Opinion | How Democrats Lost Voters With a ‘Compensate Losers’ Strategy

A lot of Democrats are bewildered by why their party isn’t doing better in campaigns against a Republican Party that is deeply dysfunctional. A new paper by three economists proposes a fresh explanation that seems persuasive to me. It says the Democrats went astray right around … 1976.

The argument, in a nutshell, is that the Democratic Party has gained educated voters but lost less educated voters because of a change in how it tried to help the working class and the poor. Instead of trying to prevent market forces from generating inequality, it has leaned toward giving free rein to market forces and then fixing the resulting inequalities through the tax-and-transfer system, taking some of the gains of the most successful and sharing them with the least successful.

The working paper, from the National Bureau of Economic Research, is titled “‘Compensate the Losers?’ Economic Policy and Partisan Realignment in the U.S.” Its three authors are Ilyana Kuziemko, a professor at Princeton; Nicolas Longuet Marx, a doctoral candidate at Columbia; and Suresh Naidu, a Columbia professor.

Historically, the Democratic Party was a party of the working class. Democrats inspired by the successes of the New Deal stood for helping working people earn a decent living through measures such as a higher minimum wage, unionization and restrictions on imports of cheap goods that would take jobs away from Americans.

But in the 1970s, New Democrats began to exert more influence over the party. They argued that many traditional Democratic policies were inefficient, creating what economists call deadweight losses. For example, they contended that high minimum wages killed jobs and that tariffs harmed consumers (including low-income ones) by raising prices.

The New Democrats weren’t heartless. They wanted to help the poor and working class. But they wanted to let the free market do what it does best, namely create wealth, and then use government policy to take from the rich and give to the poor. That’s “compensating the losers,” as the paper’s title has it. Their economics-inflected strategy was aimed at recapturing white, middle-class voters who had defected to the Republican Party.

For decades, Democratic primaries pitted traditional Democrats against New Democrats. Hubert Humphrey, Walter Mondale and Jesse Jackson were traditionalists. Gary Hart, Bill and Hillary Clinton and John Kerry were revisionists. Gradually the revisionists gained the upper hand. The Democratic Leadership Council, formed in 1985, was their think tank. Bill Clinton’s victories in 1992 and 1996 were seen as proof of the rightness of their approach.

Something wasn’t working, though. The Democratic Party was picking up college-educated suburban voters, but the working class was abandoning it in droves. The Democratic Party went from being less educated than the Republican Party to more educated.

“In the 1940s, every additional year of education predicts a three-percentage-point decrease in the likelihood of identifying as a Democrat,” Kuziemko, Marx and Naidu wrote. “This relationship holds with little change until an inflection point, which we estimate as occurring in 1976. Since then, the pace of realignment remains relatively steady.”

Party leaders consoled themselves that at least they had managed to hang on to Black and Hispanic voters, but lately Hispanic voters, too, have begun drifting toward the G.O.P.

To understand the party realignment, the three economists analyzed results of more than 800 surveys of about two million respondents since the 1940s. They also studied congressional voting records, party platforms and data on donations. They found that at least since the 1940s, “less educated voters appear to prefer a less market-based and more interventionist economic program that aims to promote domestic employment and wages.” Those voters left the Democratic Party when the party left them.

The authors labeled the traditional, New Deal approach as “predistributionist” and the New Democrat approach as “redistributionist.” The authors didn’t have data on why less educated voters prefer predistributionist policies. One explanation could be the dignity of work: People want to feel that they earned their own way (even if their earnings were invisibly bolstered by government policies such as tariffs). Or “voters may believe that the tax-and-transfer system is more opaque, corrupt or inefficient,” they wrote.

The traditional knock on a “compensate the losers” strategy is that the promises of compensation are often unfulfilled. For example, people who lose their jobs because of cheap imports don’t get the retraining they need to start new careers. When I emailed Kuziemko and Naidu about that, Naidu wrote back, in part: “Our paper is more about the political efficacy of the ‘compensate the losers’ view than whether or not it’s actually economically efficient. It might be that less educated voters don’t trust that it will happen, or it could be that even if it did happen, it wouldn’t preserve what people like about their current job.” He added, “We can’t disentangle those things.”

In reality, every government does some predistribution and some redistribution. It’s just that the Democratic Party has tipped more toward redistribution in recent decades. Whether that is good or bad from an economic perspective is not something the paper addresses.

From a political perspective, the tilt toward the preferences of the more educated might have won the Democrats a firmer majority of the electorate if the rate of college completion had continued to grow as vigorously as it did in the 1970s and 1980s, but it did not, Kuziemko told me in a phone interview with her and Naidu.

An alternative theory you sometimes hear is that the culture wars caused the party realignment. But that doesn’t match the evidence, the authors wrote. College-educated voters tend to be socially liberal, whereas Bill Clinton and other New Democrats were actually less socially liberal than old-fashioned Democrats such as McGovern. The fact that educated voters chose New Democrats anyway is evidence that economic factors were so important to them that they outweighed social ones, the authors wrote.

President Biden doesn’t fit the paper’s thesis. He is a throwback to the New Deal era of the Democratic Party. He has more in common with Humphrey than with Clinton or Barack Obama, whom he served as vice president. When he supported the United Auto Workers in its strike against General Motors, Ford and Stellantis, he became the first sitting president to walk a picket line.

Kuziemko and Naidu told me that their research didn’t extend to the Biden presidency but that Biden’s unrelenting emphasis on creating good, well-paying jobs is consistent with trying to win back less educated voters.

I ran the paper’s thesis past some people at a conference of progressive Democrats, Bold New Consensus, that was held in New York on Thursday at Cooper Union. Felicia Wong, the president of the Roosevelt Institute, said Biden is on the right track in emphasizing predistributionist policies, although she said there will always be a need for redistribution as well. Dorian Warren, who is a co-president of the progressive organizing group Community Change and co-chair of the Economic Security Project, said predistributionist and redistributionist policies can reinforce one another, to workers’ benefit.

I wouldn’t say that pre- versus re- is the entire explanation for what has happened in party politics over the past half-century, and I don’t think the authors would, either. At the conference of progressives in New York, the author Anand Giridharadas said, “We need to throw a more fun party than the other side,” calling Democrats “tedious, moralistic, scolding and wonky.” That sounds about right. My colleague Pamela Paul just interviewed John B. Judis and Ruy Teixeira, whose new book “Where Have All the Democrats Gone?” pins the blame for Democrats’ losses on a mix of economic and social policies.

That said, I do think that Kuziemko, Marx and Naidu have put their collective finger on a genuinely important factor in the Democrats’ loss of an important constituency. Assuming their analysis holds up to peer review — and I don’t know why it wouldn’t — this research is likely to be cited by economists and political scientists for years.

Judging from the weakness in recent economic data, “it is increasingly hard to imagine” that the Federal Reserve will increase interest rates any more, Andrew Hunter, the deputy chief U.S. economist of Capital Economics, wrote in a note to clients on Friday. He pointed to the slowdown of payroll and wage growth and a decline in the number of people reported as employed in the October jobs report. “Overall, we suspect the softening in labor market conditions has much further to run and still expect the Fed to be cutting interest rates again in the first half of next year,” he wrote.

“Remember what I always say: People first, then money, then things.”

— Suze Orman (frequently)