Friday, February 17, 2012

The Little Plastic Castle On The Potomac: What Republican “Leaders” Don’t Want You (Or Their Base) To Know.

17 February 2012
Tel Aviv

Among my favorite urban myths is the one about how goldfish have no memory, so the little plastic castle is a pleasant surprise every time they circle their bowls. Perhaps the Republican Party ought to replace its elephant symbol with a goldfish. Why? Because according to any Republican leader (or Fox News host), nothing happened before January 20, 2009 (or, to be specific, nothing that is the fault of any Republican). According to the “official” GOP/Fox News line, the only President who came between Franklin Roosevelt and Barack Obama was Bill Clinton and no Republicans had anything to do with any legislation, regulations or court decisions that might have had any impact whatsoever on employment, housing, government budget deficits, Wall Street disasters that almost wiped out capitalism on a global scale, oil spills or the three wars in which we have been engaged for most of the last ten years. Now, I know that some of the current candidates to be the Republican nominee for President have actually broken from this party line (e.g., Rick Santorum in Michigan conceding that government bailouts were started by Bush II and that Obama was merely “following along”) but I will deal with the delightful schadenfreude I get from watching the Republicans destroy one another in my next blog.

What the so-called party leaders and most of the talking heads want you to focus on is how all of America’s economic woes are Obama's fault, except for the stuff that is still Clinton's fault.  This includes, but is not limited to, unemployment, budget deficits, wars, the Gulf oil spill, the continued failure to restore damage caused by Hurricane Katrina, sexual immorality (well, maybe that really is Clinton's fault) and, my favorite, a tax increase, now postponed by heroic Republicans in Congress until the end of 2012 (at which time Republicans will once again seize control and make the cuts permanent, at least for rich people like Mitt Romney).

Now, before you surf away or hit your delete key, it's not that I don't think there's plenty of blame to go around. Democrats, a subspecies that seems to have no exoskeleton, let alone a back bone, are just as guilty.  At no time in the past 32 years would Democrats have been unable to block Republican legislation by voting as a block or using various Senate rules. But as the only political party I know that is capable of having its caucus in a rain barrel, the Democrats consistently caved in and even supported to every tax cut and war the Republicans wanted. This being said, it is the Republicans who have taken their goldfish-style dementia to such a high level of entertainment that I can't resist at least one snarky blog on the subject.. And here is the rest of it.High on the list of things the GOP leadership would prefer not to discuss is the fact that, in the 32 years since Ronald Reagan became President, the Republicans will have held the Presidency for 20 years, the Senate for 16 years (including the two years during which Dick Cheney had to be disarmed, sobered up and hauled in from a secure, unnamed location to break or create tie votes in favor of the Republicans) and the House of Representatives for 14 years. For 12 years, 1995 through 2006, the Republicans controlled both houses of Congress and, for six years, all three branches of government. A substantial majority of currently sitting Federal judges plus many of the people who form what was once referred to as the "permanent government" (back when I had to write this sort of stuff for final exams) were appointed by, or first came to Washington to work for, someone named Reagan or Bush.

In 1981, a new sheriff came to town, Ronald Reagan, and with him he brought what came to be called Reaganomics and the Reagan Revolution. Whether or not you are a Reagan fan (truth be told, I enjoyed Death Valley Days), you have to concede that his Administration had the greatest impact on America, in general, and Washington, in particular, since the Roosevelt Administration. The Reagan Revolution made the USA a haven for rich people, prevented middle class incomes from ever increasing, made it open season on organized labor and eliminated enforcement of outdated regulations like the anti-trust and securities laws. In general, Reagan and his allies managed to convince too many of us that, private enterprise can always do things more efficiently and effectively than the government. To this day we hear the daily cry that small government is better than big government and the ideal would be to have no government at all (unless, of course, you are a Congressman trying to get a new bridge built in his or her district). According to this new gospel, growth would always be stimulated by cutting the unfair tax burden, particularly on rich people (oh, sorry, “job creators”) and corporations and destroyed by any tax increase, ever. (Let's not confuse our GOP friends by harping on the fact that Presdients Reagan, Bush I and Clinton all signed off on tax increases which were closely followed by an historic bull market, the creation of millions of jobs and a government budget surplus. Why ruin an election campaign with facts?)  The Reagan Revolution continued on through the Clinton and Bush II Administrations. During the second Clinton and first Bush II terms, Washington managed to either repeal or, through regulatory inaction, ignore, key pieces of New Deal legislation designed to prevent banks, insurance companies and others from speculating with depositors’ money and crashing the nation’s credit and financial systems.

