WASHINGTON — It is a particularly bad election when a party's principal source of confidence is also its main form of a self-deception. Republicans generally believed that a president presiding over higher deficits, higher health costs, higher poverty, lower workforce participation, lower median household incomes and a lowered credit rating could not win re-election. No president, after all, had been returned to office with an unemployment rate higher than 7.2 percent since 1936.
Now one has. History can be a powerful teacher but it is a weak crutch. There is no law requiring a poor economy to benefit a political challenger, particularly when that challenger is responding to the wrong economic crisis.
Our problem is not a normal, cyclical slowdown — the kind that responds easily to better economic management and higher growth. The economic and social consequences of the financial panic that began with the collapse of Lehman Brothers in 2008 still ripple. According to one recent estimate, America lost $12.8 trillion in output — a year's worth of economic activity. Average household wages fell back to 1995 levels, setting a lower starting point that will undermine a lifetime of earnings. Yet these massive effects brought limited consequences for those who seemed at fault. The pain was distributed broadly. Many doubted it was distributed fairly.
The retreating economic tide also exposed some barnacled problems that had existed under the surface for a generation. As Americans have grown dramatically more productive, technology has replaced many jobs and globalization has put downward pressure on wages. So middle-class Americans work harder for stagnant incomes in an economy with fewer employment opportunities.
This is our economic challenge in all its disturbing complexity: not just failed financial institutions but strained social trust; not just an economic dip but a loss of faith in upward mobility.
The abolition of modern capitalism became President Obama's campaign message of mild class resentment and a marginal tax rate hike on those making more than $250,000 a year. It was hardly an adequate response to our economic challenge. But it was a predictable and politically effective one.