This post originally appeared at The American Prospect.
This spring, a prominent Democratic pollster sent a memo to party leaders and Democratic elected officials advising them to speak and think differently. The nation’s economy had deteriorated so drastically, he cautioned, that they needed to abandon their references to the “middle class,” substituting for those hallowed words the phrase “working people.” “In today’s harsh economic reality,” he wrote, “many voters no longer identify as middle class.”
How many voters? In 2008, a Pew poll asked Americans to identify themselves by class. Fifty-three percent said they were middle-class; 25 percent said lower-class. When Pew asked the same question this January, it found that the number who’d called themselves middle-class had shrunk to 44 percent, while those who said they were of the lower class had grown from 25 percent to 40 percent.
Americans’ assessment of their place in the nation’s new economic order is depressingly accurate. Though most of the jobs lost in the 2007–2009 recession were in middle-income industries, the lion’s share of the jobs created in the half-decade since have been in such low-paying sectors as retail and restaurants. Median household income has declined in every year of the recovery. The share of the nation’s income going to wages and salaries, which for decades held steady at two-thirds, has in recent years descended to 58 percent — the lowest level since the government began its measurements.
The waning of America’s middle class presents a huge challenge to the nation’s oldest political party. The Democrats’ ability to improve the economic lives of most Americans has been their primary calling card to the nation’s voters ever since Franklin Roosevelt became president. Since the 1940s, however, the Democrats’ preferred method of helping working- and middle-class Americans has tilted more toward spurring economic growth than aggressive redistribution. So long as the growth in the nation’s economy registered in the pocketbooks of most Americans, there was little need to adopt policies that put a high priority on, say, redirecting profits into wages.
And that was fine with the Democrats. When John F. Kennedy observed that “a rising tide lifts all boats,” he was not only accurately describing how the highly unionized and not-yet-globalized economy of the 1960s worked; he was also describing how the economy enabled the Democrats to establish a political framework in which they could seek and win support from both business and labor — from both Wall Street and Main Street.
But the kind of economy that once allowed the Democrats to be the world’s leading cross-class party has almost completely disappeared. American economic growth today goes to a relative handful of its wealthiest citizens — indeed, since the recovery began in 2009, 95 percent of the income growth has accrued to the wealthiest one percent, as University of California, Berkeley, economist Emmanuel Saez has shown. While the economy has grown by 20 percent since 2000, the median income for households headed by working-age Americans has shrunk by 12 percent. And as wages have sunk to a record-low share of the nation’s economy, the share going to profits has reached a record high.
The Democrats are hardly at death’s door. Abetted by the intransigence of a nativist, patriarchal, increasingly anti-science and fanatically anti-government Republican Party, they hold a commanding lead among the nation’s growing constituencies — Latinos, Asians, single mothers, millennials and professionals. Demographics give the Democrats a clear edge in high-turnout elections, presidential elections most particularly. But demographics devoid of economics will sustain the party’s advantage for only so long — especially absent a serious plan for improving the prospects of today’s downwardly mobile. Bettering the economic lot of their constituents — particularly since those constituents are represented disproportionately among those Americans who now call themselves lower-class — will require the Democrats to do something they haven’t really contemplated, and have consistently avoided, since the 1930s: taking a side, with all that entails, in a class war.
Taking sides has never come naturally to the Democrats. Throughout its long history, the party has not merely contained multitudes but contradicted itself, frequently and ferociously. In 1860, confronted with the new Republican Party’s challenge to slavery, the Democratic Party split in two, nominating both a Northern and a Southern presidential candidate. In the early 20th century, its two centers of strength were the white, segregationist, nativist South and the urban political machines of such cities as New York and Boston, home to millions of Catholic and Jewish immigrants. The two groups clashed so irreconcilably on issues like Prohibition and the Ku Klux Klan (which reached its apogee in the 1920s by adding anti-Catholicism to its catalog of hatreds) that the party’s 1924 convention required two weeks and 103 ballots before it could settle on a presidential nominee — John W. Davis, an obscure Wall Street attorney — acceptable to both sides. It took the crisis of the Depression to compel the rival camps to call a truce and turn their attention to economic matters and to Franklin Roosevelt.
