It is hard to believe that Massachusetts, the bedrock of American liberalism and the Democratic Party and the seat of the late Sen. Ted Kennedy, went to the Republicans. Making things worse for the Democrats is the fact that 2010 is an election year for dozens of seats in Congress and the Senate. A year after coming to power, the presidency of Barack Obama is in deep trouble because of mounting popular anger in America. What is causing so much frustration with the electorate? The answer is simple: It’s the economy, stupid.
To understand why the American people are angry, all you have to look at is the economic situation. In 2008, the American economy came to the brink of collapse with a financial crisis that looked eerily similar to a modern version of the Wall Street Crash and Great Depression of 1929. As the housing bubble of the last decade finally burst, toxic financial products (hiding sub-prime mortgages) contaminated portfolios and the credit market. Once the crisis expanded, investment dried up. With this credit and liquidity crunch, banks collapsed and financial panic set in. This is when the government had to step up to the plate with some counter cyclical fiscal policy. This spectacular revival of Keynesian economics, after two decades dominated by Milton Friedman’s market fundamentalism, led to the bailout of “too big to fail” financial institutions. This was necessary to avert total economic, financial and monetary collapse. Without the bailout and massive fiscal stimulus, things could have gone much worse.
Yet this is not how the “average Joe” sees it. In the eyes of “Main Street,” Wall Street fat cats were being saved with taxpayers’ money as the economy continued to tank. With consumer confidence and actual consumption falling, recession set in and unemployment went from 5 to 10 percent in two years. In the eyes of most Americans, there was something very wrong with a system where Wall Street was bailed out while Main Street was left out in the cold. After all, wasn’t it “greed” in Wall Street that created all the trouble? The statement “In America, there is socialism for the rich and capitalism for the poor” sounded more like a correct analysis rather than a half-joke.
As I mentioned earlier, 2010 is the year of midterm elections. What happened in Massachusetts will not stay in Massachusetts. It may repeat itself across America. If that’s the case, the Democrats may face what Bill Clinton faced in the 1994 midterm election, when the Republicans came back with a landslide. As E.J. Dionne, Jr. from The Washington Post, rightly argues: “The simple truth is that in midterm elections, no party can win without its base because turnout is lower than in presidential elections. Those who do vote are more committed to their parties and their ideological priorities. Behind the 1994 Republican midterm sweep was a dispirited Democratic base unhappy about the failure of heath-care reform, grumpy about the economy and badly split over the North American Free Trade Agreement, for which President Bill Clinton pushed so hard. While Democrats stayed home, Republicans mobbed the polls and won races all the way down the ballot. It’s the midterm rule: No base, no victory”
All this does not bode well for Democrats because the base of the party is angry and disappointed. The party’s core supporters wanted a very ambitious healthcare plan with a “public option” where the government steps in. They also wanted the fiscal stimulus to take care of “Main Street” by creating more jobs. Since neither happened, the base may stay home come Election Day. The Republican base, on the other hand, is angry as hell. They believe the government is now running half of America’s economy. Most of the Republican base sees Obama as a closet socialist. They are against healthcare reform and are also very concerned about government spending and the deficit. If they mobilize en masse for the November 2010 midterm election, while Democrats stay home, one can only imagine what will be next for the Obama administration: a nightmare until the 2012 presidential election.
