Definitely the latter. Classical liberals are practically an endangered species yet the media often overrepresents them. Here's what I mean:
This graphic also represents why the identity politics everybody complains about are front in center in our political discourse. Cultural/social issues are the main dividing line, far more chasmic than the economic divide.
Yet the Democrats don't campaign on winning on economic issues that are popular..
Yes they do, specific policy programs that are broadly popular amomgst the population are the bread and butter of Democratic campaigns. The bread and butter of Republican campaigns, on the other hand, is to broadly attack any policy program in terms of being “big government” or “socialism,” which ends up being suprisingly effective due to the symbolically conservative nature of much of the American electorate.