House Minority Leader John Boehner (R-Ohio)

In the wake of Scott Brown’s astonishing Senate win in Massachusetts last week, GOP leaders took no time to spin the outcome as an indictment of Democratic leadership that can only help Republicans in November’s mid-term elections.

[Congress1]“There’s not a seat in America held by a Democrat that can’t be won,” House Minority Leader John Boehner (R-Ohio) told “Fox and Friends” Monday. “Massachusetts proves that. When Scott Brown wins Ted Kennedy’s Senate seat, any seat’s in play.”

But while Republicans are hoping Brown’s victory foreshadows a GOP landslide, a number of political experts are warning that the country’s restless anxiety — as evidenced not only in Massachusetts, but in Virginia, New Jersey, and now Florida as well — is less a backlash against Democrats in particular than a rebuke of the business-as-usual politics of Capitol Hill in general. Even as unemployment soared and housing markets tanked, voters have watched lawmakers bicker endlessly over a stimulus bill that proved too small and a health reform proposal that remains unfinished. Meanwhile, the banks have bounced back on the wings of a taxpayer bailout, paying out billions of dollars in employee bonuses this month while the jobs crisis outside Wall Street only worsens. In such an environment, some experts caution, incumbents on both sides of the aisle could find themselves surprisingly vulnerable in November.

“The public is mad, and they’re prepared to take it out on the establishment,” said Tony Coelho, the former California congressman who served as campaign chairman for Al Gore’s 2000 presidential run. “That doesn’t just mean the party in power. That means everyone.”

David P. Redlawsk, a political scientist at Rutgers University and director of the Eagleton Center for Public Interest Polling, agreed. “The stock market has gone up, but that’s Wall Street, and many voters do not see how that benefits them,” Redlawsk wrote in an email. “There is real risk to incumbents on both sides of the aisle.”

Redlawsk said that the Democrats, because they control both Congress and the White House, have absorbed the brunt of the nation’s discontent. But for Republicans to interpret that as partisan anger, he added, would be a mistake.

“This is not a partisan backlash by voters as much as it is a backlash against the powers that be — who happen to be Democrats,” he wrote.

The evidence of voter discontent has been everywhere in recent months. An early signal came in Virginia and New Jersey last November, when the incumbent Democrats were swept out of the governor’s office by Republican challengers who wouldn’t have stood a chance a year earlier. More recently, the virtually unknown Brown overcame a 30-point deficit to steal the Senate seat vacated by the late Edward Kennedy in the liberal bastion of Massachusetts.

“The message coming out of the Massachusetts special election is clear: No Democrat is safe,” said Ken Spain, spokesman for the National Republican Congressional Committee. “In the aftermath of Scott Brown’s victory this past week, it has become evident to Democrats that to run for reelection in this toxic political environment is to ensure defeat at the ballot box in November.”

Yet recent polls indicate that the voters aren’t exactly thrilled with Republicans either. In a Washington Post/ABC News poll conducted earlier this month, for example, just 24 percent of respondents said they have either a “great deal” or “good amount” of confidence in Republicans to lead the country – down from 29 percent a year earlier. For Democrats, the number was 32 percent, down from 43 percent in January 2009.

Another survey, conducted this month by NBC and the Wall Street Journal, tells a similar story, revealing that just 30 percent of respondents have a positive feeling about the GOP, while 42 percent view the party negatively.

The message hasn’t been lost on some Republicans. Indeed, Brown packaged himself more as an independent outsider than a man of the Republican Party — a bow to the anti-establishment tea-party movement that mobilized so ardently behind him. Republican consultant Brad Todd told CQ recently that the mid-term elections will be governed by a “taint of incumbency.” Even Boehner conceded this week that voters “don’t trust either party.”

Rep. Adam Putnam (R-Fla.) might have summed it up best. “The American people have fallen out of love with the current direction, but they haven’t fallen in love with Republicans,” he said last week.

“It’s a pox on both your houses,” Coelho said of the country’s mood toward Democrats and Republicans alike. “That’s why the teabaggers have a voice. They’re saying, ‘The hell with both of you.’”

Supporting that theory, new polls Tuesday revealed that Marco Rubio, the upstart Republican contender fighting for Florida’s Senate seat, is leading GOP Gov. Charlie Crist by three points. The party scheme is different, but Rubio’s anti-establishment theme mirrors that of Brown’s message to Massachusetts voters.

