Democrats suffer from Americans' unwillingness to accept economic reality

By Steven PearlsteinTuesday, October 19, 2010; 9:30 PM
It's one of the great fallacies in politics: Candidate Jones says X, Y and Z during the campaign. Candidate Jones wins the election. Ergo, the public agrees with X, Y and Z.
Certainly there are times when that may be true, but just as often it is not. After all, if that were always true, then voters should now be ecstatic that President Obama delivered on his campaign promise of health-care reform, while being mad as hell that nothing's been done about global warming.
So maybe that wasn't what voters were really thinking way back in 2008. Maybe voters were simply angry about the lousy economy and looking for a new team to take the country in a new direction. And maybe that's the story this year as well.
As for the details of that new direction, it's not at all clear what voters have in mind. Most voters - particularly the swing voters - aren't as well-informed as they might be on major policy issues. What they do have are experiences and instincts and emotions that politicians play upon in order to win elections. Rarely, however, do the election results add up to a mandate. More often it's nothing more than a temporary license to govern.
Americans, it is said, are suddenly recoiling at the dramatic expansion in the reach and power of a federal government that is "taking over" the economy. Topping this list of alleged voter grievances is a new health-care law that requires every American to buy health insurance, a new consumer protection agency for financial products and the government bailout of the auto industry.
Now ask yourself: Do you think the results of the coming election would be tilting in favor of Democrats if the "individual mandate" had been omitted from health reform, if the consumer protection agency had been dropped from financial regulatory reform and if General Motors had been left to die. Somehow I doubt it.
The dirty little secret is that most Americans don't really know what they think about the issues that so animate the political conversation in Washington, and what they think they know about them is often wrong.
Most Americans still think that the bailouts of the banks, the auto companies and American International Group will wind up costing taxpayers hundreds of billions of dollars. In fact, the latest guess is that the government will come out even on the deal, and may even turn a profit.
Many Americans think that the economic stimulus package has been a failure. In fact, the estimates from a wide range of experts say the stimulus has saved or created more than 3 million jobs.
Many Americans believe their federal taxes have gone up in the past two years. In fact, for 90 percent of households, taxes were temporarily cut.
After the headlines of the past few weeks, most Americans probably think government has been able to do little, if anything to stem the tidal wave of foreclosures. In fact, over the past 18 months, two mortgages have been modified to avoid foreclosure for every completed foreclosure.
Oh, yes, and then there is the budget deficit, which many Americans think is out of control because of runaway spending orchestrated by President Obama and the Democratic Congress. That deficit, in turn, is blamed for the lackluster economy.
In fact, the deficit has nothing to do with today's slow growth and high unemployment. Indeed, many economists, including those at the International Monetary Fund, think that increasing the deficit even further would be a good way to reduce unemployment in the short term.
And who is responsible for this year's record federal deficit? Roughly half of it was already baked into the cake by the time Obama came into office, with another quarter coming from the "automatic stabilizers" that reduce tax collections and increase spending on things like unemployment insurance and food stamps when the economy is in recession. The rest comes from the one-time stimulus which, once it runs its course, will leave a "structural deficit" that is no bigger than it was when George W. Bush left office.
The simple truth is that Obama and the Democratic Congress were dealt a lousy economic hand, and they've played it about as well as anyone could. Along with their predecessors and the holdovers at the Federal Reserve, they prevented a collapse of the global financial system and a 1930s-like depression. But given the magnitude of the financial crisis and the global imbalances that gave rise to it, a prolonged period of slow growth and high unemployment was almost inevitable.
The political reality, however, is that voters are unwilling to accept that economic reality. They want to believe that government has the power to control the economy and fix it quickly when it breaks down. They are encouraged in that belief by politicians and special interest groups, by the media and by too many economists.
That said, trying to convince voters that things could have been worse was not a viable political strategy for Democrats in 2010. Against a backdrop of stagnant incomes and declining home prices and 10 percent unemployment, toting up the number of jobs saved, mortgages modified or bridges repaired was never going to be a winning argument. What voters needed was a broader vision of where the country needed to go and how we could get there, a credible story of how shared sacrifice today could lead to shared prosperity tomorrow.
The inability of President Obama and Democratic leaders to articulate such a vision and tell that story now threatens their governing majority. Republicans may soon be the beneficiaries of that failure. Their victory, however, will be similarly short-lived if they mistake their good fortune for a mandate for lower taxes, less regulation and further erosion of the economic safety net.
In politics as in many competitive arenas, sometimes you win simply because the other guy loses.