Wall Street or the Working Class:  The Democrats Must Choose

The Democrats want it both ways. The Party of the New Deal claims to be still championing the working class while it is also working to enrich Wall Street. The obvious goal is to secure campaign cash from the wealthy while, at the same time, attract working-class votes. After all, the thinking goes, working people don’t have any place else to turn politically. Certainly not to the Republicans, the historic party of the bosses.

But this thinking is wrong, and this approach hasn’t worked. And it’s still not working.

The more the Democrats have supported Wall Street over the past four decades, the more the working class, especially the white working class, has drifted away. Even after the anti-civil rights southern Dixiecrat exodus from the Democratic Party in the Nixon years, white working-class support for the Democrats remained strong. Jimmy Carter in 1976 gathered a solid 52.3% of the white working-class vote. Bill Clinton in 1996 received 50.0 percent, again a strong showing. But by 2012, Barack Obama won only 40.6 percent. And in 2020, Joe “Six-Pack” Biden stumbled to a meager 36.2 percent of the white working-class vote.

Working people got fed up with losing their jobs again and again, and they saw that the Democrats, who claimed to represent them, did little or nothing to stop the carnage.

And it’s not just the white members of the working class who are defecting. Recent polling reveals that Black and Latino working-class voters also show declining support for Democratic candidates.

What happened? It wasn’t the Democrats embrace of social issues. The research done for my book, Wall Street’s War on Workers, shows clearly that the white working class has become more liberal, not more illiberal, especially on LGBTQ+ rights, immigration, and abortion.

The real cause of working-class defections from the Democratic Party has been (and still is) mass layoffs. Working people got fed up with losing their jobs again and again, and they saw that the Democrats, who claimed to represent them, did little or nothing to stop the carnage. Since 1996, approximately 30 million of us have gone through a mass layoff (defined as 50 or more workers let go at one time.) Many more than once. Our research demonstrates clearly that in the key ‘Blue Wall” states of Michigan, Pennsylvania, and Wisconsin, when mass layoffs go up the Democratic vote goes down.

Democratic pollster Mike Lux supports our findings:

“[C]ontrary to many pundits’ assumptions, economic issues are driving the problems of Democrats in non-metro working-class counties far more than the culture war…. These voters wouldn’t care all that much about the cultural difference and work thing if they thought the Democrats gave more of a damn about the economic challenges they face deeply and daily…”

Why aren’t Democrats giving “more of a damn?” Because if they really helped working people meet these economic challenges, they would lose favor with the barons of Wall Street and their corporate cronies.

It’s not a win/win game. Mass layoffs are part and parcel of how corporate executives and hedge funds extract billions of dollars in profit. Those mass layoffs are very often used to finance stock buybacks, a legalized method of stock manipulation that was severely restricted by the Securities and Exchange Commission until 1982. Since corporate executives get most of their pay in stock incentives, jacking up the price of shares through stock buybacks is the quickest path to great wealth. The same goes for the Wall Street stock-sellers who force their way onto corporate boards and then demand massive stock buybacks to enrich themselves. Today nearly 70 percent of all corporate profits go to stock buybacks. (See Profits Without Prosperity by William Lazonick for an excellent account of this process.)

It’s not a win/win game. Mass layoffs are part and parcel of how corporate executives and hedge funds extract billions of dollars in profit.

Leveraged buyouts—buying up companies with borrowed money and then sticking the debt on the purchased company—virtually guarantees that mass layoffs will take place to help cover the debt costs. Case in point: Elon Musk bought Twitter, now called X, with $13 billion in borrowed money and then placed that debt onto Twitter’s books. This raised Twitter’s debt service payments per year from $50 million to about $1 billion. Nearly 80 percent of the staff have been “X-ed” out to help service that debt.

Most of the Democratic Party, unfortunately, has drunk the corporate Kool-Aid. They believe that placating Wall Street and large corporate interests will strengthen the economy, improve the U.S. position in the global economy, and produce better paying jobs at home. That’s understandable when you view the economy through the elite lens of high salaries, growing 401(K)s, and the stock market, which seems to go up and up and up. But good luck selling that vision to laid-off workers.

Those workers remember that the Democrats eagerly supported the massive deregulation of Wall Street during the Clinton administration. They also remember Democrats pushing trade deals like NAFTA and China’s admission into the WTO, which led to millions of manufacturing jobs rushing to Mexico and China. And that the Obama administration refused to punish and remove the Wall Street executives who crashed the economy in 2008-09 with their reckless gambling, enabled by deregulation championed by both political parties. Instead, the Obama administration bailed out Wall Street while distressed homeowners got nothing. That’s 16 years of Wall Street coddling by Democratic administrations.

Democratic leaders may have thought this was too complicated for working-class people to understand. But they were wrong. Working people know who is prospering at their expense. They have learned the hard way that their former allies, the Democrats, have failed to protect them from the ravages of free-market capitalism. They understand that the Democrats are wooing the well-educated and affluent elites, society’s most powerful. They also know that far too many Democrats look down on white workers, tarring them as racist, sexist, homophobic xenophobes. When Democrats show such disdain it’s not unreasonable for working-class folks to switch allegiances.

Working people know who is prospering at their expense. They have learned the hard way that their former allies, the Democrats, have failed to protect them from the ravages of free-market capitalism.

Without protection from the Democratic Party or from a sizable labor movement, it’s not unreasonable for working-class people to think that supporting business interests and Republican policies might help save their jobs. This logic is especially strong in non-union situations, which today account for 94 percent of the business sector. If there is no Democratic Party or labor union to save your job, where else can you turn?

As the sinking working-class vote for President Biden reveals, the Democratic Party has a mountain to climb in order to dig out of its anti-working-class hole. Yes, low unemployment helps. Yes, the infrastructure bills help. Yes, showing up at picket-lines helps. But those measures, for example, don’t offer any protection for the 253,629 workers at tech companies who have lost their jobs in 2023 alone. (While some of them had healthy salaries, many are lower-income workers like those at Amazon.)

Halting or slowing down mass layoffs requires real nerve. The Democrats would have to use all the levers of power (executive orders, legislation, regulation, the bully pulpit, etc.) to pressure Wall Street to stop cancerous stock buybacks and leveraged buyouts. Although the task would be difficult, there are plenty of levers to pull. At this point, however, the required New Deal muscle memory to tame corporate power is fading away.

As the sinking working-class vote for President Biden reveals, the Democratic Party has a mountain to climb in order to dig out of its anti-working-class hole.

As the 2024 elections near, democracy will be hanging by a thread. The Democrats hope to squeak through by making the national elections focus on Trump’s lunacy and the abortion issue.

The Democrats would do better by revisiting their 1984 party platform which urged that workers should have “actual ownership of the company, employee representation on corporate boards… and greater worker participation in management decisions.” The platform also called for the government to “encourage employee participation and ownership, particularly as an alternative to plant shutdowns.”

It’s high time for concerned Democrats to take on the billionaire barons of job destruction.

If they don’t, who will?