One of the many problems with Republicans (as well as Democrats) never taking ownership for the real origins of the financial crisis was that it left the Republican Party with no empirically-based story about the economy’s troubles from 2009-2015. That is, there was a perfectly good, accurate, conservative story about how the crisis was the result of government subsidies and guarantees run amok, a shortsighted immigration policy, and a lack of attention to moral hazard, along with failures in financial regulation. The problem with this story was twofold, however:
a) The most public figure pushing these subsidies in the 2000s was George W. Bush.
b) Anyone pushing the line that the foreclosed deserved their fate would be easily tagged as heartless and likely racist. In fact, Paul Krugman often brings up that the Tea Party began with opposition to bailouts of foreclosed homeowners as a way of calling Tea Party supporters heartless and racist.
So instead, Republican politicians adopted another perspective on the origins and continuance of the crisis: runaway debt, along with Obama’s meddling with the economy, was destroying business confidence and would lead to skyrocketing inflation. This story didn’t offend as many people but had the disadvantage of being largely wrong. Debt and inflation were just not short-run worries in 2009-2012, when both interest rates and inflation were roughly zero.
Republicans won back Congress while pushing this story. But it did lasting damage to the last vestiges of elite respect to Republican ideas, especially on economic policy. This was even more true because Republicans ran against debt while also complaining about cuts to Medicare and pushing Paul Ryan’s revenue-decreasing bills. It all just didn’t add up.
Paul Krugman’s constant self-congratulation is deeply irritating,but he was much more right than the inflationists about the basic facts of the crisis once it got started. His self-congratulation spread to the rest of the center-left, who decided that they could probably drop the “center” in their name without losing a whole lot.
Economic journalists, who once listened to Republicans (“fiscally conservative socially liberal” is basically a WSJ business reporter), stopped. And after the 2011 debt default standoff, big business decided that, whether or not they were right on taxes, GOP just wasn’t on their side. This is a big contributor to the one-sidedness of our current rainbow corporate coalition.
In the very long run, conservatives are probably right that our debt levels and public obligations are unsustainable and will hinder economic functioning. (I particularly worry about how state and local obligations will put them increasingly in hock to the federal government and destroy the weakening balance of federalist power.) But in the meantime, for conservatives worried about the failures of conservative intellectual elites, 2009-2012 economic policy was a big one.