Redburn Reads, Oct. 30, 2023 (Halloween Edition)

Friends,

At first glance, it has been a good month for Joe Biden. 

Republicans spent three weeks chaotically attacking each other before finally choosing the most reactionary House Speaker in history. Mike Johnson may be mild-mannered but he is someone who professes a form of Christian nationalism that is dangerous and deeply unpopular with most Americans. 

Meanwhile, Biden, whether you agree with his approach to the war between Israel and Hamas or not, is seriously engaged in defending our national interest abroad and our moral standing around the world. By contrast, Donald Trump, on trial for lying about his personal wealth and the success of his business, can’t help his mindless attacks on everyone and anyone, including minor court officials simply trying to do their job.

Moreover, the Commerce Department just reported that the nation’s economic output grew at a robust pace this summer, maintaining enough momentum that an economically and politically disastrous recession looks increasingly unlikely next year. 

Yet Biden is more unpopular than ever.

It’s almost Halloween and – maybe I’m being frightened by ghosts – but I’m scared. 

It’s particularly worrisome to me that so many Americans believe the U.S. economy is in bad shape at a time when it clearly isn’t. In the past, if the jobless rates was this low and real (inflation-adjusted) wages were rising as they are now, any incumbent President could expect to win reelection in a walkaway. So why isn’t Biden?

Writing in The Atlantic, Annie Lowery captures some of the reasons for the disjunction, citing what she calls the annoyance economy. She notes that most people say they are doing fine even as they insist that the overall economy isn’t. And while she exaggerates the problems, she identifies a number of genuine issues in day-to-day life. 

Something is driving a wedge between economic sentiment and the headline economic reality, and people might be admitting that they’re doing okay only through gritted teeth. Almost everyone who wants a job has one—that’s great. Wages are rising across the board—also good. But a lot of economic factors that are frustrating and vexing to deal with are tempering people’s feelings about the economy as a whole.

First and foremost: inflation. Yes, price growth has moderated. Yes, people’s incomes are rising faster than prices are rising, leaving most consumers better off overall. But people hate inflation. They hate doing the mental math and realizing how expensive everything is every single time they go to the grocery store, pick up takeout for dinner, and stock up on shampoo and painkillers at the pharmacy. Inflation does not just erode people’s earning power. It ticks people off. (Student loans have a similar effect. Most people who take out student loans come out ahead. But folks hate feeling like they have a second mortgage to pay down month after month.)

Second, and relatedly: interest rates. Borrowing money is very, very expensive right now. As a result, credit-card defaults are way up, and many people are putting off buying big things on credit. The housing market is a nightmare too—something that is not easy to see in headline economic statistics. Rental prices are sky-high in many metro areas. And the real-estate market is frozen solid because of those high interest rates. Nobody can sell, because who wants to give up a low mortgage rate? And nobody can afford to buy. The situation is going to be miserable for years to come too: If interest rates go down, buyers will flood into the market, pushing prices up even higher. Lots of people are trapped in places they don’t want to be living, with no end in sight.

Finally, nostalgia, true or false, is driving up the Annoyance Index. Even if things are pretty good at the moment, many Americans remember them feeling better in the recent past. Families had way more cash on hand during the pandemic. Interest rates were much lower. Wage growth was faster a year ago. Prices were lower—a lot lower—before the pandemic. And many employees have been forced back to the office, when they were happy working at home.

Things are great, but folks are mad. All we need is for prices to come down, interest rates to stabilize, housing markets to normalize, polarization to decrease, and the news media’s incentives to change. Until then, the Economic Annoyance Index will just keep getting higher.

But there’s an even larger issue for Biden – and Democrats – that has been building for generations. Two new books – one by my former colleague David Leonhardt and the other by the savvy progressive political thinkers Ruy Teixeira and John Judis – highlight the well-known problem that Democrats have lost much of their traditional White working class base (now spreading to Hispanics as well) but they approach it in fresh, illuminating ways. 

In a Washington Post review of Leonhardt's book, Ours Was the Shining Future: The Story of the American Dream, Nick Romeo neatly summarizes David’s thesis about today's political challenges.

