad shape, this is not a tactical election where nuanced positioning to show yourself to be a classical centrist is going to carry the day. The President has to be forcefully advocating that in these troubled times, he understands what people are going through, and is thoroughly on their side fighting for them.

Which brings me back to where I started this article: We are in a defining historical moment, when an economic crisis of historical proportions is forcing a big choice. Either the big banks and other economic elites are going to kill the middle class and the safety net for the poor and elderly in their efforts to save themselves from their own excess, or we are going to wrest power from them and rebuild our economy from the bottom up. My belief is that there is no in-between; this will go either one way or another within the next five years. With the economy forcing that kind of fundamental choice, things will look strikingly different when we get through this transition. Let’s hope the people win, not the banks.

About Mike Lux

Mike Lux's picture
Author, The Progressive Revolution: How the Best in America Came to Be

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