Heading into what appears to be a disastrous midterm election, the Democrats profess to be puzzled. President Obama’s record, they insist, is moderate, accommodating — if anything, overcautious. So why do most voters seem to be angrily rejecting it?
That’s one way of looking at it. Another is to say that the administration and the Democratic Congress have raised government’s share of the gross domestic product from 21 percent, where it’s hovered for several decades, to about 25 percent and have put the national debt on a trajectory to rise from 40 to 90 percent of the GDP.
Voters have noticed — and don’t like it.
But, say the Democrats, shouldn’t ordinary people — in particular, shouldn’t the blue-collar working class — be grateful to a government that tries to “spread the wealth” (Obama’s words to Joe the Plumber) in difficult economic times?
They used to be, the argument would go. In post-World War II America, voters regularly moved toward the Democrats in recession years. There’s a difference, however, that has escaped Democrats but perhaps not ordinary voters.
In recessions caused by business-cycle oscillations from the ’40s to the ’70s, voters were confident that the private-sector economy could support the burden of countercyclical spending on things like unemployment insurance and public-works projects. That spending would stimulate consumer demand, the thinking went, and once inventories were drawn down, manufacturers would call back workers to the assembly line. The recession would be over.
But it’s been a long time since we’ve had a major business-cycle recession. The recession from which we’ve emerged, but which seems to be lingering, results from a financial crisis.
Financial-crisis recessions tend to be a lot deeper and more prolonged than business-cycle recessions, as economists Carmen Reinhart and Kenneth Rogoff argue in their 2009 book “This Time is Different: Eight Centuries of Financial Folly.”
“The aftermath of systemic banking crises,” they write, “involves a protracted and pronounced contraction in economic activity and puts significant strains on government resources.”
Obama-administration economists seemed to have ignored the difference between these two kinds of recessions. Council of Economic Advisers head Christina Romer was surely sincere when she promised that the stimulus package would hold unemployment under 8 percent.
Similarly, administration economists evidently thought the private-sector economy could bear the burden of a national debt that doubled over a decade. It would bounce back like it usually does in a business-cycle recession.
Tea Partiers took a different view — and, before long, so did most voters. They seem to think that permanent increases in government’s share of GDP will inflict permanent damage on the private-sector economy — and won’t do much, if anything, to move us out of this prolonged financial-crisis recession. The evidence so far seems to support them.
They also seem to have understood that the threat of higher tax rates and more intrusive regulation from this administration would deter businesses from expanding, entrepreneurs from creating jobs, investors from taking risks and consumers from buying things.
Larry Summers could tell business leaders that they had nothing much to fear from a sophisticated economic adviser like himself. But he was working for Obama, who told ABC’s Charlie Gibson that he’d favor higher capital-gains tax rates even if they brought in less revenue to the government. This is a president who likes taking away rich people’s money.
The business leaders know that Summers has gone, while the voters know that Obama will be in office two more years — but without a Democratic House majority and, perhaps, a Democratic Senate majority, if the polls are right.
The Obama-camp line is that voters are confused, ignorant, misled or even racist; they can’t be rejecting Obama’s party on the merits. But voters, in rejecting the Democrats’ vast government expansion, may be more sophisticated than their supposed betters. Leave the private sector alone, they seem to be saying, so it can recover from the financial-crisis recession and again create the bounteous growth that has been the norm in American history.