As I write this, President Hoover is once again negotiating against himself, this time on extension of the Bush tax cuts. In exchange for a two-year extension on the Bush cuts, Mr. Obama will get, supposedly, a continuation of benefits for the unemployed and a reduction in payroll taxes. In another world, this would set up 2012 as a referendum on historically low taxes on the rich (and virtually no taxes on perfectly legal tax evasion by major corporations). But that world would require a Democratic wing of the Democratic Party, which no longer exists outside of a few members of Congress and underfunded advocacy groups. The American future is found, once again, in Arizona, which has attracted national attention for the Legislature's slash-and-burn approach to Medicaid. It's a program the state never would have adopted without a court order. Now, cuts to the program are a death sentence for transplant patients. Remember the hysteria during the health-care debate over "death panels." It's happening now, under Republican control, where the rich are protected and devil take the hindmost.
Expect more of the same, and not just in Medicaid. Our infrastructure is decades behind that of our competitors, and what we have needs $1.6 trillion just to get into good condition, according to the American Society of Civil Engineers. Most of our schools are underfunded, most of our teachers underpaid. American dominance in research and development is slipping. This is what happens when federal taxes are at a 60-year low, even as the demands (and, yes, appetites) of a complex, urbanized nation have grown. The inadequacy of tax revenue, along with the cost of empire and the recession, have put the deficit at 10 percent of GDP and debt nearly 93 percent of GDP. Yet the answers, from Mr. Obama's own commission, are to slam the middle class and start to welsh on Social Security, just as states are doing on their solemn pension obligations. Nevermind that conservative presidents and policies are most responsible for the red ink. Your tax cuts at work. At stake is whether we will still have a civilization, a meritocracy, a commons — or merely be a market for the Chinese and a looting ground for the rich playerz.
The question is whether this is sound economics and sound policy, or merely the triumph of the Fox News/talk radio propaganda machine? One uncomfortable fact: Americans pay far lower taxes than those citizens of other advanced nations. They citizens of those other countries also get the most back, from universal health care to high-speed rail. The Bush tax cuts were supposed to mimic the supposed success of the Reagan marginal rate reductions and set off an economic boom. They didn't. George W. Bush had the worst record of job creation since the real President Hoover; it would have been worse without the debt-and-swindle housing bubble, a creature of deregulation. We ought to be asking why?
Nobel laureate Paul Krugman has done the definitive takedown of the myth about tax cuts filling the Treasury during the Reagan years. The Reagan boom was powered by a massive re-engineering of American business, with both beneficial and malign consequences. Part of it was the first unshackling of Wall Street and a massive mergers-and-acquisitions wave that created huge wealth but also killed millions of jobs and consolidated too many industries (worse was to come). Reagan also benefited from the Volcker Fed's successful war on inflation and a temporary collapse of energy prices. Most of all, the American economy was still a manufacturing powerhouse and China was not in the game. The primary reason the Bush tax cuts didn't work is that the world has changed. With a surplus of cheap labor, much of it high skilled, luring investment capital to developing nations, and with much of the rich gambling in non-productive derivatives and other "investments," the hoped-for dynamism never took off. The rich had other places to put their extra money; as Tom Ricks said, most of the super-rich have checked out of America. And that's giving the benefit of the doubt to the idea that low-lower-lowest tax rates even lift all boats.
Mr. Obama started with a reasonable idea: That the tax cuts should be extended for everyone — except those making more than $250,000 would have to start paying a higher rate once they reached that threshold. But so incompetent was the White House at getting its message out, this never penetrated the debate. Still, it's telling that Mr. Obama lacks the courage to tell the American people the truth: That taxes should be raised on the richest, and many more of us, to levels seen in our prosperous past. That historic income inequality and dynastic wealth are unhealthy for a democracy, and for a liberal capitalist system. But he won't. Just as he won't tell us the truth on Afghanistan, peak oil or climate change. Much less would he, like FDR, take on the super-rich and "welcome their hatred" (worth listening to, as a reminder of what a Democrat can be).
We can't handle the truth. We're too lethargic to take to the streets and demand that the well-off and the tax-cheating corporations pay up, rather than seeing our country fall apart and our own living standards lowered to benefit the economic royalists. We'll see how we like the fantasy world of the right played out yet further. Enough Americans are doing "OK." They can buy more stuff from China for their suburban houses. They can put heated tile floors in the bathroom re-do. Historic unemployment is somebody else's problem. The same is true with stagnant incomes for most Americans. They're probably caused by that black socialist in the White House. And taxes? Cut them! Taxes must always be cut. Huckabee-Romney-Palin 2012! Keep saying it as American civilization, piece by piece, is confronted by the fate of an Arizona Medicaid patient.