Wednesday, March 26, 2008

Democrats and the Economy

Democrats and the Economy

By Stephen J. Rose and Anne Kim

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The economy is either in or sliding toward recession, and according to media accounts, the middle class is getting hammered. The conventional wisdom is that the November elections will be a cakewalk for Democrats, who are perceived to be champions of the middle class.

But the "party of the middle class" has lost middle-income voters in six of the past seven congressional elections and the two most recent presidential races. While the "Bush recession" could redound to Democratic benefit this fall, Democrats could squander this opportunity if they fall into one of three traps on what they say and offer Americans. The traps are:

  • Confusing 2008 with 1929. It's not even close. The overwhelming majority of Americans today are not on the brink of economic catastrophe, and Democrats should not treat them as if they are. In 2006, the median income of working-age husband-wife couples (ages 25-59) was $73,765. Eighty percent of Americans over 40 own a home, and while foreclosure rates have hit historic highs, it's still the case that relatively few homeowners are at risk of losing their homes over the next several years. Moreover, if the coming recession follows the same pattern of the last seven downturns since 1960, it will be relatively short and shallow. During past recessions, unemployment rose by about two percentage points, real GDP declined by a little less than 2%, and the average length of the downturn was a little less than 11 months.

  • Confusing bad times with pessimism. Even during tough times, Americans are optimists and believers in the American Dream. They believe success or failure is within their control. Eighty percent believe you can start out poor and become rich in America. And while they are anxious over the current economic downturn and the broad changes brought about by globalization, they do not see themselves as victims, and are not comforted by politicians who recite a litany of their anxieties.

    Most people think the economy is in poor shape and worry about potential misfortune. But this sour mood and their worries are tempered by a strong appraisal of their own financial situation and a low evaluation of personal risk. For example, only 15% think that it is at least somewhat likely that they could be laid off in the next year. Even in the most recent polls, over two-thirds of Americans describe their financial situation and standard of living as either good or excellent.

  • Offering only security instead of success. We're not French. Americans want to succeed, not just get by. They don't dream about a better safety net. They dream about getting ahead. If Democrats default to a traditional recipe of expanding the safety net - and that is all they offer - they will hit the brick wall of public antipathy toward "big government." In a February 2007 poll conducted by Democracy Corps, 57% of Americans agreed that "government makes it harder for people to get ahead in life," and 54% thought that "government mostly gets in the way of the economy and job growth." While people not hurt by recessions are open to helping those who are, Democrats cannot assume that economic recessions automatically translate into broad public support for major government interventions.

What could get broader support is an agenda focused on helping individual Americans achieve success in times of vast economic change. The centerpiece of a "success agenda" should be college - making it affordable and attainable to lessen the worries of parents about their children's future prospects. One idea is to offer generous scholarships to students who commit to government service for a set number of years after graduation. Another idea is to give a substantial "college tuition tax cut" to all Americans earning less than $150,000 but who are footing high-education bills.

Beyond college, the success agenda should be aimed at helping individuals navigate the new economy. For example, 401(k) accounts should be attached to workers, not companies. Health care needs to be available, reliable and affordable for everyone. Workers who lose a job, who are between jobs, or who are striking out on their own should be able to buy a low-cost health plan. And America should join every other industrialized nation and offer paid leave to new parents.

Congressional Democrats won the middle class in 2006, when the main issue was Iraq. They won the middle class in 1992, when Bill Clinton campaigned on a success agenda during hard economic times. Providing economic security should always be a mainstay of the Democratic Party. But believing that most middle-class Americans are only steps from disaster will lead to the wrong policy and political agenda. Only if Democrats speak to the true anxieties and aspirations of American families will they be rewarded in November.


Mr. Rose is writing a book called "Mythonomics: Ten Things That You Think You Know About Middle Class That Are Wrong." Ms. Kim is director of the Middle Class Program at Third Way, a progressive think tank in Washington.

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