“There is a deep and increasingly restive anger stirring in the country,” L.A. Times columnist Tim Rutten wrote last week. “Its focal points at the moment may seem to be healthcare and ‘big government,’ but if there were a Republican in the White House, they might just as well be tax cuts and ‘limited government.’ The fact is that the president and both parties’ congressional delegations have approval ratings under 50 percent.”

The Massachusetts shakeup means that Democrats are without a filibuster-proof majority in the Senate, and that has left party leaders scrambling to prevent a catastrophe in November. “Every state is now in play, absolutely,”‘ Sen. Barbara Boxer (D-Calif.) said last week. “You have to make the case that you’re the one that’s on the people’s side. And people have to get it.”‘

With that in mind, President Obama will address Congress tonight in hopes of relaying the thought that he feels the country’s pain. The real audience, though, will be an American people grown frustrated with lawmakers’ partisan hostility, and skeptical of their capacity to lead in times of duress. For Obama, Coelho said, it’s also an opportunity to reframe his approach to governing, recognizing that the 2008 elections were a cry from voters for real change in Washington.

“It was a revolt against the system,” Coelho said of those elections. “Obama interpreted that to be a victory for his policies. But what it was was a frustration with the system not working.

“His political operatives needed to read the tea leaves,” he added. “And they failed.”

As a reality check, let’s review something that happened recently — a reminder of how we got into this crisis and who bears most of the responsibility for it. On Thursday, the Federal Deposit Insurance Corporation announced it had completed the sale of IndyMac, a once high-flying subprime lender that failed last summer. The total loss to the federal insurance fund? Some $10.7 billion, according to the FDIC.

IndyMac sustained huge losses selling Pay Option ARMs, which are loans that require little or no documentation. They allow the borrower to pay only the interest on the loan for several years, or to choose the amount of the monthly payment. These loans went south quickly, often because borrowers couldn’t afford the houses they bought or their loans reset to much higher payments as the loan balance grew.

Did any of this stop IndyMac from selling these loans, even at the end of its tenure, when it was clearly in trouble? No. Banking analyst Bert Ely told TWI that IndyMac used $10 billion in loans from the Federal Home Loan Bank of San Francisco to continue making Pay Option ARMs — even when investors figured out that the loans might not be such good bets and refused to buy them anymore.

IndyMac wasn’t alone. Other struggling banks also borrowed from the Federal Home Loan Bank system to keep themselves afloat, as TWI reported. The financial newsletter of the Institutional Risk Analyst wrote that Congress ought to be investigating the whole mess:

“Most of the failed banks resolved by the FDIC during 2008 have been excessive users of FHLB advances…Remember, it was the availability of the FHLB advances as funding source which allowed the management of IndyMac to grow the bank’s size beyond that supported by its natural deposit base… Like WaMu and Countrywide, but even to a larger degree, IndyMac leveraged government funding via the FHLBs with unsafe and unsound lending practices – and all with the full approval of federal regulators!

Obama and Geithner weren’t in charge when all that deregulation was going on, as I recall. It’s true the rescue effort hasn’t been perfect, and the populist anger against AIG often has gone too far. And it’s convenient for congressional Republicans — the biggest cheerleaders of the free market for financial services — to try to pin some of the resulting damage on the people in charge now.

But the huge cost of winding down IndyMac is an important reminder: Don’t forget how we got here — and who led the way.

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Subprime loans were bad. TWI’s Twitter feed is good. Please follow it here.

Republicans are pushing two arguments now. One, that the scandal is not over until names are named (hint: one of them is “Chris Dodd”) and accountability is found for the bonuses. Two, that the House should listen to the GOP and empower the Treasury to regulate bonuses for executives who take TARP money.

Alaska Gov. Sarah Palin (Flickr: Tom LeGro, NewsHour)

The populist hero was born on a small farm not far from the Canadian border. As a boy, he scraped together money by raising chickens and managing a grocery store. He then worked his way through an unprestigious law school, and enlisted in the Marines to fight for his country.

My doctrine, the young Republican senator liked to say, “is Americanism with its sleeves rolled up.” Given his background, he said he identified with “real people” from rural areas and small towns “who are the heart and soul and soil of America.” He vowed to defend them against “the bright young men who are born with silver spoons in their mouth” who were “selling this nation out.”

The senator regularly presented himself as a man of strong faith. “Today,” he declared in 1950, “we are engaged in a final, all-out battle between Communistic atheism and Christianity…the chips are down – they are truly down.” His name was Joseph R. McCarthy.

