The conventional wisdom is that Democrats when in power spend, spend, spend, running up the deficit, while the Republicans are fiscally conservative, and balance our budgets. In other words in this view the Democrats are your teenagers with a credit card and the Republicans are your conservative parents, carefully managing their money for retirement. The problem with all this is that the facts don’t bear this out, and we ignore the facts at our own peril. Right now the Republicans are promising a return to “basics”; cut taxes, reduce spending (won’t tell us what spending), small government, and little regulation. But as I will attempt to demonstrate, these are the things that have gotten us in deep, deep trouble.
Now these are the “New” Republicans because the Republicans of old who have realized that these things are good in moderation, but as a wholesale economic philosophy are a disaster. The whole thing revolves around their fundamental belief that the market place is the real honest broker of justice. And maybe in a perfect world it might be. But we don’t live in a perfect world of pure competition and consumer choice. We live in a world where large corporations control consumer behavior, and sadly our government. In a perfect world, government would have little role because if businesses did foolish or self-destructive actions, others would step in to replace them. But we have ENRON, Massey Energy, BP, Wall Street, Savings and Loans (80’s) and I could go on and on. No Virginia, there is no perfect market place and it tends to run amok.
But the other fatal flaw in their economic theory is flow down. This is part and parcel of the New Republicans. That is the theory that as the rich get richer, they invest, which is the engine of our economy, and everyone benefits. That is the theory behind all of the tax breaks and government subsidies of the rich. Oh, and because of the lower tax rate on the rich allowing them to keep their money and invest, the economy actually generates tax revenue and the deficit caused by the tax cuts goes away. Obviously because they are rich they deserve to be don’t they?
Trouble with this theory of flow down is that it never happened. This is what George Bush senior called it “voodoo economics” before he compromised rational thinking for a shot at the White House. A little history here: Under Reagan, whose tax cuts are the foundation of the Republican mantra, the deficit was tripled making it the largest increase in the deficit since WWII. He took Jimmy Carter’s paltry $930 billion deficit to $2.68 trillion after his ballyhooed tax cuts. During George Bushes Jr. reign in 2000 to 2008 the debt, primarily due to the tax cuts and a war not paid for, increased the deficit from $5.94 trillion to $10.7 trillion. Meanwhile during the Clinton years the deficit only increased by 20% and he was the only President to decrease it as a percent of GDP. Oh doesn’t that flow down work well? (U.S. Debt by Presidential Term)
Joan Walsh from Salon.Com and others have made the following claims which if true, raise real questions about the Reagan Revolution and the whole idea that Republican policies are good for our economy or for us:
- 83 percent of all U.S. stocks are in the hands of 1 percent of the people.
- 61 percent of Americans “always or usually” live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.
- 66 percent of the income growth between 2001 and 2007 went to the top 1% of all Americans.
- 36 percent of Americans say that they don’t contribute anything to retirement savings.
- A staggering 43 percent of Americans have less than $10,000 saved up for retirement.
- 24 percent of American workers say that they have postponed their planned retirement age in the past year.
- Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a 32 percent increase over 2008.
- Only the top 5 percent of U.S. households have earned enough additional income to match the rise in housing costs since 1975.
- For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together.
- In 1950, the ratio of the average executive’s paycheck to the average worker’s paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300 to 500 to one.
- As of 2007, the bottom 80 percent of American households held about 7% of the liquid financial assets.
- The bottom 50 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.
- Average Wall Street bonuses for 2009 were up 17 percent when compared with 2008.
- The top 1 percent of U.S. households own nearly twice as much of America’s corporate wealth as they did just 15 years ago.
- In America today, the average time needed to find a job has risen to a record 35.2 weeks.
- More than 40 percent of Americans who actually are employed are now working in service jobs, which are often very low paying.
- For the first time in U.S. history, more than 40 million Americans are on food stamps, and the U.S. Department of Agriculture projects that number will go up to 43 million Americans in 2011.
- This is what American workers now must compete against: in China a garment worker makes approximately 86 cents an hour and in Cambodia a garment worker makes approximately 22 cents an hour.
- Approximately 21 percent of all children in the United States are living below the poverty line in 2010 – the highest rate in 20 years.
- Despite the financial crisis, the number of millionaires in the United States rose a whopping 16 percent to 7.8 million in 2009.
- The top 10 percent of Americans now earn around 50 percent of our national income.
So when Americans say we are on the wrong track, this is what they are talking about. The rich are getting richer and the poor and the middle class are getting poorer. This is a direct result of the country moving right and embracing New Republican conservative philosophies. The trends are striking from Ronald Reagan on. I guess my only thought is that there is no free ride, which ought to be a conservative axiom, but they keep promising one with tax cuts and flow down. After 30 years of which only 8 were under a Democrat and the trends greatly slowed, how can they still blame this on Democrats?
There is, of course, the bogus argument about how President Obama is amassing a huge deficit, but lets look once again at the reality. The $1.5 trillion in debt added to our deficit in 2009 was primarily due to the Bush tax cuts, the unfunded war in Iraq and Afghanistan, TARP, and the downward trend in the economy. These were driven totally by the Bush Administration. As shown by an analysis by the Center on Budget and Policy Priorities, the effect of the stimulus is minor to these numbers and the deficit in the out years continue to be driven by these Bush policies. To quote them:
“Some critics continue to assert that President George W. Bush’s policies bear little responsibility for the deficits the nation faces over the coming decade — that, instead, the new policies of President Barack Obama and the 111th Congress are to blame. Most recently, a Heritage Foundation paper downplayed the role of Bush-era policies (for more on that paper, see p. 4). Nevertheless, the fact remains: Together with the economic downturn, the Bush tax cuts and the wars in Afghanistan and Iraq explain virtually the entire deficit over the next ten years (see Figure 1).” (Critics Still Wrong About what Is Causing the Deficit in the Out Years)
These are not really complex issues yet the majority of Americans are still drinking the Kool-Aid that the Republicans are feeding us. The Democrats have done a terrible job of pointing this out with such morons as Ben Nelson and Evan Bayh actually believing this stuff. But I have to think that if the American people once again elect the people whose policies have brought us to this sorry state, they truly are a stupid lot. Clearly if President Obama would have had more courage he would have done much more to stimulate the economy and create jobs, but to say that our sorry state is his fault is to very sadly miss the whole point.