Mitt channels his inner Jimmy Carter…he should have let sleeping dogs lie

As the implications of Mitt Romney’s nomination of Paul Ryan sink in, surely one factor must have been overlooked by his team: the political calculus of American workers. Apparently his team drew the wrong lesson from the recent Wisconsin experience.

Recall that in Wisconsin the Obama team and the AFL-CIO thought they could coopt a grass roots movement by Wisconsin workers to defend their unions and turn it into an arm of the flagging Obama campaign. They overreached and alienated the center by trying to recall a duly elected Governor in mid-term while alienating the left by re-running a boring candidate who had not beaten Governor Walker the first time around.

The defeat in the recall sent a shock wave of demoralization through labor not just in Wisconsin but nationally because on the same day voters in San Diego and San Jose voted to cut pension benefits for public sector workers.

The effect was to knock the last puff of wind out of the Obama campaign and the result was small crowds and a tough time in fundraising for the President. Obama’s response was to go negative with attacks on Romney’s taxes and experience running Bain Capital. These certainly had an impact but would not likely have lasted as they lacked real depth.

In the face of these attacks Romney panicked and walked off a cliff.

Had he had the confidence to rely on his own instincts, the natural pick for Romney would have been Marco Rubio. Rubio’s life story should have fit easily the “city on a hill” vision that the Mormon Romney ought to have naturally gravitated towards. Rubio would have also been a home run with the conservative base.

Rubio sends the message that the American Dream for immigrants is alive and well. His nomination would have sent a subtle but clearly optimistic economic message as well. This would have clashed with the listlessness of Obama’s efforts to deal with the economic malaise.

It would have put a Jimmy Carter gloss over Obama and allowed Romney to claim the Reagan mantle, if not explicitly then implicitly. That worked for Reagan because it created a sense of hope for American workers, however odd that may seem in the wake of Reagan’s attack on unions like the air controllers.

Thus, perhaps most critically, a Rubio pick would have avoided a senseless head on battle with labor and the beneficiaries of our social safety net, such as it is, in the heart of a crisis of demand in the macroeconomy.

Instead, likely pressured by his financial backers freaking out over the polls, Romney turned 180 degrees to the right not 90. In picking Ryan and not Rubio he is now committed to taking the Wisconsin recall story national. It’s a direct attack on the public sector and the unions that people like Ryan and his fellow Ayn Randians think are the source of all evil in modern society.

This is coupled with an attack on the client base of public employees: medicare and medicaid patients, welfare and early childhood education benefits recipients. These are the beneficiaries of the “new property,” as legal scholar Charles Reich famously called it, a mainstay of American society for a half century.

Ryan represents that wing of capitalism that responds to economic crisis by repeating in one way or another the infamous advice of Hoover’s Treasury Secretary Andrew Mellon: “liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.”

That was in 1929. We all know what happened next. Keynes warned the Mellons of the world: you can cut high labor costs (known as the “rigidity of wages”) if you want and there is a model available, actually two models – one is called Stalinism and the other is Fascism. Take your pick if you think you can impose one of those systems in England or the US.

Keynes offered an alternative – the deft use of public finance, the bond markets and the tax structure to avoid economic collapse, instead of authoritarianism to revive capitalism.

We are all Keynesians now, Nixon once quipped and no one ran on austerity again until, well, Jimmy Carter. And we all know what happened to him.

Instead of Reaganizing the campaign, Romney has insisted on Carterizing it. He has thrown his lot in with the same slash and burn milieu.

In doing so, he leaves behind his comfort zone developed while growing up in a Michigan dominated by the UAW and by winning the governship of a liberal pro-labor Massachusetts.

He gives Obama a natural target and instead of letting the labor movement and other constituencies of the Democratic Party drift off during the campaign sidelined emotionally by the Wisconsin defeat, he has blown a loud horn in their ears.

He may soon realize he would have been better off letting sleeping dogs lie.