Screwed 3.0

Now we enter the next phase of the Great Disruption, where political dysfunction meets unsustainability. The Greek debt crisis is helping prepare the way for American panic about the federal deficit and national debt. These two maladies are a cause célèbre for the Tea Party. The supposedly left-wing media are on board. USA Today headline: "Nation's soaring debt calls for painful choices." Tom Friedman of the New York Times: "After 65 years in which politics in the West was, mostly, about giving things away to voters, it’s now going to be, mostly, about taking things away. Goodbye Tooth Fairy politics, hello Root Canal politics." Isn't he cute? I can't wait for the idiot David Brooks to weigh in. (He's already written about how "as government grew, the anti-government right mobilized. This produced the Tea Party Movement — a characteristically raw but authentically American revolt led by members of the yeoman enterprising class...As government became more threatening..." Funny, he means the Obama administration, not the Bush wars, shredding of civil liberties and crony capitalism leading to trillions in federal bailouts, i.e., government growing.) You see, we're just like Greece — a profligate nation that needs to tighten its belt, cut government.

The reality, of course, is very different. Whatever his failings, Bill Clinton showed that seemingly intractable red ink could be turned into surpluses. The present deficit and debt is almost entirely a creation of the Bush tax cuts, the Bush wars and the Bush bailout of Wall Street (for which Sen. Obama voted). The fiscal situation was made more severe by the worst recession since the Great Depression. It's as if FDR fought World War II twice as long, cut rather than raised taxes, and did all this in the worst part of the Depression while using federal money for the banksters rather than the people. It's a wonder the deficit is so low as a percentage of GDP. It is not a cause for hysteria.

But, ah, dear reader, it will be used. "You never want to let a serious crisis to go to waste," said White House tough guy Rahm Emanuel, who is letting the real crises of the Great Disruption do just that. The extreme white-right — the idiot David Brooks' "yeoman enterprising class" — and the plutocracy will use the "crisis" of federal spending to their own ends. And if the effectiveness of their party as the minority in Congress is any indication, wait until they take the House this year from a feckless Democratic Party. And then the Senate and White House. Prepare for Screwed 3.0

Screwed 1.0 might be traced to the Reagan administration, but its roots actually predate it. High black unemployment is popularly ascribed to welfare and family breakdown, but much more was at work. In the late 1960s and 1970s, inner city factories closed and our railroad system nearly collapsed. These were major job providers for African-American males. Minorities often didn't have the ability to commute to new job centers as sprawl took hold. Poor schools also held back economic mobility.

In the 1980s, the circle of losers widened to include steelworkers, auto workers and other high-paid, blue-collar employees, victims of foreign competition as well as management's complacency and slowness to invest in new technologies. Reagan (and some Carter) policies helped unleash a tidal wave of creative destruction. Some of it was healthy, as lazy companies went down and entirely new industries arose. But we saw the first phase of the financialization of the economy, with the merger mania, LBO craze and S&L deregulation, ending in the '87 crash and '90 thrift collapse. Gutting effective anti-trust protections, tax treatment of mergers and the counterweight of union power, the Reaganites oversaw the beginning of the looting of American wealth it had taken a century to produce. Still, the economy was very dynamic. Through the Clinton years, millions more jobs were created than lost. Pensions were replaced by 401(k)s, but it was a 20-year bull market and few realized the implications of giving up this bulwark of the middle class. They "had control of their own money." The slowly declining earnings power of many groups of people were cloaked by the rise of others. Education and retraining, those were the answers. Or so we were told.

These relative good times convinced most Americans that Reagan was right: government was the problem, and tax cuts were the answer (even though Reagan also raised taxes). Red tape should be cut. The free market works. Thus, in so many ways, the Clinton years were an extension of 1981-1992, with another modest tax increase. Clinton presided over further consolidation of many industries (including the notorious telecom act), further trade deals and deregulation of finance, the cancer cell that would metastasize in 2008. In fact, millions of Americans were doing worse, slipping back. But they were a relative minority, probably a lazy one at that, and government certainly couldn't be a force for good to ameliorate their plight. The era of "big government" was over, Clinton said to a cheering, jeering Republican Congress. Few pointed out that the economy's strength was increasingly dependent on Fed-generated bubbles.

Screwed 2.0 began with the election of George W. Bush. He pushed through tax cuts for the richest Americans. He started two wars, asking for no sacrifices from the American people. Regulation was left even more in the hands of the regulated. The decisive power of heavily consolidated industries, especially Wall Street and the oil companies, over government became apparent. But even before the Great Recession, the losers circle had widened dramatically. Wages were flat for most of the Bush years; median household income actually declined for most Americans — and this was during the "boom" produced by the housing bubble. Income inequality is now at historic highs. Poverty has risen. Entire cohorts of the population are facing long-term, perhaps permanent, unemployment. Cities and regions have been devastated by losing their key employers. Now it's unclear whether members of the next generation will enjoy better living standards than their parents — an unheard-of thing in American life. It's unclear whether they can even keep pace with their parents.

