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What Went Wrong for the Democrats?

Yonoson Rosenblum

The results of this week’s midterm elections will be widely read as a referendum on President Obama’s first two years in office, even though he was not on the ballot. If anything, the polls revealed an American public in a grumpy mood, especially compared to Inauguration Day in 2008, when six out every seven Americans declared themselves to be optimistic about the next four years with President Obama at the helm. Mishpacha analyses the new mood of the electorate, and what it spells for the next two years.

Wednesday, November 03, 2010

To phrase the question only in terms of what went wrong for the Democrats is somewhat unfair. In a very real sense, the Democrats are the victims of their own successes. President Obama and congressional Democrats read the 2008 election as a mandate for a dramatic restructuring of American society, and to a large extent they succeeded in doing so.

The President was quite correct in describing “ObamaCare” — with its promise of universal health care and a dramatic move towards a more centrally planned health care system — as the culmination of a Democratic dream of nearly seventy years. At the same time, President Obama succeeded in overseeing the largest expansion of the federal government since President Roosevelt’s New Deal of the 1930s, and steered the United States sharply in the direction of Western European social democracies. Over the past two years, the entire national debt — accumulated during the preceding 220 years of American history — has increased by one-third.

But the president misread his 2008 mandate. Some on the political left interpreted the financial and economic collapse in the fall of 2008 as proof of the inherent failure of market capitalism, and of the need for a more centrally planned economy. That mood was best captured in former White House Chief of Staff Rahm Emanuel’s widely quoted remark, “No great crisis should go to waste.” In other words, the administration saw the financial collapse as an opportunity to rush through emergency legislation, as Roosevelt did in his first hundred days. But there is no evidence that the American public had similarly committed itself to a radical restructuring of the American economy.

The second reason for the rapid decline in the President’s popularity, and that of Congress, is that many of the specific policies they pushed were either perceived as having failed or were never popular from the start. “ObamaCare” was unpopular with more than half the public before its enactment, and that disapproval has only increased since its passage. During the debate over the $787 billion stimulus bill, the public was told that passage was necessary to prevent unemployment from rising above 8 percent. Unfortunately, not only did the unemployment quickly reach 8 percent, it is now at 9.6 percent. Hundreds of thousands more not listed on the unemployment rolls have simply stopped looking for jobs. Even though the recession officially ended in June 2009, the recovery has proven to be a singularly jobless one compared to previous recoveries.

Debt Weight

The stimulus funds failed to generate business investment. At most, they allowed state and local governments to continue to meet their existing payrolls, and thereby increased the ratio of government to private sector workers. American corporations are sitting on $4 trillion that they are leery of investing in expansion of their own businesses. And banks are not lending, preferring to make easy profits by borrowing from the Federal Reserve at near zero interest and investing the money in government bonds.

The president chose to embark on the social democratic model at the very time when that model is proving itself unsustainable in Europe. The southern European states — Greece, Portugal, and Spain — are tottering on the brink of bankruptcy. Great Britain has undertaken its most severe peacetime austerity budget ever, and almost every European government has dramatically cut back on spending, even as the United States is incurring massive new debt. Americans watch French workers rioting over a government proposal to raise the retirement age from sixty to sixty-two, and they want nothing of a model that so inflates people’s expectations of being taken care of by their government.

Americans are concerned that they are saddling their children and grandchildren with unsustainable governmental debts. Under the most likely scenario projected by the Congressional Budget Office (CBO), the ratio of debt to GDP would reach 185 percent by 2035, which would mean that half of the taxes American citizens pay would be needed just to repay America’s debt. Harvard economic historian Niall Ferguson is even more pessimistic, projecting a debt to GDP ratio of 425 percent by 2040, higher than that of the four weakest Western European economies. Chinese willingness to finance this debt by buying US treasury bonds has spared America from feeling worst of the crunch so far. But it cannot be a good idea for a country to be trillions in debt to its major geopolitical rival.

The government debt problem at the state and local level is even worse. Joshua Rauh of Northwestern University’s Kellogg School of Management estimates that states are already carrying $3.4 trillion in unfunded pension liabilities, and municipalities $574 billion. Seven states, including some of the most populous, will have exhausted their pension assets by 2020, and half of all the states will be in that same leaky boat by 2027. The largest California state retirement fund currently has 9,000 beneficiaries receiving more than $100,000 a year. At a time when unfunded government pensions loom as a major domestic issue at every level of government, it is easy to see why further government expansion — and a political party that proffered that approach — would lose popularity.

Right before this week’s midterm elections, the Real Clear Politics (RCP) average of leading polls showed 62.2 percent of citizens responding negatively to the question, “Do you feel the country is headed in the right direction?” Nearly three-quarters of the public expressed disapproval of the job performance of Congress. A Rasmussen Reports survey taken the same week found that 44 percent of American strongly disapproved of President Obama’s job performance, versus only 29 percent who strongly approved. His Gallup Poll favorable rating of 44.7 percent marks the lowest reading of his presidency, the latest Harris poll puts his approval rating at 37 percent, and more than half of Americans said he does not deserve to be reelected.


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