In recent months, longtime supporters of a more expansive federal government have lamented that getting stuck with crippled industries like Detroit and the financial sector wasn’t exactly what they had in mind. Paul Krugman and Bob Reich both call it lemon socialism —the national takeover of sectors that are not only too big to fail but too failed to want. (This is not to be confused with lemon capitalism, a term coined by Timothy Noah, who was six years ahead of Krugman in seeing the dangers of Davos.)
In the wake of the AIG bonus scandal, lemon socialism is now producing an equally unsatisfying corollary: lemon populism. In the same way that proponents of big government take no pleasure in using it to bail out those who knew better and brought on their own demise, critics of corporate excess can’t take much satisfaction that the long-awaited backlash came not because those AIG bonuses went disproportionately to those at the top but because they were paid for with taxpayer dollars. If the only way to rein in executive pay is to lend every company $200 billion, America won’t have any money left over for pitchforks.
As Washington proved time and again in recent weeks, lemon populism is a remarkably unrewarding phenomenon. Populism has long been an outlet for popular anger and on occasion a constructive one. But while the latest bonuses made Americans plenty mad—even President Obama declared, “I’m as angry as anybody”—the whole AIG episode was more deflating than energizing. After pouring billions down the rathole, Americans think Paul Lynde was right—the rats are winning.
The bitterest aspect of lemon populism is that—like lemon socialism—it does little to address the core problems that make people upset and comes at the cost of real efforts to help the little guy. The political panic that consumed Washington this past month did more to rattle the masses than assuage them. Until Obama put out the fire, the House rush to pass an AIG tax it knew could not pass constitutional muster simultaneously raised private sector fears that government would overreach and the general public’s fears that government would be powerless to act in time of crisis.
Populist doubts about the high and mighty are deeply ingrained in the American character. We believe both in striving for success and in playing by the rules, and we are troubled when those ideals collide. We’d rather get rich than get even with the rich, but we insist on responsibility from all. Those competing desires have limited populism’s impact as a political movement. Democratic attempts to exploit popular resentment against big institutions, like major corporations, often founder because the same populace feels a healthy skepticism toward other big institutions, like the government. Republican attempts to exploit populist anger toward government often flop when the public sees that the rich and powerful, not the little guy, stand to benefit.
The most successful populists have balanced Americans’ dual passion for success and responsibility. Positive populism built on the hope that all Americans can get ahead stands a better chance of stirring the country to collective action than negative populism that depends on sustained anger and resentment. When Bill Clinton raised taxes on the wealthy, he never railed against success, always pointing out that he had nothing against the rich and wouldn’t mind being rich himself. President Obama made a similar distinction in his press conference last week, insisting that we should hold those at the top responsible for playing by the rules but not “demonize every investor or entrepreneur who seeks to make a profit.”
The trouble with lemon populism, like lemon socialism, is that it speaks to responsibility but can’t find room for success. AIG deserves great scorn for helping bring on the financial crisis, then exploiting taxpayers who came to the rescue. But as the Treasury Department recognized in its plan on toxic assets, it will be impossible for banks and the economy to recover—or taxpayers to recoup our vast losses—without someone making money.
With a Newsweek cover story, an Economist lead editorial, and another what’s-the-matter-with-the-masses column from Thomas Frank, populism has emerged as an elite obsession. At the grass roots, however, anger may well miss the elite’s intended targets. This weekend, a Democratic legislator in Texas told me that one of his constituents actually showed up at a town hall meeting with a pitchfork. The man was hopping mad, all right—at how much the federal government was spending on the stimulus.
The clearest sign that the recent strain of populism may turn out to be a lemon is how quickly the GOP rushed to embrace it. Conservatives are now running attack ads against AIG bonuses—which is pretty rich, considering that the AIG bailout began under a conservative administration whose guiding economic theory was to reward risk and to lower taxes on high compensation. Republicans aren’t running those ads to usher in a new era of equality; they want to poison the well against government action of any kind, from the economy to health care.
Congressional Republicans can do plenty of damage by posing as lemon populists. Still, Obama is better off to keep governing out of hope, not anger. Even when everything around us is coming up lemons, most Americans prefer leaders who can help us make lemonade.