Illustration by: Matt Mahurin

Populism in America is nearly as old as the republic itself. Since President Andrew Jackson’s epic battle to shut down the “money power” symbolized by the Second Bank of the United States in 1833, politicians and citizen-activists have voiced their outrage about the “elites” who ignored, corrupted or betrayed the common people.

Right-wing populists typically drum up resentments based on differences of religion and cultural style. Their progressive counterparts focus on economic grievances. But the common language is promiscuous — useful to anyone who asserts that virtue resides in ordinary people and has the skills and platform to bring their would-be superiors down to earth

During the half-century since McCarthy’s remarkable rise and ignominious fall, his fellow conservatives have rarely stopped singing from the same populist hymnal.

“I had the privilege of living most of my life in my small town,” beamed Sarah Palin in her bravura speech to accept the GOP vice presidential nomination Wednesday night. It was, she explained, the kind of place inhabited by the people “who do some of the hardest work in America…who grow our food, run our factories, and fight our wars.” She defiantly contrasted her plain-folks view of the world to that of “the permanent political establishment” and “the Washington elite.”

Joseph McCarthy (Library of Congress)

It may be the same old song, but cultural populism has helped Republicans win many an election and has consistently put their opponents on the defensive. Richard M. Nixon championed the values of “Middle America;” Ronald Reagan damned a tax policy that took “from the mouth of labor the bread it has earned,” and George W. Bush mocked “liberal elites” for being soft on terrorism and warm towards gay marriage.

Conservatism would never have become a large and influential movement without such language; and liberals have yet to find a way to counter it. Why?

The answer has much to do with the anxieties of a racially divided consumer culture and the absence of a social movement grounded in the workplace. After World War II, most Americans, for the first time in U.S. history, considered themselves “middle class.”

But that homogeneous identity obscured big differences between a minority of “cosmopolitan” Americans — who could afford a four-year college, who lived in cities with large non-white populations, who had a professional job — and those who were not. The bitter conflicts of the 1960s and 1970s added in resentments over sexuality, religious faith and affirmative action.

President Andrew Jackson

Meanwhile, the labor movement that had done so much to build support for liberal Democrats, from Franklin D. Roosevelt to Lyndon B. Johnson, gradually lost both its numbers and its aggressive, populist spirit. Blue-collar workers had once flocked to unions and voted for politicians who bashed their opponents as “economic royalists.”

But by the 1970s, a rigorous labor movement that had helped lift incomes and gain job security for millions of wage-earners seemed to be resting on its laurels. Fast-growing unions of government workers were the exception — but as unruly public “servants,” they were unable to brighten the image of labor. With the stagflation of the Ford and Carter years, corporations were able to brand unions a fetter on productivity and growth. New movements that focused on race and gender gained the headlines and the attention of prominent liberals.

As a result, no one on the left seemed able to speak to ordinary white men and women who earned a decent income. but resented their diminished status in society.

Contrary to nostalgic mythology, Americans have never been a united people free of rancorous divisions. As Kevin Phillips once wrote, accurately if cynically, “knowing who hates who” and acting accordingly has usually been the key to electoral success.

With a dynamic labor movement behind them, liberals had been able to exploit antipathy against wealthy employers and the Republicans they bankrolled. But when conservatives began attacking liberals as an elite that was unpatriotic, condescending, ungodly and licentious, they had no rebuttal to offer.

This election will, in part, be a test of whether right-wing populism still works. Sen. Barack Obama, the Democratic nominee, will try to use the rise in foreclosures and joblessness to stir up anger at Republican policies, from which Sen. John McCain, the GOP nominee and the owner of multiple luxury dwellings, may not be able to separate himself.

McCain clearly hopes to refresh the conservative mantra of tax-eating bureaucrats and effete liberals — a charge that Palin’s small-town origins and tough demeanor may help drive home.

Conservatives have dominated the battle over populist rhetoric so long that even Americans who mistrust it bring up “elitism” and the “common-sense values” of “ordinary people” — as if they were objective realities instead of partisan talking points.

If liberals hope to win the White House again, they could think about engaging with gusto in the battle to define these terms. For better or worse, populism lives too deeply in America’s fears and expectations to be trivialized or replaced. Without it, both sides in the nation’s long-running political conflict are lost.

Michael Kazin is an American history professor at Georgetown University. He is the author of “The Populist Persuasion: An American History” and, most recently, of “A Godly Hero: The Life of William Jennings Bryan.”