How the Democrats Lost the Working Class

Democrats had just absorbed a crushing defeat in the 1994 midterm elections when President Bill Clinton’s very liberal labor secretary, Robert Reich, ventured into hostile territory to issue a prophetic warning.

Struggling workers were becoming “an anxious class,” he told the centrist Democratic Leadership Council, two weeks after Republicans led by Newt Gingrich had gained 54 seats in the House and eight in the Senate. Society was separating into two tiers, Mr. Reich said, with “a few winners and a larger group of Americans left behind, whose anger and whose disillusionment is easily manipulated.”

“Today, the targets of that rage are immigrants and welfare mothers and government officials and gays and an ill-defined counterculture,” Mr. Reich cautioned. “But as the middle class continues to erode, who will be the targets tomorrow?”

His message went largely unheeded for 30 years, as one president after another, Republican and Democratic, led administrations into a post-Cold War global future that enriched the nation as a whole and some on the coasts to staggering levels, but left many pockets of the American heartland deindustrialized, dislocated and even depopulated.

As a half-century-old world order organized around American-Soviet contention gave way to a more freely competitive landscape of shifting alliances, presidents from both parties sought to secure U.S. leadership under new rules for economic competition, global stability and strong financial markets. Democratic presidents tried, with limited success, to expand safety nets at home, especially health care and income support for the poor. In the end, however, their bets on foreign policy — opening China to capitalism, halting Iran’s nuclear program, tightening economic bonds with allies — took precedence, and a new fealty to megadonors shaped fiscal policies that bolstered financial markets but shuttered many factories.

The unintended consequences often came at the expense of American workers. And Mr. Reich’s “anxious class” — neither the impoverished nor the highfliers riding the rising global stock market — felt unheard until the rise of an unlikely new kind of Republican: Donald J. Trump.

The Democratic Party’s estrangement from working-class voters first became clear with Mr. Trump’s upset of Hillary Clinton in 2016, powered by broad shifts in the preferences of white voters without college degrees, and it became even more unmistakable with his emphatic defeat of Vice President Kamala Harris in November. That result was a reckoning for a party that thought it had fixed its problems with blue-collar voters by heavily reinvesting in domestic manufacturing but instead discovered even more erosion, this time among Black and Latino workers.

Many Democrats have blamed recent social issues like transgender rights or the “woke” language embraced by many on the left. But the economic seeds of Mr. Trump’s victories were sown long ago.

“One of the things that has been frustrating about the narrative ‘The Democrats are losing the working class’ is that people are noticing it half a century after it happened,” said Michael Podhorzer, the former political director of the A.F.L.-C.I.O. “The resentment and movement away from the Democrats began long before they were for nongendered bathrooms. It was because their lives were becoming more precarious, their kids were leaving town, the pensions they expected were evaporating, and that took a toll.”

A big bet on China, without a safety net

To be sure, blue-collar voters have long been fickle. Richard M. Nixon’s “silent majority” delivered him a landslide in 1972, propelled not by a Republican economic platform but by a backlash to civil rights legislation and anti-Vietnam War protests. The so-called Reagan Democrats, stung by inflation and economic malaise, helped give the White House back to the G.O.P. eight years later, and it remained in Republican hands for 12 long years.

William A. Galston, a domestic policy adviser to Mr. Clinton and an architect of the Democrats’ shift to the center, said that after the election debacles of 1980, 1984 and 1988, the party’s repositioning on social and economic issues was not a choice but an imperative.

But once Mr. Clinton took office in 1993, choices were made.

“The Clinton vision was to be a pro-growth progressive by combining major expansions in public investment and the safety net with more private investment through fiscal discipline and vibrant markets,” said Gene Sperling, an economic adviser to the last three Democratic presidents. “As the first post-Cold War president,” he continued, Mr. Clinton also tried to have “a focus on strengthening global relations through trade agreements.”

The North American Free Trade Agreement had been negotiated under President George H.W. Bush. It fell to Mr. Clinton to get it through Congress. His rationale was that the trade agreement would enhance Mexico’s stability and economic growth, reduce illegal immigration and foster cooperation in fighting drug trafficking. A wider social safety net — including universal health care, expanded education and job training and economic investment — would cushion the blow of employment losses, while cheaper consumer goods would make everyone happy.

