It is a particularly bad election when a party's principal source of confidence is also its main form of a self-deception. Republicans generally believed that a president presiding over higher deficits, higher health costs, higher poverty, lower workforce participation, lower median household incomes and a lowered credit rating could not win re-election. No president, after all, had been returned to office with an unemployment rate higher than 7.2 percent since 1936.
Now one has. History can be a powerful teacher but it is a weak crutch. There is no law requiring a poor economy to benefit a political challenger, particularly when that challenger is responding to the wrong economic crisis.
Our problem is not a normal, cyclical slowdown — the kind that responds easily to better economic management and higher growth. The economic and social consequences of the financial panic that began with the collapse of Lehman Brothers in 2008 still ripple. According to one recent estimate, America lost $12.8 trillion in output — a year's worth of economic activity. Average household wages fell back to 1995 levels, setting a lower starting point that will undermine a lifetime of earnings. Yet these massive effects brought limited consequences for those who seemed at fault. The pain was distributed broadly. Many doubted it was distributed fairly.
The retreating economic tide also exposed some barnacled problems that had existed under the surface for a generation. As Americans have grown dramatically more productive, technology has replaced many jobs and globalization has put downward pressure on wages. So middle-class Americans work harder for stagnant incomes in an economy with fewer employment opportunities.
This is our economic challenge in all its disturbing complexity: not just failed financial institutions but strained social trust; not just an economic dip but a loss of faith in upward mobility.
An early political response came from Occupy Wall Street — which proved, once again, why the hard left has been such an insignificant force in American history. The revolution lacked only a leader, an agenda and a clue. But in the best American tradition, the sentiments of revolution were domesticated, homogenized, shrink-wrapped and mass marketed by the center-left. The abolition of modern capitalism became President Obama's campaign message of mild class resentment and a marginal tax rate hike on those making more than $250,000 a year. It was hardly an adequate response to our economic challenge. But it was a predictable and politically effective one.
Historians will be more confused by the Republican reaction. Less than four years after the fall of Lehman, the GOP standard-bearer was a venture capitalist who opposed the auto bailout and was building a dream home in La Jolla. Conservatives generally find Mitt Romney's business achievements meritorious. But stepping back a bit from ideology, it is remarkable that the Republican Party nominated a capitalist caricature to respond to an economic crisis created, in part, by capitalist caricatures. The choice involved a certain gutsy, irrational defiance — like wearing a top hat to a NASCAR race. But it didn't turn out well.
Obama pressed the class-based critique of Romney early and often in battleground states. One ad bluntly claimed that Romney is "not one of us." The effectiveness of these attacks seems to have varied by state. But overall, Obama's strategy worked. He carried minority voters by massive margins while Romney underperformed among white working-class voters in key states. Obama won by mobilizing his most enthusiastic supporters while dispiriting Romney's least enthusiastic backers.
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