In the United States, where the Democrats’ commitment to workers was always suspect, the transformation had been no less consequential. Jimmy Carter entered the White House in 1977 with a labor-backed program centered around infrastructure spending, full employment targets, and welfare state expansions. But within a year, alarmed by rising consumer prices, he thought better of these plans and proposed a “lean and tight” budget to control spending.
Inflation continued to rise, reaching double digits in 1979, and so an even more drastic measure was soon taken. Under Paul Volcker, the Federal Reserve contracted the overall money supply by allowing interest rates to soar. Unemployment reached levels not seen since the Great Depression. Carter paired Volcker’s shock treatment with reductions in New Deal–era regulatory infrastructure, especially in the financial sector. While the president spoke on TV about America’s moral health, the economic health of the workers who had elected him was failing. A wave of deindustrialization hit the US manufacturing base, spiked the trade deficit, and fueled urban decay. By the time a halting recovery eventually took place in the mid-1980s, Ronald Reagan was in power to take credit.
Like social democracy in Europe, the Democratic Party in the United States made its own supporters responsible for getting growth back on track. But what came next was equally damaging. Despite the pain wrought in the late 1970s and ’80s, Bill Clinton counted on much of the old New Deal coalition to win office in 1992. Once in power, however, he pursued a new bipartisan consensus on free trade and “ending welfare as we know it.” Clinton did little to prevent industrial job loss, and he embraced suburban professionals and “knowledge workers” as replacements for his party’s lost voters. He found new sources of capitalist support in Big Tech — among the “Atari Democrats”— and in finance.
The Democrats went from being the party of justice and stability to the party of meritocracy and dynamism. This transformation was clear in Senator Chuck Schumer’s infamous comment on the eve of the 2016 election: “For every blue-collar Democrat we lose in western Pennsylvania, we will pick up two moderate Republicans in the suburbs in Philadelphia, and you can repeat that in Ohio and Illinois and Wisconsin.” Without a New Deal–sized economic vision with a unified working class at the center, Democrats were left to talk about progress solely in the language of representation and civil rights. Such appeals had little tangible to offer to anyone, especially the white men who flocked to Trump in 2016.