Oddly enough, back in the Reagan/Bush I years, in what can fairly be described as a bipartisan effort, Congress managed to impose fiscal restraints on itself. Kind of. Sort of. Well, at least by Washington standards it was restraint. Any new spending or new tax cuts had to be revenue neutral. In other words, if you wanted to spend more money you had to either find new revenue (i.e., raise taxes) or cut some other spending. Incredibly, with Congress and the White House, divided between the parties for most of the late 80s and 90s, this worked. Kind of. Sort of. Well by Washington standards it worked. And so, by the end of the Clinton Administration the government actually ran a surplus. And, according to the Congressional Budget Office (“CBO”), that surplus was going to grow to be hundreds of billions of dollars. That was, of course, if nothing significant happened to cause a change in America's or the world's economy over the ten years beginning with 2001. Would you rely on such an assumption? The CBO warned anyone who would listen (which turned out to be Fortune's Allan Sloan and his readers but apparently this group did not include anyone holding an elected Federal office) that its estimate could not be relied on for a period much longer than it just took you to read this sentence.

And so, in 2001, we were gifted with the first round of Bush tax cuts. Even under the rosy predictions used to pass these cuts, the Federal government would start running deficits again by the end of 2010. Looking forward after 2010, the projected deficits rose into the trillions. And so, in yet another act that passes for fiscal restraint in the Capitol, Congress put a sunset provision into the tax cuts. In general, on January 1, 2011, the tax code would revert back to the rules that would have been in effect had the 2001 legislation never been enacted. Bush signed the bill into law figuring that one of two things would happen. Either a later Congress would blink first and make the tax cuts permanent or he would be out of office and his successor would be blamed for imposing a huge tax increase; which is just what the Republicans are now trying to do to Obama.

And the surplus? Well, for those of you who have no memory of the United States before January 20, 2009, Bush signed his first round of tax cuts in Spring 2001. Starting on September 11, 2001, the United States suffered its worst terrorist attack, a stock market crash and entered into wars on three fronts (Homeland Security, Afghanistan/Pakistan and Iraq). And so, with tax revenues falling while expenses were rising at astronomical rates, the Republicans in Congress and the White House stepped up to the plate and passed a second round of tax cuts. Where were the Democrats? They were cowering in the corner trembling in fear of not being seen as supporting our troops or of losing the next election by voting against more tax cuts. Thus, the Bush II administration, with the full support of Congress, guaranteed that the USA would have multi-trillion dollar deficits for decades to come.

Meanwhile, outside the Beltway, from 1981 until 2007 (with a couple of minor bumps in the road) Wall Street was on its greatest roll ever. Ripping up companies, sticking them back together, destroying huge numbers of jobs, and creating jobs that were either lower paying or located in China, India, Southeast Asia and Eastern Europe. The bottom line?  In 1980, the top 1% of Americans, when ranked by annual income, received 10% of all income. In 2007, just before the Bush Recession, this had grown to 24% and all indications are that this gap between the 1% and the 99% continues to grow. For most Americans, family income has been flat or gone down when adjusted for inflation. The most striking example of what can be best described as the Republicans’ War on The Middle Class is that roughly 75% of workers who lost their jobs in the Bush Recession and have now returned to work are working for less.

But what about the great economy we’ve had for most of the past 32 years? If things are so bad, where have all those corporate profits and personal wealth come from? Well, for Wall Street, there's globalization. It is not uncommon for a US-based corporation to earn more money outside than inside the US. (How do you think Ford avoided a bailout and bankruptcy when their US sales were not much better than Chrysler or GM?) Back at home people on Main Street were increasing the volume of what we consume. But didn’t I just tell you how most Americans have seen their incomes drop, or at least not rise, over the past 32 years? So, how can we buy more and more stuff with less cash to spend? Easy: credit. And I do mean easy credit. Give everyone 5 or 6 credit cards, give people who can’t possibly repay them home mortgages and equity-based lines of credit. Just keep extending credit to support the purchase of stuff. Need to pay off your old loans? Just get new loans. And, to keep the money flowing, take all these basically worthless IOUs and “securitize” them into investment products that not even their creators understand. Then, to top it all off, give the securitized debt a AAA rating courtesy of the rating companies who get their fees from the creators of the securities and fully insure the investment banks' risk, but not their customers', using an insurance company whose assets could not possibly cover the potential losses. Our government didn't just allow this, the government was a major player in the action.

And so, after almost 30 years of the Republicans pushing their version of free market capitalism (that’s a system under which profits are privatized for the top 1% while losses of companies deemed "too big to fail" are socialized among the rest of us), the US economy was transformed into one gigantic Ponzi scheme. And so, when the inevitable down cycle came, when the housing market collapsed and the stock market went south, when major banks and insurance companies were sinking under so much leverage that they could never work themselves out of debt, the US economy dropped into its worst recession since the 1930s. The Roosevelt Administration had tried to warn us this would would happen without the protection of New Deal legislation. The Republicans, who at one point wanted to replace Roosevelt’s picture on the dime with that of Ronald Reagan, told us that we had to root out socialism in America by eliminating all vestiges of the New Deal and managed to trigger a second great depression. The only reason why we are now slowly pulling out of a recession instead of slogging through the second great depression have been the bailouts arranged by that class traitor, Henry Paulson, Bush II Treasury Secretary and former Chairman of Goldman Sachs, followed by the Obama Administration's efforts to put a floor on our losses and try to stimulate a recovery. Americans will be paying for Republican profligacy for decades to come, except for guys like Mitt Romney. But that's another blog.

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