For the last half century in the United States the victims of any economic downturn were invariably the same, at least in the sense that they generally came from the bottom half of the income distribution. Oh, occasionally there'd be some regional variety--petroleum geologists in the Oil Patch back in the 80s, a bunch of white shoe paperhangers in the 60s (i.e., go-go year stock brokers), the occasional wave of aeronautical engineer layoffs in Southern California as the defense cycle turned, the almost comical dot.com geek zillionaires turned burger flippers. But, on the whole, the burden generally and relentlessly fell on the unionized worker, the craftsman, Joe Sixpack, AS the people for whom he voted dismissively labelled him.
Now, the for the first time, we may actually be in a situation where the pain and the burden falls disporportionately on the well employed, well-educated and well off. The 32% of the population that doesn't own a home are spectators to the popping of the housing bubble. The majority of Americans will less than $50,000 in financial assets (or is it $15,000) are not taking the paper losses on their 401ks that their supervisors, and their supervisors' managers, are letting pile up unopened. You've got to have some wealth to feel its destruction. And the elements in the service sector which are for the first time bearing the brunt of the downturn include lawyers and architects as well as retail clerks and minimum wage waitstaff. When an auto dealership closes, the credit manager, sales manager and service manager are all out of a job, not just the floor sales reps and the cleaning staff.
I don't want to overstate this. But the political implications of economic distress that really touches the midle class and the upper middle class in this country is unexplored territory. Conventional wisdom is that the reaction will be conservative--politically and socially. I don't doubt for a minute that in this instance there will be a conservative social reaction. But the political one is harder to call. The political right is so thoroughly tainted with responsibility that it is difficult, for a couple of election cycles, at least, to see it benefiting, even if Team Obama flubs completely. If Team Obama muddles through, I could see a shift to the right as the slog gets longer and longer and memories fade about how the mess came about in the first place. But, in the short term, it's hard to see it.
In terms of historical precedent, I'd offer two conflicting possibilities. One is the rise of fascist tendencies in '30s Europe. The other is the Populist/Progressive movements in the United States of a century ago. I'd guess we're more likely to see a reprise of the latter than the former (in the United States, at least), but I'm far from certain.
Wednesday: FOMC Announcement, CPI
3 hours ago