A Short History of American Populism

It was a "populist night," Yale Law School professor and longtime New York Times reporter Linda Greenhouse wrote of Barack Obama's State of the Union address. The president denounced "bad behavior on Wall Street" and called for "a fee on the biggest banks." He said he wanted to take "$30 billion of the money Wall Street banks have repaid" and give it to community banks. He denounced CEOs who reward themselves for failure and bankers who put the rest of us at risk for their own selfish gain. He denounced "insurance company abuses." He called for higher taxes on "oil companies, investment fund managers, and those making over $250,000 a year."

Mr. Obama seemed to be taking the advice of those on the political left who have long argued that there is political profit in populism--in framing issues as battles between "the people and the powerful," in the words of multiple clients of the gifted Democratic speechwriter Robert Shrum. The assumption is that populism--policies that would, in candidate Obama's words to Joe the Plumber back in 2008, "spread the wealth around"--is a winning political strategy.

But American history teaches a different lesson. Looking back and trying to find when populism worked is like looking back for that golden age when Democrats and Republicans basked in bipartisan harmony. The 1990s? The Clinton impeachment. 1980s? Iran-Contra. 1970s? Watergate. 1960s? Vietnam. 1950s? Communism, corruption and Korea. The mirage seems to get farther away the farther you look.

The Obama administration argues that Democratic big government and health-care programs will help the little guys. Jacksonians today, as in the 1830s, don't agree.

So it is with populism. Ask anyone reasonably well versed in American history to name our most populist-minded president, and you'll likely hear the name of Andrew Jackson. He was the son of Scots-Irish immigrants, raised on the frontier, and he ran the first democratic (and Democratic) campaign. A gang of Jackson's roughneck supporters, so the legend goes, rushed to the White House after his inauguration and tore the place apart.

But Jackson was not a "spread the wealth" populist. On the contrary, he opposed the American System of John Quincy Adams and Henry Clay to have the government build roads and canals and other public works. He killed the central bank and paid off the national debt.

Jackson argued that government interference in the economy would inevitably favor the well-entrenched and well-connected. It would take money away from the little people and give it to the elites.

That view seems to be shared today in what I have called the Jacksonian belt, the broad swath of America settled by the Scots-Irish from the Appalachian chains in Virginia southwest to Texas. The Obama administration argues that Democratic big government and health-care programs will help the little guys. Jacksonians today, as in the 1830s, don't agree.

Jackson's arguments were not ill-founded. The Republican Party that fought and won the Civil War sponsored aid for railroads and favored corporations--and got caught up in messy scandals. That helped to spark the populist movement of the 1890s. But the populists' central policy plank was inflation. They wanted to get off the gold standard, which Republicans imposed after the greenback-fueled inflation of the Civil War, so that farmers could pay off their debts in cheap dollars.

This was economic redistribution of a sort, from bankers to farmers--and was soundly repudiated by the voters. William Jennings Bryan, the populist nominated three times by the Democrats, was beaten by two uncharismatic hard-money Ohioans, William McKinley and William Howard Taft. A Democratic Congress created the Federal Reserve in 1913, and there hasn't been a major political movement calling for inflation since.

Bryan, as his recent biographer Michael Kazin notes, also advanced proposals that in some ways anticipated the New Deal of Franklin Roosevelt. And it is Roosevelt's record on which those who argue that populism is a winning political formula mostly rest their case.

But it's not as straightforward a case as they suppose. New Deal historians have long claimed that blue-collar masses in big cities and factory towns moved toward Roosevelt when he was re-elected in 1936 (while rural voters moved away) because of redistributive policies passed in 1935--high taxes on the rich, the Wagner Act strengthening labor unions, Social Security. But as I pointed out in my 1990 book "Our Country," Democrats had already made substantial gains in the 1934 congressional elections--before those laws were passed.

Roosevelt's Democrats won over urban voters then because they stopped the downward spiral of the recession with laws like the National Recovery Act, which froze wages and prices in place--the opposite of economic redistribution. After he was re-elected in 1936, Roosevelt's policies became increasingly unpopular. Gallup polls showed that most voters wanted lower government spending and curbs on labor union powers. Roosevelt won his third term in 1940 not because of domestic issues but because he was a proven leader in a time when the world was plunged into war.

So the appeal of populist redistributionist policies was at best mixed. Voters did support mildly redistributionist policies, like Social Security and the G.I. Bill of Rights, which connected effort and reward (you had to pay taxes or serve in the military to qualify). And they supported progressive and even confiscatory taxes in World War II. How could the rich complain about high taxes when so many others were dying?

But in the postwar period voters and their elected representatives rejected Harry Truman's 1945 proposal for a public health-insurance option (sound familiar?). When unions staged the largest number of strikes in American history in 1946, voters elected a Republican Congress whose Taft-Hartley Act, passed over Truman's veto, trimmed union power.

The near-confiscatory wartime tax rates lingered on in the Cold War period, but were cut by a Democratic Congress following the lead of John Kennedy. In the 1980s Ronald Reagan got Congress to cut tax rates again. Both moves were politically successful. In contrast, when Bill Clinton got Congress to raise rates on high earners, his party lost control of both houses of Congress in the next election.

Lyndon Johnson's Great Society measures included Medicare, which like Social Security connected effort and reward, as well as antipoverty programs that did not. Medicare proved to be popular, but welfare programs did not. In the 1980s and early 1990s, state governors (most of them Republicans, led by Wisconsin's Tommy Thompson, but also some Democrats) advanced reforms that required recipients to work. These reforms swept the nation and resulted in the 1996 welfare reform passed by a Republican Congress and signed by Bill Clinton.

Mr. Clinton was re-elected but the next two Democratic nominees, Shrum clients both, championed the "people versus the powerful" and lost to George W. Bush.

In the years when Republicans either had majorities in Congress or held the White House, Americans did not have much occasion to think hard about "spread the wealth around" policies. But in 2009, with Mr. Obama as president and large Democratic majorities in Congress, they did.

The reaction to the stimulus package's vast increases in government spending and the health-care bills, with their redistributive taxes, has been unmistakably negative. If you have any doubts about this, check out the election returns in Massachusetts.

Why has the politics of economic redistribution had such limited success in America? One reason is that Americans, unlike Western Europeans, tend to believe that there is a connection between effort and reward and that people can work their way up economically. If people do something to earn their benefits, like paying Social Security taxes, that's fine. But giving money to those who have not in some way earned it is a no-no. Moreover, like Andrew Jackson, most Americans suspect that some of the income that is redistributed will end up in the hands not of the worthy but of the well-connected.

Last year Mr. Obama and his policy strategists seem to have assumed that the financial crisis and deep recession would make Americans look more favorably on big government programs. But it turns out that economic distress did not make us Western Europeans.

Now the president and his advisers seem to be assuming that populist attacks on the rich will rally the downtrodden masses to their side. History does not provide much hope for this audacity. William Jennings Bryan, whose oratorical skills outshined even Mr. Obama's, got lower percentages of the vote each time he ran.

Michael Barone is a senior fellow at AEI.

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