Thursday, July 31, 2014

Political Coalitions Realignment

Bill Bishop, The Big Sort

Over the last year, I've been very disinterested in policy because the political process has ground practically to a halt. It started in Washington, but then begun to spread like a virus from statehouse to statehouse - not even local governments were spared. One party would propose something, then the other would oppose it for the mere sake of opposing it. Nothing gets done.

Some of it was recalcitrant political interests that naturally had different visions for where they wanted the country to go - but most of it was, and still is, political theater. Why actually solve problems when they can be used for campaign fundraising instead? Both sides have more than enough money to bash each other into the ground and no incentive to help the other by passing even the most reasonable piece of legislation. 

Democrats with union money and Republicans with Big Business money - the remnants of the New Deal coalitions (or really the backlash thereof, beginning with the Reagan era) - or at least, this is what I thought. Then I started to see headlines that didn't make any sense:

Both Big Business and Unions are supporting the Democratic party. Strange, isn't it? Despite Obama running on a pro-regulation anti-Wall Street platform, the Big Banks gave Obama way more money than McCain in 2008 and would have done so again in 2012 if the Republican didn't nominate Wall Street's own Mitt Romney. They look like they are on the verge of supporting a Hillary candidacy for 2016 as well (unless Chris Christie or Mitt Romney is the Republican nominee). 

With all the major economic players - except for the natural resource industries - behind the Obama administration, it would be easy to assume the that Obama administration is enjoying sky-high approval numbers. Yet that isn't the case at all. His numbers are middling at best; hanging around the low-40s since re-election. What gives?

One answer is that, despite growing jobs figures, the majority of people have failed to feel the impacts of the growing economy due to wage stagnation. That theory has its own problems, but seems true enough. Bear with me as a I propose an alternative.

I believe we are living through a fundamental re-alignment of America's two-party system; mainly because we are living through a fundamental re-alignment of the American economic system. 

FDR's New Deal Coalitions (1932 -1980) was founded on the combination of Big government spending, backed by Keynesian economics, to jump start the US economy as a reaction to the Great Depression. We picked the low hanging fruit of economic development by building schools, highways, bridges, and dams; we sent young adults to college in droves and built a middle class society. This theory of economic growth is often called The Big Push.

Reagan Revolution (1980 - 2008), like all movements, was created as a reaction to what went wrong in the prior era. It made our government lean as a reaction to corruption, our businesses competitive as a reaction to international competition, and our military unstopplable - prepared to take on traditional enemies like the Soviet Union (not the guerrilla combat that we actually engaged in). Military spending created a world that was safe to invest in, and deregulation made businesses competitive in it (often, at the plight of the common man). This theory space of economic philosophy is often called Neoliberalism.

???? (2008 - ?) I don't know what to call this era ( The Information Age? The Internet Economy? Creative City Theory?), but the feeling that something new is afoot is definitely here.

Recessions create populist anger. That anger swept Obama into office in 2008 and backlashed against him in 2010 as many people were not yet feeling the recovery. And they still aren't. Despite the fact that GDP growth and the stock market are at all-time highs. Half the country has recovered, while the other half has not. And the geography of that recovery is divided by the new economy. 

Manufacturing employment is gone, but the need to produce new things is not. The US economy produces something previously taken for granted, but are now harder to come by than ever before: ideas. The economy is fundamentally now about technology and research. Education is the key to unlock new innovations. University graduates flock to centers of transformation (the cities on both coasts), leaving the rest of the country behind in rural regions. Richard Florida and Bill Bishop document this quite well. The uneducated are moving to places that are inexpensive, while the well-educated are moving to places with high rents and high earning opportunities. In cities, as rents rise, the poor are being priced out and pushed out. But they are not going quietly. 

Big Business has learned to thrive in this environment. Remaining union membership is city-based. So is Wall-Street. The Democrats are the party of the new economy - the technocrats, the bureaucrats, the yuppies, the professionals.... while the Republicans are the party of those left behind in the rural areas and outer suburbs - the rural farmer, the machinist, the suburban mom, the Christian voter, the elderly, and so on. 

We aren't there yet, but that's where we are heading. So when asking, "why can't our politicians agree on anything?" It's because the policies needed to help those who benefit from the status quo are very different than the policies needed to help those who do not.