 It’s a chronicle of almost a century of American economic life, rich with historical details and resonant narratives. It also makes a subtle but pointed argument about the present, offering a diagnosis of our current maladies and suggestions about the shape solutions could take.

His central contention is that the American left has largely abandoned fighting for basic economic improvement for the working class. Some of the defining progressive triumphs of the 20th century, from labor victories by unions under Franklin Roosevelt to the Great Society programs of Lyndon B. Johnson, required vast popular mobilizations to succeed. Leonhardt, a writer for the New York Times, champions a progressivism that is “more inclusive of people who are not white-collar professionals.” Borrowing a useful phrase from the economist Thomas Piketty, he argues that the “Brahmin left” must stop demonizing working-class people who do not share its views on cultural issues such as abortion, immigration, affirmative action and patriotism. A less self-righteous and more tolerant left could build what successfully increased access to the American Dream in the past: a broad grass-roots movement focused on core economic issues such as strengthening unions, improving wages and working conditions, raising corporate taxes, and decreasing corporate concentration.

Some of the most fascinating material in the book endorses a more nuanced interpretation of America’s political realignment in the 1960s. The standard view is that the Democrats, by opposing segregation, lost millions of racist White voters to the Republican Party. Leonhardt argues that this captures only part of the truth. Another significant factor was the failure of Democrats to address issues such as crime. Rates of murder, assault and robbery all surged between 1960 and 1980, but some liberal publications and politicians refused to take the issue seriously. The Nation even used quotation marks to parade its skepticism, as if the crime wave were simply a fabrication of the political right.

This was part of a broader shift. While progressives in the 1930s and 1940s had concentrated more on material issues such as wages, retirement and unions, by the 1960s influential sections of the left began to focus “more on the psychic concerns of people fortunate enough to take material comfort for granted.” . . .

Not all Democrats labored under this delusion. Robert Kennedy sought to create a working-class coalition across racial lines. A strong supporter of civil rights, he knew that some demagogues used the fear of crime to inflame racial tensions. He also understood that crime was a real issue, and for Democrats to ignore it would fatally undermine their credibility. Martin Luther King Jr. also recognized the value of broad, multiracial coalitions. Discussing the needs of Black Americans in 1961, he said, “Our needs are identical with labor’s needs: decent wages, fair working conditions, livable housing, old-age security, health and welfare measures, conditions in which families can grow, have education for their children and respect in the community.” Leonhardt’s delineation of this historical template for a genuinely inclusive progressive movement is a valuable contribution with striking contemporary relevance.

His examination of the politics and economics of immigration is also fascinating. He traces the often forgotten history of progressives who opposed unrestricted immigration because it increases the supply of labor, thus lowering wages. From labor leader Samuel Gompers to civil rights leaders Booker T. Washington, Frederick Douglass, A. Philip Randolph and Rep. Barbara Jordan, an illustrious line of progressives has recognized that unlimited immigration can harm workers. Leonhardt makes a persuasive case that Democrats must move beyond an immigration policy that essentially maintains “more is better, and less is racist.”

Similarly, Teixeira and Judis, in their forthcoming book, Where Have All the Democrats Gone: The Soul of the Party in an Age of Extremes, 

argue that progressives need to temper the noisy demands (“Defund the Police”) and identity politics (LBGQT+) of activist groups on the left if they want to regain enough support among culturally conservative non-college-educated voters to consistently win in the battleground states that will determine future elections. In a podcast for the centrist Niskanen Center, Teixeira describes the evolution from writing (with Judis) The Emerging Democratic Majority two decades ago to today’s lament. Here’s the intro to the podcast, which is well worth listening to in full.

In 2002, sociologist Ruy Teixeira (and co-author John Judis) published The Emerging Democratic Majority, a diagnosis and prescription for the Democratic Party that the New York Times later called “one of the most influential political books of the 21st century.” The book argued that the United States was changing demographically, economically, and ideologically in ways that could benefit Democrats electorally. All too often, however, the book’s thesis was interpreted as a “demographics is destiny” argument, positing that population growth among a left-leaning “rising American electorate” — including young people, minorities, college-educated professionals, and single women — inevitably would lead to Democratic landslides. Teixeira, however, maintained that this winning Democratic coalition would only be possible if the party retained a strong level of white working-class support. 

