Correction to This Article
Some versions of this column, including in the print edition of The Washington Post, contained a sentence that, because of a missing "not," conveyed the opposite of its intended meaning. It should have read: "It is hard not to argue that the government's ability to respond to what most Americans experience as unsatisfactory economic performance has largely been thwarted by a political process rendered dysfunctional by partisan and ideological polarization." This version has been corrected.

So goes the center, so goes the economy

Steven Pearlstein
Thursday, September 16, 2010; 8:16 PM

It's hard to read this week's election results, and the public opinion polls generally, and not be concerned about the collapse of the political center.

I disagree with my Post colleague E.J. Dionne that this is strictly a Republican phenomenon, in which the "tea party'' and other anti-government zealots are in the final stages of driving out experienced, thoughtful moderates from the Republican party. The dynamic on the Democratic side is as much about interest group politics as it is about political ideology, but you don't have to look hard to find it in the defeat locally of Washington Mayor Adrian Fenty and Montgomery Council member Duchy Trachtenberg, or nationally in President Obama's declining poll numbers.

In the context of District politics, Fenty was a pro-business moderate who won the enmity of city workers by firing some of their underperforming colleagues and of the black political establishment by defying the unwritten commandment that top positions in city government should only be filled by blacks. Trachtenberg was targeted by Montgomery's me-first employee unions for having the temerity to speak the truth about their unsustainable wage increases and gold-plated health and pension plans.

Obama is perhaps the classic case of the unloved office-holder trying to govern from the center and accommodate his liberal program to political and practical realities. By declining to pull troops immediately out of Iraq and Afghanistan or fight for a single-payer health plan or bring Wall Street to its knees he has lost the enthusiastic support of the liberals, even as economically-anxious moderates and independents fall prey to misguided propaganda about a government takeover of the economy.

The president's loss of popularity is now being felt most keenly by moderate Democrats from Republican-leaning districts who were swept into office two years ago on the anti-Bush tide. Their defeat in November, combined with the uncompromising intransigence of a newly-empowered Republican leadership, will leave the centrist president even more dependent and politically beholden to the far left wing of his party.

This trend toward polarization has been developing for some time, aided and abetted by an increasingly fragmented news media and a rising tide of special-interest spending on campaigns and issue advocacy. We've reached a point, however, where a vicious and self-reinforcing political and economic cycle has taken hold - one in which a lack of sustained growth and widely-shared prosperity leads to political polarization, which by paralyzing government leads to even slower growth and even less widely-shared prosperity and yet more polarization.

This interplay between the politics and the economics is the subject of a provocative new book, "Winner Take All Politics," by political scientists Jacob Hacker of Yale and Paul Pierson of the University of California at Berkeley. While slowing growth and rising inequality have afflicted all advanced economies in recent decades as a result of globalization and new technologies and globalization, Hacker and Pierson find them to be more pronounced in the United States, as Thursday's report on the nation's soaring poverty rate attests. Conservatives like to ascribe such trends to the natural dynamics of efficiency-producing, liberty-protecting markets, but Hacker and Pierson remind us that there are no such thing as "pure" markets, and that markets everywhere are shaped by laws and regulations, cultures and the institutional arrangements that themselves are shaped by the political process.

Less convincing is the Hacker-Pierson thesis that U.S. markets have now been captured by a clever and carefully-plotted right-wing conspiracy to screw the American middle class. It is hard not to argue that the government's ability to respond to what most Americans experience as unsatisfactory economic performance has largely been thwarted by a political process rendered dysfunctional by partisan and ideological polarization.

One obvious recent exception was Washington's dramatic and successful response to the financial crisis two years ago which briefly enjoyed broad support from political and business leaders. But no sooner had it succeeded than everyone rushed back to their respective corners to declare it a failure and a political abomination.

We saw another small example this week regarding the new consumer financial protection agency established under the financial regulation legislation passed by Congress over the summer. The agency represents precisely the kind of check on markets that can even out the distribution of income a bit by sparing middle-class households the financial hardship and ruin caused by abusive lending practices while reducing the fees and profits that might be earned by bankers and other titans of finance. But because of the total breakdown in comity and majority rule in the Senate, the new agency will be run for its first two years not by a director nominated by the president and confirmed by a majority of the Senate, but by a special assistant to the president and Treasury secretary.

Whatever you might think about the appointment of Elizabeth Warren, however, using this clever maneuver to circumvent the law will inevitably add to the polarization and the paralysis and make it less likely that Congress will be able to stimulate job creation, balance the budget, reform the tax code, clean up the immigration mess and accelerate investment in clean energy and infrastructure.

This is the way wealthy nations become poor. There are no vibrant economies without effective political systems, and there are no effective political systems without a vibrant center. A Hatfields-and-McCoys politics produces a Hatfields-and-McCoys economy (it works the other way as well). In the end, there are no winners - except, perhaps, for the Chinese.

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