When the GDP is growing annually, even due to precarious bubble, there are always additional resources to be split between leadership of various factions that support (or might support) the government in power. However, when recessionary stagnation and reversals come along, the pie to be split between existing and potential supporters stops growing. In many authoritarian societies around the world, reversal in economy means that there are less resources for elites to fight over and thus the intensity of political struggle shoots up since the number of elites is not really reduced. Sure, some tycoons go broke but as Donald Trump has shown in the past, when you owe somebody thousands of dollars you're in trouble but when you owe somebody billions of dollars, your creditors will bend over backwards to help you repay. The power of government in a recession often significantly grows (that is until a coup, mass protests, or oligarch sponsored election smears/removal) since the government can pick which factional leadership to help survive and even prosper.
United States is no different. The structurally non-inclusive system created by the founding fathers allows bits of the shrinking economic pie to be denied to entire factions that refuse to join one of the main two political coalitions. Many elites that formerly did not participate in good economic times are now compelled to join one of the two parties depending on which one is in power. They certainly know their grievances will never acquire any legitimacy if they pursue structurally marginalized third party politics.
How will American Democratic party be effected by this? At this point they have become an amorphous pragmatic entity like parties in much of the world. They realize that ideology and a lasting platform makes one inflexible and allows opponents to out think you, outmaneuver you, and win. The future of United States is not being bound by ideals but whatever works practically.
Pragmatic evolving behavior is the only way to adapt and grow. Democrats have been out of power for long enough to now be able to methodically expand and solidify a ruling coalition for a long time. This development occurred roughly when United States became obviously ideologically bankrupt and demonstrated that being an opposition to Soviet Union, long after Soviets are no more, is very counterproductive for economy and stability. Before the presidential election Barack Obama has effectively amalgamated Democratic National Committee with his campaign structure. Besides saving money in efficiency, this has effectively merged Obama's personal power with the party's. We know about the 13 million name mailing list of supporters and their information that was collected during the campaign. That list, is on one of the best organized supporter databases yet used in United States politics. Precise targeting of supportive population throughout the country can be accomplished when it's time to ask for financial/logistical help. Future democratic candidates for congress will be in great need of such valuable data on democratic supporters (and their preferences, background, etc) in their own state. As such, they will be more open to suggestion from the president when it comes to policy. Democratic congressmen (even the elderly dinosaurs among them) will be slowly pressured to become less and less ideological and more and more pragmatic like Obama himself.
Aren't they already sneaky pragmatists as demonstrated by Clinton and DNC's "triangulation" in the past 25 years? Yes and no.
Figure 1 shows that so far democrats, as well as republicans, have been straddling the ideological center and majority of the population. In the meantime, they have been neglecting the needs of the people who in a freer society, would have a smaller party to effectively represent them in government. Some libertarians would be confused why progressives are rated higher in economic freedom than Ron Paul. That is due by the fact that population cannot be economically free if investments in healthcare, education, and infrastructure are neglected (although ultimately same could be said for socialists, I'm working within American socioeconomic system now). Only such expenditures allow many people to get on the road towards economic autonomy. Currently, there is endless debate concerning whether 1) recent democratic victory is further triangulation and Democrats moving so far to the lower left corner (right) as to only leave the unappealing, nasty, aggressive, uneducated, religious Palin supporters in the opposition or 2) bulk of the centrists have had enough of the failed socially and economically stagnating lower left corner and moved towards greater economic and social freedom (libertarian/progressive).
Disentangling such things is next to impossible considering the fluid nature of demographics. However, it is safe to say that majority of stated policy objectives on both the center-left and center-right have clustered in the middle and on top of the demographic electoral bell curve. Educated ivy league Republican leadership has had their coalition co-opted and torn apart between the uneducated rural militarists and the increasingly educated suburban middle class and urban profesionals. If the country had a saner proportional representation, we would have seen the poor rural militarists have a nationalist discriminatory party of their own, like Zhirinovsky's LDPR in Russia. Center-Right would then be able to create a coalition with them as needed while not having to pander to them. Center-Left would counterbalance that with an alliance with Progressive Party (Kucinich-Nader-Green factions) and most people would get some sort of representation without feeling that one of the only structurally possible parties is constantly compromising and selling them out. As things stand today, Democratic coalition is able to bring factions from a wide political spectrum. This is fragile however due to Democratic policies clustering in the center and Republicans can conceivably re-organize by 2020s to regain power under even more pragmatic umbrella (assuming US doesn't collapse before then).