Roosevelt commanded substantial business support during his 1932 campaign and in his first two years as president, though he kept Wall Street at arm’s length. When he was assembling his Treasury team prior to taking office, someone suggested he consider appointing Russell Leffingwell, a leading executive at the J.P. Morgan investment bank, which was headquartered at 23 Wall Street. Roosevelt thought about it for a moment and then shot down the idea. “No,” he said. “We can’t have anyone from 23.”
As Roosevelt moved left in 1935, signing into law the National Labor Relations Act, the Social Security Act and a substantially higher income tax for the wealthiest Americans, many of his former business backers, most prominently former Democratic National Chairman John J. Raskob, who’d been the financial vice president of both DuPont and General Motors, turned against him. They founded and funded the Liberty League, which throughout the 1936 presidential campaign relentlessly attacked Roosevelt as a socialist. On the election’s eve, secure in the knowledge that he was about to win an overwhelming victory, Roosevelt struck back. In an address, broadcast on national radio, to a screaming crowd at Madison Square Garden, FDR singled out “business and financial monopoly, speculation, [and] reckless banking” as enemies of social peace. “Government by organized money is just as dangerous as government by organized mob,” he continued. “Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me — and I welcome their hatred. I should like to have it said of my first administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second administration that in it these forces met their master.”
Roosevelt’s speech remains the apogee of the Democrats’ taking up the cudgel of class war. No Democratic president or nominee has put it quite that way ever since. Nor, by the calculus of conventional politics, did Roosevelt’s successors need to. Economically, the New Deal reforms were a stunning success, setting in place the structures that ensured the 30-year boom that began with World War II would be felt across the economy. From 1947 through 1973, the nation’s productivity rose by 97 percent and its median compensation by 95 percent. Politically, the reforms fostered an era of Democratic dominance. An occasional Republican — Dwight Eisenhower, Richard Nixon — would be elected president, but they did nothing to endanger the Democrats’ core economic programs. The Democrats’ hold on Congress during this period was almost unbroken.
The New Deal coalition broke up in the decades that followed, as many white Democrats rejected what they saw as the party’s targeting of tax dollars to help minorities. Pollster Stan Greenberg’s study of Macomb County, Michigan — a white working-class suburb of Detroit that had given John Kennedy 63 percent of the vote in his 1960 campaign against Richard Nixon and had given Ronald Reagan 66 percent in his 1980 campaign against Jimmy Carter — demonstrated that Macomb’s Democrats believed their party was taxing them to support Detroit’s African-Americans.
The movement of the white South and elements of the white working class into the Republican column — a journey that began during Nixon’s presidency and has continued to this day — initially spurred centrist Democrats to push their party rightward on such issues as lengthening prison sentences and curtailing welfare. Ultimately, however, the wholesale flight of the white South into Republican ranks had the effect of greatly diminishing the divisions on racial, gender, and cultural issues that had rent the Democrats for much of the 20th century. As a Southernized Republican Party moved right on those issues, it prompted a countermovement from socially liberal professionals, many of whom had previously identified as Rockefeller Republicans, into Democratic ranks. As John Judis and Ruy Teixeira reported in their 2002 book The Emerging Democratic Majority, professionals — previously a solidly Republican constituency — backed the Democratic candidates in the elections of 1988 through 2000 by a margin of 52 percent to 40 percent. Henceforth, the issues that would divide the Democrats would be preponderantly economic.
During the 12 years in which Reagan and George H.W. Bush were president, centrist Democrats sought not only to win back the Reagan Democrats with more-conservative social and economic policies but also to cultivate more business donors for party candidates. Tony Coelho, a California congressman who spearheaded House Democrats’ fundraising efforts for much of the 1980s, shifted the balance of funds coming into the party’s coffers more toward Wall Street and other business interests. When political journalist Thomas Edsall, in his 1984 book The New Politics of Inequality, tallied the funds received by all congressional Democrats from business and conservative interests and compared the total to the funds they received from labor and liberal interests, he found that they evened out. The Democrats’ right-left funding ratio was 1 to 1. Republicans, by contrast, received $33 from business and conservative interests to every $1 they received from labor and liberal groups. Not surprisingly, on such fundamental economic questions as taxation, trade and worker rights, Reagan-era Republicans had a clear sense of direction. Democrats were all over the map.
