John Buell

Whither the Reagan Democrats?

Corporate America’s attack on unions in the workplace has been a kind of two-fer. In addition to quashing workers rights to fair wages and working conditions, corporate chiefs undermine union efforts to get workers to vote. Fortunately, what remains of the union movement in this country is fighting back by trying to mobilize voters, especially the white working class, often called the Reagan Democrats. This election may well turn on the success of efforts by unions and the Obama campaign in speaking to the discontent of these voters.

Regaining white working-class votes requires more attention to how those votes were lost. William Connolly, professor of political science at Johns Hopkins and author of Capitalism and Christianity, American Style, asks: “why, besides the decline of unions, has the vote shifted over the last several elections?” He cites the long term decline in worker income. This decline has played out in a context of historic racial antagonisms. Many marginalized rural and high school educated whites also share a sense that they have been left out of political movements redressing historic or emerging patterns of discrimination. They do not view government as working for them. In addition, lacking challenging and rewarding jobs, many found in personal consumption some chance for satisfaction and self-respect. He concludes: “Each reverberates with the others, until “income decline” becomes linked to the other three in a way that transmutes it into a demand for tax reduction. “

Republicans have long been successful at displacing working class anxiety and frustration through race- or gender-based “wedge issues.” Democrats inadvertently aided this strategy. Though properly attacking historic racial and gender injustices, they increasingly neglected weakening unions and offered marginalized workers only the distant prospect of jobs in a new high tech economy. Hence the Democrats became the elitist “latte liberals.”

There are good reasons, however, why this divisive strategy may not work this time, especially if the Obama campaign sharpens its focus on the economic injustices staring the electorate in the face. The factors to which Connolly alludes are also closely connected to the rise of a debt economy. Decreasing incomes could in some circumstances be an occasion for the electorate to move leftward, but at least two compensatory mechanisms besides racial scapegoating were in play. Though median wages on an hourly basis have been essentially stagnant for a generation, workers have worked longer hours—at least during parts of the business cycle when the economy was growing. More family members entered the workforce. But most importantly, workers and their families were encouraged to go into debt not only through a deluge of credit card ads and deceptive teaser practices but also by low interest rate policies from a Fed. Allan Greenspan did not perceive or would not acknowledge bubbles in stocks, houses, or credit card debt.

I am not conspiratorial, but notice how the whole corporate order benefited from a debt economy. Low wages can occasion recessions if the wealthy don’t spend most of their income. Increasing levels of debt, however, can cushion the effect of low wages, allowing poorly paid workers to participate in the American dream, thereby blunting any incipient radical impulses. And for the wealthy, who can only spend so much on yachts and multiple houses, the emergence of shadow banking and leveraged finance create extraordinary investment opportunities. The real economy, even with debt financing the bottom two thirds, has remained persistently sluggish.

Debt has another more subtle function. It becomes the modern form of indentured servitude. Once you are in debt, you can’t cut back on work, especially if the terms of the debt suddenly get worse. (And in an unregulated and oligopolistic credit market, that can happen quite quickly.) One is locked into a world of long working hours at lousy jobs. Compensatory consumption becomes more entrenched. One has little time for family and friends and is bossed around all day, so it is at least great to have that SUV and cell phone to assert one’s place in the world.

Of course overwhelming debt is now the 800-pound gorilla in the living room of many middle- and working-class homes. The Ponzi structure has crashed. Demonizing Barack Obama as a terrorist may not resonate as well. Citizens are overwhelmed with debt burdens in an economy where their jobs and pensions become ever more tenuous even as Bush et al. bail out the banks.

Nonetheless, the political and economic risks today are grave. Spending immense sums for the recent bank bailout will be used to embolden that segment of market fundamentalism that wants to shrink government. And once political discourse turns to the subject of debt relief for strapped homeowners, credit card holders etc., expect anguished discourse about the moral hazard of writing down consumer debt in any form.

By advocating Main-Street-targeted additions to the bailout, Obama can appeal to working-class voters across racial and life style divides. He can also be on sound ground economically. If banks and investment houses that miscalculated and misled in the loans they marketed are to be rescued, ordinary working and middle class citizens are morally entitled to the same relief. And as long as many consumers are overwhelmed with debt, they will restrict their purchases even if their incomes grow marginally. More homeowners will face foreclosure, leading to continually sinking housing prices and cascading decline.

A modern New-Deal-style government agency can buy troubled mortgages at a discount, so the banks don’t gain windfall profits. It can rewrite them at a lower principal and interest rate. If there is a concern that “unworthy” borrowers will intentionally default on payments, government programs could insist on some claim to any capital gain resulting from the eventually sale of the house. The real moral hazard in this society is the way it coddles the rich at the expense of the vast majority.

John Buell lives in Southwest Harbor, Maine, and writes regularly on labor and environmental issues. Email

From The Progressive Populist, November 15, 2008

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