Then the health-care push collapsed in the late summer of 1994. The Republicans took control of Congress after their decisive victories that November, and the domestic agenda was moribund, replaced by a zeal for budget cutting. The Clinton administration faced a choice: Pull the plug on free trade and internationalism or push ahead without the safety-net side.

Over the objections of more liberal voices in the administration, Mr. Clinton chose the latter, pressing on with legislation to normalize trade relations with China and allow Beijing to join the World Trade Organization.

Even then, there was concern that China’s accession into the family of trading nations could flood the United States with cheap imports and bankrupt American manufacturers. But the economy was roaring, deregulation was the order of the day as the administration worked to free Wall Street from Depression-era banking and investment rules and, most important, a reformer, Jiang Zemin, had taken control in China. The foreign policy chiefs in the White House believed firmly that cooperation was vital to securing a prosperous, peaceful and eventually democratic China.

“You might think I was nuts,” Mr. Clinton allowed last month as he discussed international trade at The New York Times DealBook Summit, “but Jiang Zemin was president of China, and he was a darn good one.”

A disregard for ‘the dignity of work’

That tendency to roll the dice on grand international bets, with working-class voters as the chips, would become a theme. Too often, the bets did not pay off.

China became more autocratic, not less. And the feared tsunami of Chinese exports indeed arrived, along with the damage. In 1998, 17.6 million Americans were employed in manufacturing. By January 2008, the “China shock” had cost U.S. manufacturers nearly four million jobs. By January 2010, as the financial crisis waned, manufacturing employment had bottomed out below 11.5 million.

“I would be the first to say the leadership of both political parties were in the grip of a theory or story that turned out to be wrong,” Mr. Galston said, “and damagingly so.”

Still, Democratic economists defend their choices. Jason Furman, an economic adviser in the Clinton and Obama White Houses, said the biggest expansions of income inequality came in the 1980s and 1990s, before the China shock. Overall, China’s integration into world markets did increase the number of jobs in the United States — selling services like insurance and Hollywood movies to the Chinese, and peddling Chinese-made goods at stores like Walmart — while sharply lowering the cost of living for American consumers.

What was less appreciated beforehand was the psychological damage that would be done by factory closures, large and small, in communities where prestige, stability and identity centered on those plants — as well as the political impacts of those closures on key industrial states like Pennsylvania, Ohio, Michigan and Wisconsin.

Democratic policies focused on people as consumers instead of as workers, counting on those people whose jobs were eliminated to find their way to jobs newly created — an assumption that was often flawed, given that the new service jobs frequently required out-of-reach skills or were located on the coasts, not in the upper Midwest.

Too often, said Jared Bernstein, the chairman of President Biden’s Council of Economic Advisers, there was a “disregard for the importance of work, the dignity of work.”

“Forty people might have lost their job in a factory, but 100,000 people in the community had lower prices,” Mr. Bernstein said. “The calculus seemed obvious. But the calculus was wrong.”

Still, for years, the Democratic Party’s drift away from the working class could be papered over. George W. Bush eked out the narrowest of victories in 2000 in part because the economy was doing so well that voters could focus on his appeal to “restore honor and integrity to the White House.” Four years later, Mr. Bush was re-elected as a wartime president, his domestic agenda topped by hot-button social issues like opposing gay marriage.

But blue-collar voters, who had soured on the “trickle-down economics” of the Reagan years, turned away from the party of Mr. Bush, who had entangled the nation in two wars, and watched helplessly but angrily as Wall Street tycoons dragged down the banking and housing markets in 2008 with their opaque financial gambles.

And they spurned the G.O.P. again in 2012 when it turned to Mitt Romney, a wealthy businessman seemingly plucked from plutocratic central casting.

Pulled punches after the financial crisis

David Axelrod, one of the architects of Barack Obama’s 2008 campaign, said the last years of the George W. Bush administration were a moment when Democrats could pivot back to policies to address the hollowing out of the industrial base, and with it, the middle class. The 2009 bailout of the auto industry was driven by those concerns, as were the re-regulation of Wall Street and the creation of the Consumer Financial Protection Bureau.