During Reagan’s presidency, and again during George W. Bush’s, centrist Democrats backed reductions in top tax rates that the Republican presidents had proposed. During the presidencies of Jimmy Carter and Barack Obama, House Democrats passed bills amending labor law so that workers could join unions without fear of being fired, but centrist Democratic senators kept those bills from passing in the upper house, while Carter and Obama — and Bill Clinton as well — failed to make labor-law reform a legislative priority. The fiercest battles in the Democrats’ class war have come over trade. A majority of House Democrats, echoing labor’s argument that such deals only hastened offshoring and job loss, voted against both the North American Free Trade Agreement (NAFTA) in 1993 and establishing permanent normal trade relations (PNTR) with China in 2000. This year, three-quarters of party members have gone on record against fast-tracking the current proposed Trans-Pacific trade deal through Congress absent major modifications intended to preserve American jobs. Senate Democrats, who receive a higher percentage of their campaign funding from Wall Street (ever the most avid promoter of free trade) than House Democrats, backed NAFTA and PNTR.
It was Bill Clinton and Barack Obama, of course, who sent these trade deals to the Hill. Both had received major funding from the financial sector when they sought the presidency; both had selected as their chief financial advisers and policymakers a network of investment bankers and their protégés, Robert Rubin, Larry Summers and Timothy Geithner most prominent among them. While backing many of their president’s more progressive social policies, this network also avidly promoted the trade deals, financial deregulation and post-recession recovery measures that benefited Wall Street at the expense of the great majority of Americans. FDR’s reluctance to entrust the Treasury Department to Wall Street bankers did not get passed down to his more recent Democratic successors.
To be sure, Republican opposition to workers’ concerns has been the biggest and most constant impediment to Democrats’ initiatives on working Americans’ behalf. Nor is this to gainsay the epochal advances in racial and gender equality and economic security that the post-Roosevelt Democratic Party has helped realize. Medicare and Obamacare affirmed the nation’s responsibility for the health care of its citizens. Medicaid and a raft of other programs targeted various forms of public assistance to the poor. But none of these programs — nor any of the party’s signature civil-rights legislation — specifically sought to advance workers’ interests against their employers’. That had been taken care of by the National Labor Relations Act and minimum-wage legislation. That was a fait accompli. The party had been there and done that.
Except, as American capitalism changed, what the Democrats had done had come undone. As corporations steadily weakened their workers’ bargaining power by shifting work abroad and breaking their unions at home, the link between productivity and workers’ income was severed. Since 1979, the nation’s productivity has risen by 65 percent and its workers’ compensation by just 8 percent. As well, businesses have changed the forms of employment they offer. Workers who formerly would have been full-time employees have been labeled as independent contractors or listed as working for temporary-employment agencies — changes that have stripped from them the right to unionize and the protections of wage-and-hour laws. The number of part-time employees has ballooned.
The Democrats haven’t been insensible to working Americans’ concerns during these years. When they had the votes, they raised the minimum wage, increased the funding for college grants and loans, and initiated public-works programs during recessions. At the same time, however, they largely failed to grasp the full extent of the erosion of middle-income jobs, the decline in worker bargaining power, and the stagnation of Americans’ incomes (offset, until 2008, by the corresponding increase in Americans’ debt). The idea that the nation’s middle-class majority wasn’t a permanent axiom of American life, that it might one day cease to exist, simply didn’t occur to most party leaders, as it didn’t occur to most members of the country’s political and economic elites.
Democrats now find themselves in an unfamiliar world — not of their making, exactly, but one whose creation they didn’t do much to retard. It’s a world where they can no longer deliver job-based prosperity — at least, not without radically altering their politics. Rebuilding that middle-class majority requires Democrats to embrace ideas and find a voice as new to them as the cadences of the New Deal were to the Democrats of 1933.
The new base of the Democratic Party appears primed for such a change. The share of liberals in party ranks has swelled. In 2000, Gallup reports, 44 percent of Democrats identified as moderates, and 29 percent as liberals. Today, the share of moderates has dropped to 36 percent, while that of liberals has increased to 43 percent.