Over time, and particularly after the 2016 election, Teixeira continued to insist that the Democrats, as they tilted toward college-educated voters, were repelling their working-class supporters by embracing cultural leftism and racial identitarianism as well as writing off all of Trump’s working-class voters as irredeemable racists and xenophobes. Such criticism was increasingly unwelcome in Democratic circles and Teixeira’s employment at the left-leaning Center for American Progress, where he had been a fellow since 2003, became untenable. In 2022 his departure from CAP, and his subsequent hiring at the right-leaning American Enterprise Institute, made national headlines. 

In this podcast episode, Teixeira discusses his founding of The Liberal Patriot, which has recently expanded from a newsletter into an online publication and nonprofit organization, and the tough-love criticism he has continued to offer to the Democratic Party. Teixeira believes that the Democrats’ long-term electoral viability depends upon their being able to regain at least some level of rural and working-class support by moving to the center on cultural issues, promoting an abundance agenda, and embracing patriotism and liberal nationalism. Teixeira is no fan of the current inception of the Republican Party, which he says no longer has any real idea of what it needs to do in order to be a successful conservative party again. But, he adds, “it also became the case over time that the Democrats lost track of what it would take to be a successful and productive liberal party, and how to be the actual party of the ordinary America, which is their historical brand and where they’ve had the greatest success.”

Democrats, of course, haven’t abandoned the working class as much as Republicans have blocked them from carrying out much of the agenda that would respond to their needs and earn them the credit they deserve. 

Higher taxes on the rich and upper middle class are necessary components of any progressive economic program that doesn’t explode the budget deficit. But Republicans, thanks to the filibuster and other anti-majoritarian rules, are able to block most tax increases even when Democrats are in power in Washington. And when the GOP has control of the White House and Congress, the first thing the party does is cut taxes for corporations and the wealthy, sending the deficit skyrocketing and making clear it is a fool’s game for Democrats to take the blame for adding to the tax burden (even when essentially limited to the most affluent Americans) if Republicans are only going to reverse it at the first opportunity and claim credit for cutting taxes.

There’s no easy answer to this dilemma, which I believe is one of the key reasons (beyond the cultural issues Leonhardt, Teixeira and Judis rightly highlight) why our politics has become so polarized. And one of the reasons why Americans are so disillusioned with our flawed system of democracy that many of them, rather than seeking to reform it, are willing to support a presidential candidate (and the party that backs him) prepared to abandon it altogether.  

And that’s the biggest reason of all why the disjunction between economic reality and economic sentiment is so worrisome. Writing in The Bulwark, an outpost of Never-Trump Republicans, Jonathan Last paints a bleak picture of our current situation.

The reason I keep hammering this subject and arguing with Tim and Sarah isn’t because I think everything is great and everyone should be happy. (See the caveats above.)

I’m also not doing this because I want to argue people into feeling better about the economy.

And finally, I understand that you can construct an argument that partially explains some of the sentiments we see from voters. If you cherry-pick, and squint, and do a lot of psychoanalysis.

Here is why I keep talking about this: Because something is wrong here.

All of the arguments about why people feel the way they do are post facto rationalizations—if you were just looking at the data, you’d never think to make them. They are rationalizations to try to make sense of a general mood in the population that, fundamentally, does not make sense.

This may not be the Roaring Twenties, but the average American seems to think we’re in the Great Recession and we most certainly are not.

And it’s the existence of this disconnect that worries me.

When citizens of a democracy start constructing alternate realities based on their feelings, it’s a sign of something. Call it decadence, call it delusion, call it decline.

Whatever it is, though, only bad things can come of it.

I’m about to undergo a discectomy operation this week for my sciatica. I’ve got a great surgeon in Boston and I'm expecting to feel a lot better by Thanksgiving. But I’m afraid the prospects for my aging body are looking better these days than the prospects for our body politic. 

Take care,

Tom