But under Mr. Obama, no one on Wall Street or in the banking sector faced prosecution for the global financial crisis. After Mr. Obama called bankers “fat cats” on “60 Minutes,” Democratic donors on Wall Street howled.

“The masters of the universe,” Mr. Axelrod said, “turned out to be more sensitive than we thought.”

Mr. Obama tempered his language.

The 2012 campaign was marked by an early effort by Democrats to tar Mr. Romney as an insensitive, rapacious businessman willing to send jobs overseas. It worked. The working class stuck with Mr. Obama.

But the later years of his presidency veered away from kitchen-table issues as Mr. Obama tried to secure his legacy on the global stage.

That meant striking a deal with Iran to curb its nuclear program, at least temporarily; completing groundbreaking regulations on trucks, cars and power plants to curtail climate change; and finalizing one more ambitious trade agreement, the Trans-Pacific Partnership, to unite a dozen nations on both sides of the world’s largest ocean under trade rules and in an alliance that would isolate China.

As Mr. Obama basked in those achievements, Mr. Trump campaigned against every one of them, framing them not as steps toward a more peaceful planet but as job killers again threatening the forgotten working class. Once elected, he would undo all of them within months.

A glaring math error

The Democrats’ alienation from blue-collar voters was scarcely a unique phenomenon. Across the developed world, as Western democracies have grown more affluent and less industrially centered, so have the parties that once represented the working classes, said Thomas Piketty, the French economist who has become one of the foremost experts on wealth inequality.

It seemed to make sense politically: With the largest cities and the growing suburbs backing those center-left parties — which Mr. Piketty called “the Brahmin left,” or “parties of the educated” — shrinking towns and rural areas would matter less and less.

But there was always a problem with the theory, said Mr. Bernstein, the Biden adviser: “About 60 percent of the work force is still not college-educated.”

Douglas Holtz-Eakin, a veteran Republican economic adviser in the Bush White House and for John McCain’s 2008 presidential campaign, observed that huge shocks to the nation’s economic system — terrorism and war, the financial crisis and the coronavirus pandemic — had upended many Americans’ lives, but least of all those of the wealthy. The rich did not send their children to war, their banks were bailed out, and they rode out the pandemic working from home.

“In all of it, the elites got away unscathed,” Mr. Holtz-Eakin said, “while the ordinary man took it on the chin.”

Exploiting such resentments, Mr. Trump, with his relentless economic appeals and his open disregard for America’s global leadership, broke the Democratic formula by winning over not only a large majority of the white working class but also a strong percentage of workers of color.

Of course, there is plenty of blame to go around.

Labor leaders often point to the Democratic Party’s movement away from unions as an intermediary between the party and working-class voters. During the 2008 campaign, Mr. Obama was instructed to not even use the words “labor union,” Mr. Furman recalled: Most workers were not members, and it was believed that unions were unpopular.

Mr. Podhorzer said he understood why Democrats had moved away from unions as their conduits to the working class.

“When you talk to the unions, you’re talking to an institution that can hold you accountable to the promises you are making and can ask you for specific things,” he said. “When you’re talking around them, you’re basically doing commercial marketing.”

But, he added, “that sets you up for the moment when a Donald Trump comes along, and you have a candidate who just has better marketing than you.”

Still, Lawrence F. Katz, a Harvard professor who was the chief economist in the Clinton Labor Department, said unions had played their own negative role. As the chief negotiator on the labor agreements that would accompany NAFTA’s passage, Mr. Katz recalled, he worked out an $8 billion package to bolster unemployment insurance, expand job training and relocation assistance and increase other transition programs for every worker affected by trade, whether in a union or not.

Union leaders balked, he said. They simply wanted to kill NAFTA. Short of that, they wanted any trade adjustment assistance to go through the unions to union workers. The $8 billion package became a $50 million-a-year program administered through the unions, available only to workers who could show that they lost their jobs because of international trade and the movement of factories to Mexico and Canada.