This leftward movement at least partly reflects the growing weight of Latinos and millennials within Democratic ranks. Like African-Americans, Latinos differ sharply from white Americans in their level of support for government. Asked in a 2012 Pew survey whether they preferred a smaller government with fewer services or a bigger government with more services, Latinos backed the bigger-government option by a 75 percent to 19 percent margin, even as the general population supported the smaller-government alternative by 48 percent to 41 percent. Since California Latinos began voting in large numbers in the mid-1990s, they have proved the state’s strongest supporters — even more than African-Americans — of ballot measures protecting workers’ rights and authorizing more spending on schools.
As with Latinos, so with millennials. A Pew survey of those young Americans from March of this year found them to be the only age group in which the number identifying as liberals (31 percent) exceeded the number calling themselves conservative (26 percent). Fifty-three percent of millennials preferred the bigger-government-with-more-services option, and just 38 percent the smaller.
One reason millennials lean left, of course, is that each successively younger cohort of Americans contains a larger share of Latinos (not to mention Asians and secularists). White millennials preferred the smaller government option by 52 percent to 39 percent, but millennials of color supported the bigger-government alternative by a hefty 71 percent to 21 percent margin.
Small wonder, then, that America’s young adults harbor the greatest skepticism toward the nation’s economic system. A 2009 Center for American Progress survey showed that their view toward unions was 9 percentage points more favorable than the overall population’s. And a 2011 Pew Poll revealed the somewhat astonishing fact that 49 percent of millennials had a positive view of socialism, while just 46 percent of them viewed capitalism positively. (Just 31 percent of all Americans viewed socialism positively; 50 percent of them felt that way about capitalism.)
The rising number of left-leaning Latinos and millennials gives Democrats sound reason for believing that their future is bright — assuming elections can be reduced to demographics. With Republicans working overtime to estrange nearly every growing group in the political landscape, while Democrats have championed such policies as the legalization of undocumented immigrants and equal rights for gays and lesbians, the demographic tide is certainly running in the Democrats’ direction. Minorities and the liberal young have already pushed America’s cities decidedly leftward: 26 of the largest 30 now have Democratic mayors, the greatest partisan imbalance in history. They have turned such onetime Republican bastions as Florida and Virginia into proto-Democratic states. Georgia and North Carolina, and, within two or three presidential-election cycles, Texas and Arizona will likely fall prey to the same purpling. To be sure, the movement of young people and African Americans out of some longtime Democratic bastions in the industrial Midwest, and the understandable reluctance of immigrants to move into this economically embattled region, may turn such states as Michigan into Election Day toss-ups. Any Republican gains in the Midwest, however, could be more than offset by the Democrats’ pickups in the South and Southwest. As the South — the Republican Party’s chief electoral fortress — edges into the Democratic column, the Democrats may be able to contemplate a new era of political dominance. Provided they can figure out how to reinvent broadly shared prosperity.
For despite their new adherents’ liberal leanings, the Democrats are sure to pay a price if they can’t arrest the downward spiral of Americans’ economic lives. The price isn’t likely to take the form of increased millennial or minority support for Republicans. More likely, many in these groups will just disengage from politics and cease showing up at the polls. Despite their liberalism and preference for a government that smooths out the economy’s increasingly jagged edges, young Americans don’t invest a lot of hope in the political process. Just 31 percent of millennials say they see a great deal of difference between the two parties — the lowest level of any age group in the Pew survey. Similarly, 50 percent of millennials identify as independents, while 27 percent call themselves Democrats and 17 percent say they’re Republicans. If the Democrats are to establish the enduring majority that many of them see in the offing, they will have to shift the rewards of economic growth from profits, dividends, and rents to the wages and salaries on which the majority of Americans depend.
Emmanuel Saez, UC Berkeley
Even in regions where Democrats dominate, numerical majorities will not suffice. The left-leaning constituencies need to form durable alliances — almost invariably in opposition to the prevailing Democratic establishments — in order to secure pro-worker reforms.
