Robert Reich: Reading America's Tea Leaves

[Robert Reich was the nation's 22nd Secretary of Labor and is a professor at the University of California at Berkeley.]

November 3, 2020. The newly formed Independence Party pulls enough votes away from both the Republican and Democratic candidates to give its own candidate, Margaret Jones, a plurality of votes, an Electoral College victory and the presidency. A significant number of Independence Party members have also taken seats away from Democrats and Republicans in Congress....

To get some insight, let’s examine what could very well occur in the decade preceding the election of Margaret Jones.

History teaches us that politics is inextricably bound up with economics. Presidents are not nearly as responsible for the economy as voters assume, but they are held accountable nonetheless. Jimmy Carter lost his bid for re-election in 1980 because the economy had been suffering double-digit inflation, mostly brought on by soaring oil prices. In order to “break the back of inflation”, Paul Volcker, then chairman of the Fed, raised interest rates so high that he also broke the back of the economy, pushing unemployment into the stratosphere. That also broke the back of the Administration. Voters blamed Carter and elected Ronald Reagan.

Reagan, by contrast, won re-election handily in 1984 largely because the economy was surging by then and voters credited him. George Bush lost his re-election bid in 1992, this time at the hands of Alan Greenspan. Greenspan raised interest rates to ward off inflation, which also raised unemployment. Voters blamed Bush and gave Bill Clinton a plurality of votes because he promised to fix the economy (in the words of his colorful political adviser, James Carville, “it’s the economy, stupid”). Clinton was re-elected in 1996 mainly because jobs were returning. Barack Obama won in 2008 as the economy teetered precariously on the edge of a precipice. Many blamed the bad economy on George W. Bush, and that blame spilled over to John McCain, the Republican candidate. (It’s not just the economy: George W. Bush defeated Al Gore in 2000 by the narrowest of margins, even though the economy was still in fine shape and Gore had been part of the Administration that was credited for it; and in 2004, Bush won re-election mainly because of the political psychology surrounding the War on Terror. The only thing that can be said with confidence is that jobs and the economy are almost always high on voters’ list of priorities.)

But even accepting the powerful effect of the economy, a backlash on the scale of my hypothetical Margaret Jones scenario would have as much to do with voters’ cumulative frustrations and pent-up anger as with specific economic conditions on Election Day. It is not difficult to foresee a plausible trajectory: After the stimulus ends and the Federal Reserve tightens the money supply and raises interest rates, and after businesses replenish inventories and consumers replace worn-out products, the jobs machine stalls and economic growth slows. Over the slightly longer term, more companies decide their American employees are overpaid relative to equally productive workers elsewhere in the world who work at a fraction of American wages, or to readily available software and automated equipment. Consequently, large numbers of middle-class Americans have to accept lower pay if they want to stay employed....

This has not been the case in America, at least not so far. Here, opulence has provoked more ambition than hostility. In this respect we are different from older cultures with feudal origins and long histories of class conflict. For most Americans, the rich have not been “them”; instead, they’re people whom we aspire to become. Given the chance, most of the middle class want to join the ranks of the rich and gain all the perks that come with great wealth. We worry only when private wealth exercises political power—in other words, when democracy morphs into plutocracy. It was here that Theodore Roosevelt and Woodrow Wilson drew the line on the trusts, and Franklin D. Roosevelt damned the “economic royalists.” Private wealth applied to ostentatious consumption is perfectly appropriate; applied to the purchase of political power, it becomes diabolic....

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