Workers dismissed trade adjustment assistance as burial assistance.

There were also missed opportunities: Mr. Furman said the Obama administration’s timid response to the financial crisis prolonged the slow, frustrating recovery, intensifying the anger that Mr. Trump tapped into in 2016. And Mr. Clinton’s balanced budgets and record surpluses in the late 1990s had quickly been squandered by Mr. Bush.

But there, too, political reality played a part. Republicans controlled Congress.

“Do I wish Clinton had spent the surplus on great things instead of handing it to George W. Bush? Yes,” Mr. Furman said. “Do I think he could have spent it on all those great things in a divided government? No.”

A Biden recalibration, undone by inflation

If any Democrat intuitively understood the voters who were abandoning his party, it was Mr. Biden, who campaigned in 2020 as “Scranton Joe,” the product of a small, deindustrialized city that epitomized the ground lost by the working class.

His victory may have been fueled by the pandemic, but his focus was on economics. He tried to undo or reverse some of the damage that had been done by his predecessors. He brought in left-leaning economists like Mr. Bernstein and Heather Boushey, who had often been voices of dissent in the Clinton and Obama years.

His chief at the Federal Trade Commission, Lina Khan, zealously tried to break up monopoly industries. The United States Trade Representative, led by Katherine Tai, steadfastly avoided pursuing new trade deals that might rankle labor leaders, instead focusing on issues like strengthening labor rights in Mexico.

The new administration ushered out the belief that healthy financial markets, low unemployment and adequate support for people with the lowest income were enough to sustain an economic growth whose benefits would be shared broadly.

None other than Robert Rubin, the former Clinton Treasury secretary most associated with the Democratic shift toward promoting economic growth and market stability, called the Biden recalibration “constructive.” The president largely confined his “industrial policy” to promoting domestic manufacturing in arenas like semiconductors, which are vital to economic and national security, and to combating climate change, which unfettered free markets have failed to address, Mr. Rubin said in an interview.

The Biden administration also moved to bolster the clout of unions, drive down unemployment so workers would gain bargaining power and strengthen the Internal Revenue Service to go after affluent tax cheats, Mr. Bernstein said.

Mr. Biden did not have the surplus of federal dollars to invest that Mr. Clinton had bequeathed to his successor, so he guided private investment through regulations and huge tax credits secured through Congress.

“A trillion dollars of private investments have already been announced and are underway,” said Lael Brainard, the director of the Biden National Economic Council. “That’s a pretty remarkable number. Factory construction has doubled relative to the Trump administration — doubled.”

A “worker-centered trade policy” strengthened so-called Buy America commitments, maintained most of Mr. Trump’s tariffs on foreign products and pumped hundreds of billions of dollars into new American infrastructure and factories.

“Our new approach to trade recognizes people as more than just consumers, but also producers,” Ms. Tai said in a 2023 speech, “the workers, wage-earners, providers, and community members that comprise a vibrant middle class.”

If all of that was a corrective for policies past, the working class proved to be in an unforgiving mood in November. Ms. Harris saw some electoral gains among union workers. But she lost far more ground in the much larger, nonunion work force.

In November, 56 percent of voters without college degrees voted for Mr. Trump. In 1992, just 36 percent of voters with only a high school diploma voted Republican — about the same percentage that Barry Goldwater got in his overwhelming defeat against Lyndon Johnson in 1964.

Republican and Democratic economists point to a single reason: inflation. Mr. Reich’s “anxious class” was as anxious as ever, unwilling to see policy shifts that might take years to bear fruit as a salve for the immediate pain of rising prices.

Democrats said the president was the political victim of a global trend emerging from the pandemic. Republicans pointed to his policies, and one piece of legislation in particular, the $1.9 trillion American Rescue Plan, saying it poured gasoline on the smoldering embers of post-pandemic inflation.

“The American Rescue Plan killed the Biden administration in its infancy,” Mr. Holtz-Eakin said, almost ruefully. “It was the worst thing they could have done, and they did it. They were warned, and they did it anyway.”

Ana Swanson contributed reporting from Washington.