The Unemployment Election

The midterm elections of 2010 have generated a lot of claims that they represent a hard turn to the right.  Nothing could be farther from the truth.

You can understand the elections almost perfectly by just considering two factors: the worst unemployment since the Great Depression (and actually surprisingly comparable to the Great Depression) and the usual midterm effect (a shift in party turnout that nearly always occurs in midterm elections).  Mathematical models based on past elections have been run, and these two effect explain 98% of the magnitude of the results.

In addition to these two effects, the recent Supreme Court decision Citizens United is allowing corporations to spend unlimited funds on advertising which may influence elections.  And this opened a new floodgate of corporate spending, almost entirely going to Republicans (who are often mistakenly believed to be populists because of their rhetorical style) in this election.

Given all this, one may even be surprised that the outcome wasn't a bigger defeat for Democrats than it was.

But perhaps the biggest question is, why is unemployment so bad?  With a corporate media drumbeat constantly raising unwarranted fears about the deficit and misdirecting the blame for it away from their failure to warn viewers years in advance about the housing bubble, it's not surprising that many people not paying close attention would blame unemployment on the deficit.  That is a crazy idea, and nothing could be farther from the truth.

The large unemployment we face now resulted most immediately from the collapse of a housing bubble which had sustained relatively high consumer spending (relative to wage income) on the basis of perceived housing wealth, which was often borrowed against to maintain or increase spending.  That bubble should never have been allowed to grow so big, but the Bush administration had no desire to take the punchbowl away, in fact they kept on spiking it even more, such as by removing caps on leverage for the largest banks.

But I cannot honestly leave all the blame with Bush, as there is an even deeper problem which has been developing for decades.  The problem really started with financial deregulation during the Carter administration, and which grew especially under Reagan.  All this deregulation pulled out the rug under US manufacturing industries, increased offshoring and outsourcing, ultimately leading to the hollowed out economy of today, run by the giant casinos of Wall Street which make the very rich even richer while the middle class is crushed.