Last week I wrote that economic conditions plus the swollen Democratic majority would predict a 45 seat Democratic loss. So, I concluded, before we even have the "what did Democrats do wrong" conversation, we need to first establish that they did anything wrong at all, with "wrong" being defined as a loss in excess of 50 seats or so. Now that we see Republicans gained some 20 seats more than mere fundamentals would predict, let's have the "what went wrong" conversation.
I think the root of the Democrats' political troubles lies in the initial flurry of activity--the stimulus, restructuring TARP, and the auto bailout. In the public mind, this all become jumbled together as "the bailouts" -- a conflation carefully nurtured by Republicans--even though obviously Keynesian fiscal policy is not the same thing as a bailout. But the truth is that all those policies were highly unpopular, and all came to symbolize big government rescuing bad actors while average people paid the bill. It became a frame that colored perceptions of the entire Democratic agenda.
The trouble with laying the blame for the loss on this is that I can't see a good alternative. You could give the people what they want -- let the banks fail, let the auto companies fail, respond to economic crisis with fiscal contraction rather than expansion. But that would have been insanely bad policy, deepening the crisis and ultimately driving more public discontent. The fundamental dilemma is that the economic crisis made Democrats unpopular, but so did steps they took to resolve it. What are you gonna do? Sometimes the people are wrong about macroeconomic policy. The issue of AIG bonuses might have given the White House a chance to take a populist turn. I'm skeptical that scolding Wall Street would have had much political impact. It is indeed amazing that Republicans held a double-digit lead among voters who blame the banks for the state of the economy. On the other hand, if open Republican shilling for the banks during the financial regulation debate didn't cure that, it's hard to see what would.
A more preventable problem was the extended health care debate. From Al Franken's seating, in July of 2009, through Scott Brown's election in January, Democrats had 60 votes. Democrats desperately needed to pass health care reform, and end the interminable process that was slowly bleeding support for the bill. Instead, Senate Democrats let it drag out. That was a huge mistake.
As some have noted, the White House erred politically in its handling of tax cuts. By putting them in the stimulus from the outset, it gave Republicans nothing to add to the bill. Additionally, they spread out the tax cuts to make them less noticeable, which helped make people more likely to spend them (you might save a temporary windfall) but also, well, made people not notice them.
Many conservatives were proposing a payroll tax holiday. Obama should have taken them up on it -- not in return for infrastructure spending or anything else, but straight up. A bipartisan, tax cuts-only deal would have bolstered his centrist credentials. And if Republicans refused, it would have made for an effective attack line.
In general, though, the big picture is that Democrats were trying to defend an overstretched majority in a midterm election during an economic crisis. They had assembled a voting base that was unusually dependent on the young and other groups that do not historically turn out in midterm elections. (That fact probably made their coalition even more vulnerable than your average overstretched, wave election majority.) When you're talking about the effects of tactics and policies, you're talking about the effects on the margins. There were no good choices, only degrees of bad.
Click here to read Jonathan Chait's post on the influence of health care on last night's Republican win.