Let’s face it: Voters don’t understand that Keynes is right

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.

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