It’s in America’s cities, home to the largest influx of immigrants and millennials, where this strategy has had the most effect. In New York, Boston, Seattle, Pittsburgh, New Haven, Minneapolis, Phoenix, Santa Fe and a host of other municipalities, voters have elected progressive mayors and city council members whose candidacies were backed, and in many cases incubated, by these new alliances. The key players in these coalitions tend to be service-sector unions (representing janitors, hotel and health care workers, supermarket clerks), immigrant-rights groups, working-class neighborhood organizations active in African-American communities (many of them successors to ACORN), and affordable-housing and environmental-justice advocates. The ordinances enacted by these new governments run the gamut of causes important to the cities’ working classes: raising the minimum wage, setting living-wage standards for city contract workers, mandating paid sick days, requiring developers to construct affordable housing in return for their building permits, reining in discriminatory police practices, and curtailing the police’s cooperation with federal officials seeking to deport noncriminal undocumented immigrants.
Although America’s demographic changes reach well beyond city lines, it’s only in these urban areas that the new Democratic and largely working-class constituencies have organized themselves sufficiently to attain power. The politics of California provides a case in point. No other state has seen its population so thoroughly transformed in the past three decades, with Latino and Asian immigrants not only pushing Los Angeles and the Bay Area further left but also moving many historically Republican regions — San Diego, northern Orange County, the Inland Empire, and parts of the San Joaquin Valley — solidly into the Democratic column. By the early 2000s, it was clear that the California Legislature would be under Democratic control for the foreseeable future. At which point, the state’s business community — oil companies, banks, apartment owners’ associations, chambers of commerce — began to cultivate candidates of their own in Democratic primaries. Since then, those primary contests frequently pit business-backed candidates against candidates supported by unions, environmentalists, and other progressives.
In the Bay Area and Los Angeles, the progressive candidates usually prevail. In other parts of the state, business-backed Democrats frequently win. In 2012, Democrats won more than two-thirds of the seats in both houses of the legislature, but while the legislature has enacted some significant progressive statutes, others have fallen victim to a coalition of the business Democrats and the Republicans. The defeated bills included one that would have put a moratorium on fracking and another that would have allowed San Francisco to slow the flood of evictions in hopes of keeping developers from eliminating what remains of the city’s affordable housing stock.
In late May, the Senate approved a bill raising the state minimum wage to $13 an hour. Notwithstanding the Democrats’ supermajority, the bill narrowly squeaked through, with business-backed Democrats abstaining, despite representing such working-class cities as Fresno, Stockton and Santa Ana, where wages are notoriously low. Those are cities, however, where the kind of labor-left alliances that have formed around San Francisco and Los Angeles are still too weak to prevail electorally. Nationally, New York’s Working Families Party is the most successful alliance to have achieved sufficient density across an entire state to affect state-level politics, but it is still far stronger in New York City — whose new mayor, Bill de Blasio, was one of the party’s founders — than it is upstate. In Minnesota, another such statewide alliance scored a surprising victory in 2012 when it persuaded voters to reject a ballot measure that would have required them to produce photo IDs at polling places, but like the Working Families Party, it is far stronger in its state’s urban center, the Twin Cities, than elsewhere.
One impediment to the emergence and growth of these progressive alliances is the ability of centrist Democratic officials to pick off the support of these alliances’ constituent organizations by adopting policies that benefit those groups only. Even the strongest such alliance, New York’s Working Families Party, was pressured by many of the unions that have historically supported it to endorse Governor Andrew Cuomo’s re-election bid this spring without even winning Cuomo’s commitment to causes the unions supported. Cuomo had declined to campaign against continuing Republican control of the state Senate, which had bottled up legislation to create public funding of election campaigns and to let cities raise their minimum-wage standards. However, Cuomo had also helped many unions win particular campaigns, and those unions feared his support for their efforts would prove fleeting if the WFP didn’t endorse him forthwith. Only an extraordinary campaign by Working Families Party leaders, who threatened to run a candidate against him, compelled Cuomo to reverse his stance on the state senate and the minimum wage in order to win the party’s backing.
The appeal of transactional politics — in which a group supports a politician in return for his support for their cause, regardless of his positions on other issues — runs deep in America, where larger ideological or class concerns have never loomed as large for Democrats as they have for European social democrats. The appeal of transactional politics grows even stronger when organizations are so embattled they feel required to support anyone who will help them on a particular issue — a situation in which most unions have found themselves in recent decades.
