Democrats can get elected again.

Democrats Self Inflicted Wound:  Bush and Obama bailed out the banks, but Obama didn't then punish them or break them up.  

Working people noticed.  The system must be rigged.

I had a close up look at a catastrophe.  For thirty years I was a Financial Advisor for a series of Wall Street firms whose names and corporate ownership kept changing.  

I watched the crazy leverage and foolish bank lending 2003-2007, I saw ugly mortgage securitization where bad loans were packaged then marked AAA, and I walked clients through the disaster that resulted.  I was up close when money funds shares quit being worth a dollar, when banks were failing, when GE and GM and AIG and Fannie Mae and all the big banks needed bailing out.   My employer, Citibank, was a major malefactor.  In the aftermath of the crisis Citibank sold my brokerage firm to Morgan Stanley, yet another malefactor.  Morgan Stanley  went into crisis and with 24 hours left to survive saved itself by becoming a something they insisted for years they were not--a bank.  It made it eligible to borrow from the Fed--ultimately the American taxpayer--since no one else dared to do it.

The Bush Administration began bailing out the banks in 2008 and Obama continued the process in his first days in office.   Saving the banks became understood as Administration policy--Obama's--and therefore the Democrats'.   Clients and friends during the aftermath of the crisis asked me why weren't the leaders of my various employers prosecuted for fraud?  How come no one was going to jail?  Surely there was evidence of financial fraud when they sold toxic mortgage pools to pension funds and other institutional investors, they said.

My answer was that I didn't know for certain but I was pretty sure that if the leaders of financial firms were arrested and the institutions investigated closely defining their work as "criminal fraud" rather than just "business that didn't work out" that the participants would all lawyer-up and that their ongoing work would essentially stop and the institutions would fail.  That would be a disaster.  Everyones bank accounts would freeze up.  Employees wouldn't get paid, grocery stores and gas stations would close, people could not pay bills, commerce would slow or stop.  A country cannot have a working economy without a working financial system, and one cannot have a working financial system without financial institutions.  

 Obama saved the system, but it is rigged.

Bank leaders were not prosecuted.  Worse, most of them got their bonuses because otherwise they would have left and their institutions would have failed.  America needs those institutions.  Populist revolts sprang up, the Tea Party on the right, Occupy Wall Street on the left.

President Obama may well have done the right thing for the economy, but it was politically costly for Democrats.  It symbolized that the whole economic system worked for the rich who were carried on the back of the middle class.  The system was unfair.  It was wrong. The rich got away with murder and the regular guy got stuck with the bill.

Donald Trump put the mood into words: "The system was rigged."  

Meanwhile, Obama said the economy was getting better.  

Obama was right by the numbers but wrong by the gut feeling among the great middle of America.  It was in fact getting better but the improvements mostly went to the richest, not the working and middle classes. Wages were stagnating in the middle. Something wasn't right.  Donald Trump caught the mood of voters.  Obama did not.

Click Here to see the article

My blog post yesterday caught the attention of Ashland Oregon resident Patrick Von Bargen.  He wanted me to see an article in The American Prospect that spoke to the issues in yesterday's blog post.   I urge readers to click on the link to read it.

Patrick had a long career in politics and executive development.  He is an executive coach who counsels entrepreneurs and venture capitalists.  He was Chief of Staff to a US Senator and Chief of Staff at the Securities and Exchange Commission.   He is the founder of Harley Street Associates, which readers can look up:  https://www.coachingimpactleaders.com

I asked him to send me a comment, describing the American Prospect article, which I place below:  

Guest Post by Patrick Von Bargen:  Observations on Democrats and its Working-Class problem.

Patrick Von Bargen

In an unusual coincidence, you blog entry “Democratic Class War” was published the same day as a Stan Greenberg article in The American Prospect, entitled “The Democrats’ ‘Working Class Problem.’”  You both focus on the same problem, emphasizing different dimensions.  I find both your blog and Stan’s article compelling and complementary in many ways.  I will let your blog speak for itself to your readers, but I want to offer a few notes on Stan’s piece.

