Six conclusions about the elections:
1)It really was all about jobs and the economy. With official unemployment at 9.6 percent but actually hovering near 20 percent when more accurately measured, and with 62 percent of the public saying the nation is heading in the wrong direction, a significant move away from the party in power was inevitable. The administration’s arguments that “it would have been worse” without the stimulus and bailouts couldn’t work, no matter what their factual validity. Had unemployment been below 6 percent, does anybody think the anxiety over the health care bill and auto bailouts would have mattered as much?
2)The Wall Street bailout. President Obama lost his capacity to harness the support of the disaffected middle when he enhanced the bailout of Wall Street without getting anything meaningful in return. That was the emotional Rubicon for this administration. Had the bailout been accompanied by fundamental reform, genuine contrition, and actual pounds of flesh, the public might have accepted it. But when the banks, in the midst of the foreclosure morass and economic disaster, returned to the same old bonus behavior, the public sensed one thing: betrayal. The president had become one of “them,” and the space for the Tea Party to capture the anxiety of the middle was created. Franklin Roosevelt never would have let it play out this way. He would have raked the Wall Street titans over the coals, demanded that all bonuses be returned, and forced real reform on them. Compare the president’s meek statement to Wall Street: We are all in this together. The president ended up getting the worst of all possible bargains. He gave Wall Street what they wanted yet got their enmity. He evoked taxpayer ire by making taxpayers pay for Wall Street excess, yet didn’t align himself with the taxpayer emotionally.
3)The death of Keynesianism. The stimulus and auto bailouts did a fair bit of good— but by being afraid until too late to defend them, the president got stuck with the stimulus and the bailouts as an albatross around his neck and destroyed the opportunity to build support for any new stimulus that may be needed going forward. Political and popular support for Keynesian economics, which had been pretty solid since the Great Depression, is for the moment dead.
4)No one has an economic plan. There’s an overwhelming need for an economic growth agenda beyond merely keeping the Bush tax cuts. But no one seems to have one—not the White House, not the traditional Republican leadership, not the insurgent Tea Party. We all know the macro data on income growth, jobs, and trade are terrible. But there is no macro plan for jobs, energy policy, or the infrastructure investment needed to transform our economy. Consumers are still overextended, the housing market is still a disaster, interest rates are as low as they can get, and demand is nowhere near sufficient to trigger investment. So where are the jobs going to come from—especially those that will pay enough for a middle-class standard of living?
5)The Republicans’ bogus attack on “uncertainty.” The notion that eliminating tax and regulatory “uncertainty” will trigger massive investment is a canard being propagated by the business community to justify sitting on $2 trillion that could be invested. The regulatory and tax environments are as certain—or uncertain—as they have been over the past 50 years. The issue is demand —or lack thereof. Until this is confronted head on, the economy will sputter.
6)Job creation is the first, and most important, bipartisan challenge. If the president and the new Republican leadership are serious about a new bipartisanship, they should focus immediately on a strategy to generate jobs. The deficit will subside only if the economy returns to full strength. Job creation is the predicate to all other major policy issues.
Video: Obama Feels Bad About Dems’ Losses