Pocket Change

The Real Reason Democrats Lost

‘The economy’ isn’t the problem. Wage stagnation is. This is what the Democrats need to understand. And talk about more. And… fix.

So there are roughly five main reasons that the collective wisdom, such as it is, has identified to explain why the election was such a blowout. One, Barack Obama’s unpopularity. Two, a motivated conservative base. Three, a dispirited liberal base. Four, the recruitment by the Republicans of affable-seeming candidates who had some discipline drilled into them. Five, the tens or arguably hundreds of millions of dollars in dark money that flowed from corporate sources into GOP coffers.

Those who feel moved to add a more substantive reason will say, “Oh yes, and the economy.” In fact they might even list it first. But this is wrong. It’s way too vague. It’s really important to understand this and focus on the exact problem, so that the Democrats can try to get this right in 2016.

“The economy” is pretty good. The gross domestic product in the third quarter grew at an annual rate of 3.5 percent. The deficit is down to 2.8 percent of GDP, from a high of 10.1 percent in the wake of the meltdown. At the moment I’m writing this paragraph, the Dow Jones Industrial Average is at 17,523, and it’s been closing at all-time highs lately. Corporate profits are enormous, as you know. Average weekly jobless claims are at a 14-year low. And as we just learned Friday morning, the economy added 214,000 jobs, and its now clear that 2014 will be the best year for job growth since 2006.

So the problem isn’t “the economy.” The problem is one particular aspect of the economy: wages. Unfortunately for Obama and the Democrats it’s the thing that kinda matters the most to people, and it’s the thing that during his presidency has sucked for pretty much everyone except those at the top.

Here, we have to take a quasi-wonkish dive into the numbers, but I promise I’ll keep it as sprightly as I can. This chart lists median household income in the United States for every year going back to 1967, when it started being measured. We’ll go farther back into that history in a bit, but for now let’s just focus on more recent years. All the numbers below are inflation-adjusted.

Median household income peaked in America in 1999, under Bill Clinton, at $56,080. In 2000, it dropped off a hair, to $55,987. Under George W. Bush, there was a little slippage: For example, $53,891 in 2004. The highest number of the Bush era was the $55,627 recorded in 2007. Then in 2008, the year of the meltdown, it dropped to $53,644.

Under Obama, it has dropped every year: $53,285 in 2009; $51,892 in 2010; $51,100 in 2011; and $51,017 in 2012. Last year, it began to recover a bit for the first time since the meltdown—it was logged at $52,100 in June 2013. But real wages for the middle class are still down 6.1 percent from before the meltdown, and of course even more than that from the Clinton-era high.

It’s down for almost entirely meltdown-related reasons—the slackening of the labor force and so on. But in all of politics, nothing is easier than being the out party during a crap economic time, because all you have to do is finger the president’s policies, and because people have no knowledge of these matters and short memories to boot, it’s pretty much a snap to create millions of voters out there who are convinced that their wages are stagnant because of the stimulus bill or Obamacare or Michelle’s campaign to make kids eat kale or whatever.

This is Obama’s fundamental political problem. If wages were even getting back to mid-Bush levels, enough people would be feeling it that the public mood wouldn’t be so sour and Tuesday wouldn’t have been such a wipeout. But they aren’t and it is and it was.

In fact, the public mood should be much more sour on this issue than it is, because the real problem is much longer-term and runs much deeper. If I were a billionaire, I’d spend a lot of my money plastering the stuff I’m about to write on billboards all across the land, just in an effort to get Americans to know some of these facts, even as I recognize that in vast swaths of the country the billboard owners wouldn’t let me or would let me and then paper it over with Jesus images, but be that as it may, let us proceed.

The median household income in inflation-adjusted dollars back in 1987 was… well, what do you think? Around $42,000? Maybe $45,000? Nope. It was $50,389. Not much different from today at all. It was lower in that first year, 1967 ($42,934). By the 1970s, it bumped its way up to the mid- to high-40s. Then it hit 50 under Reagan, but it wasn’t until Clinton that it consistently stayed in the 50s. So the basic story is: In the last 30-plus years, very little change.

Now let’s dive a little bit deeper. As we know from the joke about what happens to the median income in a bar when Bill Gates ambles in for a scotch, the overall median income doesn’t tell us as much as we’d like to know. And so economists break it all down for us by percentile. And when we look at that, we see a still-bleaker picture. The Economic Policy Institute (EPI) tracks this closely, so here (pdf) for your review is a study the group put out in June. For the bottom 10 percent, from 1979 to 2013, real wages declined by 0.2 percent. At the 30th percentile, they were flat. At the 60th percentile, they went up 0.2 percent. And finally, for the top 10 percent, they rose 1 percent. Whoopee.

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So this isn’t just an Obama problem. It’s an America problem. Solving the long-term problem, seeing to it that workers enjoy the benefits of growth, is rather complicated. So let’s start with something more modest: In the shorter term, how can we at least get back up to $54,000 or $55,000, which people would begin to notice in their paychecks?

I asked EPI’s Lawrence Mishel, Dean Baker of the Center for Economic and Policy Research, and Jared Bernstein, who was Joe Biden’s chief economist (yes, they’re all liberal economists, but I tend to trust liberal economists, so there you are). They were in broad agreement that getting the unemployment rate down to at least 5 percent—and ideally, down to the “full employment” level of 4 percent—would tighten up the labor market and, as Bernstein put it, “replace at least some of the bargaining power most workers have lost over the years and raise the hourly pay of low- and middle-wage workers exclusively.” They also mentioned lowering the trade deficit; ending worker misclassification as contractors; doing something about wage theft, a huge unaddressed problem; and a few other factors. But the priority is a lower unemployment rate.

OK, for good measure I asked a non-liberal, the policy expert Bruce Bartlett. He’s a former conservative who likes to joke that he seems to have become a liberal in 21st-century Washington without changing a single position. Anyway, Bartlett says “We need a massive public-works program, perhaps to deal with the consequences of global warming. That would raise the demand for labor and raise wages.” Most Republicans know, by the way, that a massive public-works program would indeed have this effect, which is why they’re against it. David Koch doesn’t want those wages to rise.

And what can Democrats do? For starters, talk about the problem more. They don’t, very much. Obama has been intermittently good at urging investment in the middle class, but that’s not quite the same thing as talking about wages. I suspect they’re afraid to, because 1) it’s not something they can really control, so what happens if they make higher wages a centerpiece of their rhetoric and then can’t deliver on it, and 2) they’re not getting their campaign contributions from the people whose wages are stagnant.

But those aren’t very good excuses to me. I mean, in an ideal world, we want our politicians to address real problems, and problems don’t come much more real. At least let people know somebody is thinking about them and trying. There’s been a lot of hand-wringing since Tuesday about the Democrats and the white working class. Democrats are never going to win back the white working class; at this point the cultural politics are just too hard-wired. But they can win back a portion of it, and in many states and congressional districts, a portion will be enough to change things. And oh yeah, it’s the right thing to do.