First, Stan Greenberg is, like you, not a newcomer to the topic he addresses in this article.  As a former chief of staff in the U.S. Senate, we hired Stan as our pollster in the first reelection race my former boss ran, shortly after Stan published Middle Class Dreams in 1988 about working class voters in Macomb County, Michigan.  In his focus groups, polling, and analysis, he has been focused on American working class voters for almost 40 years now. 

Second, Stan’s thesis is that the Democrats’ problem is not a white working class problem, but a working class problem, including all non-college-educated voters -- whites, minorities, men and women, rural and urban and suburban.  Reflecting many of the themes in your blog, he argues that what alienated them from Democrats over the past 8 years was (1) a bailout of Wall Street and corporate America combined with an economic recovery that left them with low wages and greater economic insecurity; (2) trade policies that ignored the negative effect on their economic futures; (3) an immigration posture that moved away from emphasizing strong security measures and earning one’s way to citizenship; and (4) a failure to communicate true respect for faith-based, patriotic, traditional, and conservative moral values.

The challenge for Democrats, Stan argues, is “to embrace dramatically bolder economic policies and to attack a political economy that works for the rich, big corporations, and the cultural elites, but not for average Americans.”

What does that mean? It means that Democrats need to relentlessly deliver a compelling economic message demanding “an economy for everyone, not just the rich and well-connected,” attacking trickle-down tax cuts “for the richest and special breaks for corporations,” and promising an agenda to “rebuild the middle class.”

Based on my long career in Washington, I would make two observations.  First, such a message is powerful.  In 1994, my boss had the reelection battle of his life; that year Democrats lost both the House and the Senate in the worst general election drubbing since the 1950s, and he was running against a multi-millionaire in the small state of New Mexico.  Our opponent characterized my boss as out of touch with the average New Mexican and part of the Harvard-Stanford cultural elite.   The TV ad that turned the tide was one that truthfully pointed out that our opponent had voted against the minimum wage 16 times in the legislature, whereas my boss had consistently supported the minimum wage.  My boss won by 6 points, even though other Democrats were defeated left and right.

The second observation is that pursuing “dramatically bolder economic policies” is hard.  Serious change is always hard because of the inertia of the status quo and all the moneyed and powerful forces whose purpose it is to uphold the status quo.   I cite two examples from my experience.

My boss never thought it made sense to be either for totally free trade on the one hand, or protectionism on the other.  Rather, he thought we should develop a range of policies that would structure trade and manufacturing initiatives so that we would leverage American companies’ technological advantages and would secure high-paying jobs for workers in the U.S.   Advanced (now LED) computer and telephone screen displays are a case in point.  It was Americans who researched and developed the technology for these displays.  And we even paid defense contractors exorbitant amounts to manufacture them for fighter aircraft.  But then we did nothing to ensure that billions of such screens were manufactured here in the U.S. for consumer use.  Instead, we let Asian manufacturers do all of that, and we missed a huge opportunity to build our manufacturing base here in the U.S.

My boss was derided because he was championing “industrial policy.”  Think tanks from both sides of the aisle and incumbent business groups pursuing freer and freer trade held up his “industrial policy” as a kind of modern example of a 5-Year Plan.  The analogy was laughable, but it was difficult to overcome.

It can be done, profitably.

The second example was a 1996 economic policy paper my boss developed for the Minority Leader in the Senate called “Scrambling to Pay the Bills: Report of the Democratic High-Wage Tax Force.”  The report included a range of recommendations to benefit working families, but the core concept was that the corporate tax code would be structured so that companies who did right by their workers (paid health care, retirement programs, training, etc.) would get the benefit of lower tax rates.  Of course, each policy recommendation had its detractors, and while praised by those who read it, the forces of status quo made sure that it went nowhere.

So that’s why I say above that Democrats must deliver this new message “relentlessly.”  Democrats must be willing to repeat the message over and over and convince the voters that they will overcome any and every challenge to the message.  They can be open to amendments, they can consider modifications, but they must not waver from their commitment to an agenda to rebuild the middle class.  Without this single-minded and relentless focus, nothing will change.