But the leftward movement of the Democratic base has undermined at least some of the foundations of such transactional politics. The Working Families Party was able to pressure Cuomo to reverse field because polling showed that a generic WFP candidate on the November ballot would diminish Cuomo’s support from roughly 60 percent of the electorate to roughly 40 percent. New York’s unusual election laws, which permit third parties either to back major-party candidates or to run candidates of their own, gave the WFP more leverage than kindred alliances may have in other states and cities, but the entire episode (and the polling) demonstrated the depth of support from the Democrats’ new base for policies that advance working-class interests, and the disdain for Democratic pols unwilling to fight for them. Traditional pro-Democratic institutions that continue to play the transactional game may find themselves retarding the growth of a new Democratic electorate demanding the very policies that would most benefit working people’s organizations and prospects.
What might those policies be? While the new urban regimes are enacting a host of progressive ordinances, local governments lack the power to create the kind of economic transformations that the nation’s 99 percent need. Even at the state and federal level, raising the minimum wage, say, directly affects just a fraction of American workers. What else can government do to re-establish the link between economic growth and Americans’ incomes?
The single most helpful reform would be to restore workers’ bargaining power. With the rate of unionization in the private sector falling beneath seven percent, the ability of workers to bargain collectively for improvements in their pay, benefits, or hours is effectively nonexistent. Efforts to shore up their power by strengthening their capacity to form unions without fear of being fired, however, failed during each of the four most recent Democratic presidencies (Johnson’s, Carter’s, Clinton’s, and Obama’s). Progressives cannot abandon this fight, but it’s time to open other fronts as well — particularly since years of polling show stronger support for such labor-backed causes as greater tax equity, higher minimum wages, and restrictions on corporate offshoring than they do for unions themselves.
The conventional viewpoint within the economics and business establishments is that workers’ declining incomes are the inevitable result of globalization and the automation of work. This viewpoint neglects to consider how the structure of corporate decision-making affects workers’ experience in the face of these trends. In Germany, laws that require corporations to split their boards between management and worker representatives have led to the preservation of the highest-skilled and -value-added jobs at home — a key reason that country has become an export giant and boasts a far more secure and prosperous working class than ours. A law greatly reducing taxes on corporations that adopt this worker-management balance on their boards, and increasing them on corporations that don’t, could have a profound effect on the way corporations look at such matters as offshoring and the proper division between profits and wages.
These proposals would surely encounter massive opposition, but they have the virtue of appealing to Americans’ sense of equity and collegiality, as well as their skepticism about corporate managers, without raising the specter of big government.
Democrats must also pursue policies with a more conventional pedigree: investing in public works both because we need to and because it’s impossible to foresee how we get close to full employment or environmental remediation without doing so; steeply raising the tax rates on the top income levels; raising taxes on capital gains and dividends (and perhaps devoting those revenues to a greatly increased Earned Income Tax Credit); regulating finance to the point that it can no longer dominate the economy; and diminishing the responsibility of students and their families for covering the costs of public higher education. But the emphasis on increasing worker power and pay should be central to the Democrats’ concerns, both politically and economically. If the American economy is indeed descending into what economist Larry Summers terms a state of secular stagnation, the low pay of American workers, which has depressed their purchasing power and reduced the profits of all but the highest-end retailers, is largely to blame.
Like the other Democratic elected officials of her generation, Hillary Clinton came of age and (more than the others) thrived in an economic and political system in which Kennedy’s rising tide did lift all boats, cohabiting with both Wall Street and working people’s organizations was routine, and the pressure to take a side in a slowly emerging class war could barely be felt. Today, however, that pressure is palpable — and increasingly uncomfortable to a host of Democratic pols, Clinton most especially.
How this conflict affects the 2016 presidential race, the more-likely-than-not Hillary Clinton presidency and the larger future of the Democratic Party remains to be seen. Despite its demographic advantages, the party cannot indefinitely retain its electoral edge if it fails to address the falling power and income of ordinary Americans — even if such policies cost the party the backing of financial elites at a time when elections are more driven by money than ever before. It’s time for Democrats to disenthrall themselves from their routine conciliation of interests that have become profoundly opposed. It’s time for them to welcome more hatred from the successors to Roosevelt’s forces of selfishness. Harder choices than those Clinton chronicles in her new book await them.
The views expressed in this post are the author’s alone, and presented here to offer a variety of perspectives to our readers.
