Populism has a long tradition in America and American politics. At this juncture it is completely understandable for people to be outraged at a) the Wall Street fat cats who almost brought down the financial system, and yet are rewarded with bonus packages completely unrelated to their horrific job performance, b) the rising economic inequality of the past decades, which continues to accelerate while median incomes remain relatively stagnant, and c) the politicians, including prominent Democrats, who put in place the policies that helped create problems (a) and (b).
Given these grievances it is both reasonable and rational to demand greater regulation and monitoring of the banking industry, policies to help decrease the gaps in wealth and income, and politicians who will put the public interest over corporate interests. (This is not to say that there aren’t legitimate arguments against doing these things, only that a populism which expresses itself in this manner is intellectually consistent). This strain of populism is largely the populism of the left and those who support President Obama and the Democrats. Unfortunately, because of Obama’s and the Congress’ inability to pass healthcare reform and financial regulatory reform, this group is currently deflated and is questioning whether everything they invested to get Democrats elected will ultimately be for naught (putting aside for now how much worse a McCain-Palin presidency would’ve been).
The populism emanating from the right is anything but deflated, as the Tea Party shouting matches on TV have repeatedly shown. Yet, at its core, this right-wing populism is inherently contradictory. While it includes anti-corporate rhetoric and anger directed at the bankers, as well as disdain for virtually all established politicians (including most Republicans), the remedies and demands expressed by this group make little sense. For example, according to many rightwing populists, the solution to the excesses of the bankers is more deregulation—because, somehow, it was government interference that made the bankers do all the bad and unwise things they did. This complete nonsense is exactly what Frank Lutz, a leading GOP strategist, is telling Republicans to say when they vote against Democratic proposals for financial regulatory reform: that they don’t want to bail out banks anymore (and the Republicans are listening). Whether the public is actually stupid enough to believe this remains to be seen.
But there is an even greater contradiction at the heart of rightwing populism, where the main grievance seems to be that government spending is out of control and must be reined in. But the fact is that most of our tax dollars go to just three things: the military, Social Security, and Medicare. While there is no doubt waste in the military, and there are sound arguments for reducing our global military footprint, the security challenges we face make it unlikely that the military budget can be pared down significantly.
That leaves the entitlement programs. Social Security is relatively solvent; not in great shape, but not terrible either. Long-term projections suggest a deficit of about 20-25% between income and outgo, which will need to be made up by higher taxes, a decrease in benefits, or both. Medicare on the other hand is in terrible shape, both because of skyrocketing healthcare costs and the demographic shift to a greater portion of older people in society.
Contrary to what most Americans think about government spending, these programs are not very wasteful. Social Security is simply a transfer payment system with extremely low overhead. While there is some fraud in Medicare, its efficiency is far greater than that of private insurers. Administrative expenses eat up about 20 percent of the income of private insurers; the comparable figure for Medicare is only 5 percent.
Since nothing angers rightwing populists more than higher taxes, there is little chance they would entertain raising them, even on the rich. This leaves only one choice: massive cuts in the very entitlement programs they rely on. In essence, the message of the Tea Party movement and the angry rightwing crowds is this: I demand massive cuts to my retirement and medical insurance! And I demand them now!
This is exactly what the ranking Republican on the House Committee on the Budget, Rep. Paul Ryan, has proposed (although he and other GOP leaders appear to be quickly backing off). The people who would be hit hardest and suffer the most are exactly the working class, non-college-educated Americans so heavily represented in the Tea Party anti-government crowd.
What is shocking is how little the Democrats have capitalized on this inherent contradiction. A plausible strategy would be to tell the American people that they too share their anger, and channel this into calls for hedge fund managers to have their income taxed at income tax rates instead of the 15% capital gains rate (a lower rate than their secretaries pay). Or to increase the cutoffs for Social Security and Medicare taxes so that those making $100 million a year don’t continue to pay exactly the same as those making $100,000.
Whether it’s fear of being accused of class warfare or being labeled as “tax and spend” Democrats, the party has let the rightwing populist anger go unchallenged. If they continue to be cowed, the Democrats could suffer massive defeats in the 2010 midterms and Obama could be a one-term president.
But the rightwing populists would then be in for a rude awakening: if they get what they say want, they’re going to be much worse off. It would be a classic example of the “winner’s curse”.
Jason Scorse