There is another form of pragmatism that can be done by Democrats that mimics coalition building in proportionally representative democracies. It is throwing the occasional bone to the small ideological clusters on the periphery of the ruling coalition and opponent's coalition to get their loyalty. In United States this would effectively mean co-opting some of the Palin faction, Greens, and Libertarians. This form of pragmatism is also superior to what is currently done since it provides more of a stark differences between the parties. Right now, center-left and center-right are both pushing at each other on a demographic bell curve with backing of the more intense ideologues on their side. That makes the two parties practically indistinguishable from each other. It also makes them unable to perform national transformation since it's always one step forward two steps back on each side of the aisle. The center just keeps switching hands.
Obama (and now DNC after the merging with president's former campaign organization) lacks a clear long term platform to be defined by, has political empathy when it comes to traditionally non-democratic factions, and a political database list worth millions of dollars. That gives him ability to not only micro-target various populations in ways Bill Clinton couldn't dream of but to eventually co-opt smaller ideological clusters that would be their own parties if they had a choice. What does that mean?
1) Figure 2 shows that Obama can appeal to some of the Libertarian /single issue voter faction of the Republican party on gun control. He does so easily by leaving the touchy issue of gun control alone. Second amendment supporters cut across political lines and touching the issue would create a bit of mutiny within the Democratic party from the more rural states like Indiana. It's a very easy decision in terms of spending political capital since rural democrats are placated, some single issue second amendment supporters stay at home, and the libertarian faction within Republican party (and LP party itself) looses some steam.
2) He can also appeal to the rural militarists who enjoy hearing stories of dozens of Taliban dead in missile strikes. We can expect more aggressive pro-active attacks on Taliban positions that result in body counts. Militarists will see that under Obama, United States continues to kill as much if not more so than before. Considering that United States is already occupying areas abroad, this requires little political expenditure.
3) Gradually and tacitly allowing states to decriminalize some drug posession (by not pro-actively encouraging prohibition) is an easy way to appeal to both Libertarian Party/Green party supporters as well as progressives. Decriminalization can also be used as another wedge issue to drive moderate republicans like Arnold Schwarzenegger and Ron Paul supporters against the religious faction. Such a strategy would have to be gradual since outright support for decriminalization can rapidly create a backlash and sensationalistic media trough to feed on.
4) Centrist voters in Romney faction, Huckabee faction, and poor rural militarists can be placated by some tax breaks, some major cuts in spending, and major investment in healthcare, education, and infrastructure. This would continue the traditional triangulation and maintain most of policies within centrist cluster politically. Pressure on oligarchs can be increased gradually so they don't rebel all at once and some sectors of the economy can come under increasing regulation. This would placate and bring loyalty from progressive democratic faction as well as some Greens. Measures like this would more than make up for progressives' displeasure concerning militarism abroad. Most of the population is already getting used to constant occupation anyway. Rudy faction wont scream murder against it.
However, in the beginning of Obama's administration the primary goal is to get re-elected. This means strengthening of the existing democratic coalition, rewards for supporters, and outreach to consolidate those that voted for Hilary Clinton. We already see this happening with transfer of General Motors shares to organized labor. Private 401 K holders, insurance companies, and stock holders get hurt in the recent government interference with car companies but they are not an organized blue collar democratic voting block. We can expect further federal focus and relatively drastic actions (compared to the stagnation of the last 25 years) in all the states that Hilary won in the primaries and any close states that McCain won in the general. Obama's coalition will continue to expand in a virtuous cycle of material reward to supporters in the next 4 years.
Next Republican presidential primaries will be even more vicious than the last. We can expect to see the Ron Paul faction rise to become a co-equal in respect next to the brutish militarists, uneducated rural theocrats, and Huckabee supporters. This combined with the above mentioned Democratic co-opting of some Republicans and Libertarian/Green/Constitution party supporters should create a total landslide defeat for Republicans unseen since McGovern and Mondale. This will occur even in the unlikely event of Republicans successfully marginalizing/co-opting the rural theocrats by elegantly merging meritocratic centrism of Romney, Christian economic welfare of Huckabee, and Ron Paul's social libertarianism. This will occur even if economy stagnates for years (but not totally collapses).
A grand coalition is emerging where most of the power elites have their cards with one party. Strategically that's where most of the money is and will continue to be. Movement of educated professional to the urban areas and republicans losing a whole generation of young voters means that Democrats might control United States for decades to come. Considering the only real opposition are uneducated religious peasants, that is a good thing short term. Longer term, marginalized uneducated (as opposed to Bush years) opposition, with access to weaponry, can spell trouble for social stability.