Now we're headed into dark territory, indeed. Some clue is gained by who has been strengthened by the Great Recession: the big banks that caused it, the anti-government "free market" philosophy that underlay it, and the richest Americans, whose share of national wealth actually increased. Offshoring of American jobs? Get used to it, Jack Welch says. Wall Street bonuses are back to setting records while transit systems everywhere are facing fiscal crises. Add in the Tea Party, the weakness of Democrats, the undiminished power of corporations, an easily-led uneducated electorate. Another clue comes from states, many of which actually cut their budgets for years, but most driven by the tax-cut orthodoxy into the ditch. Even basic human services are being slashed, state parks closed, buildings sold. People largely accept all this meekly.

Here comes Screwed 3.0. To the deficit hawks, defense spending is always off the table. So the wisdom of being involved in two wars that seem to only be generating domestic terrorism is not questioned. Nor is the cost of soft empire. Tax increases are always off the table. Under Eisenhower, taxes on the richest were at a 70-percent rate. Now they are one-third that, for those who pay (tax cheats are a significant cause of the Greek situation). Most major American corporations pay no taxes at all, despite their clever pleadings. Taxing the bonuses of the bailed-out banksters, taxing mergers — not possible. Nor is using the tax code to recoup the massive public costs associated with sprawl or environmental damage caused by big carbon polluters.

So what's on the table? Help for the poor and vulnerable — they don't have a lobby spending $300 million a year to further their interests (and we're a Christian nation, ya know). Social Security for the baby boomers, most of whom have worked like dogs stuck on a treadmill, most of whom didn't make out like Bill Gates or Bill Clinton. Medicare. The extreme right has worked for decades to eliminate these foundations of the social contract. Now they have their chance, their excuse. Also to be cut: The weak health-care "reform" passed this year. Transit, rail and high-speed rail. Friedman can kiss his green Manhattan Project adios. The educational excellence and research we'll need to compete in the 21st century. National Parks and Forests will fall into further disrepair. Any serious efforts to make progress on addressing climate change. Public libraries? Is that a joke question? And on and on, not to mention the re-regulation of finance and re-creation of a real American economy that benefits all. Great Reset? Forget it.

Friedman chirps of the boomers, "To be the Regeneration, they’ll have to figure out how to raise some taxes to increase revenues, while cutting other taxes to stimulate growth; they’ll have to cut some services to save money, while investing in new infrastructure to grow economic capacity. We have got to use every dollar wisely now. Because we’ve eaten through our reserves, because the lords of discipline, the Electronic Herd of bond traders, are back with a vengeance — and because that Tooth Fairy, she be dead."

Isn't he cute?

What is going to be dead are cornerstones of American society and civilization. The haves will have more. The have-nots will be more, many many more. They will be your neighbor. And you. But the have-nots will be a useful tool to help the white-right keep power even as the nation becomes more diverse. Every loss, you see, will somehow be government's fault, and they're never really the government, even when they're running it (e.g., Arizona). The disruptions from financial collapses to come will be government's fault. The ills from climate change and drill-baby-drill and endless war will be ignored or quickly forgotten, until they can't be, and then this will somehow be a liberal conspiracy to hurt "real Americans," the "yeoman enterprising class." Screwed 3.0 will be as politically useful as God, guns and gays.

If America is so far gone as to allow this, which appears to be our trajectory, the only question is whether it ends in a bang, or yet more virulent versions of the virus?

Comments

[Kmhwildlife]

"Here and now is all that counts, here and now in large amounts" - that's pretty much the mind set that got us here.

A fitting epitaph for America's tombstone I think. Uh huh.

[soleri]

Getting the white working class and low-level managers to see themselves as entrepreneurs was a fairly amazing piece of political jujitsu. Rush Limbaugh made the sale with dog whistles so high-pitched you could barely discern them. Liberals and their wards (i.e., blacks) are takers. Conservatives are "producers". Ergo, politics was more a matter of racial allegiance than class consciousness.

The teabaggers are the final stand of an attitude many of us grew up with: American entitlement. They're assured of health care (Medicare) and a reasonable standard of living (pensions, SS, and paid-for houses). Socialism, as we're continually learning, is okay for me. For thee? Not so much.

We have pathologized government to the point that the nation itself is sick from an auto-immune disorder. We can't do anything because only corporations are "efficient" and "create jobs". Investment, education, R&D, and industrial policy depended on a tacit agreement between generations and classes: wealth would be shared. That agreement is now broken.

Friedman's fuzzy and eupeptic futurism seems like a fraud for this reason. A nation this split can find neither the political will nor the overarching rationale for common endeavor. The genius of the right was to stigmatize that as "liberalism". Help people and some welfare queen might have a dozen kids.

If the ordinary shlubs who make up the GOP base feel embattled, it's not because "socialism" is wreaking havoc on their lives. Rather, it's because they're reduced "America" to a sit-com where the poor, minorities, and the young are ridiculous clowns. Listen to talk radio for ten minutes and you'll catch the laugh track in its sniggering contempt for the unchosen. This is our nation now, for better or worse.

I'm not sure how you heal this fundamental split. Obama's post-partisan bonhomie has been utterly ineffectual. Maybe demographics will eventually take us to the place argument cannot. But by the time that happens, it may already be too late.

[Rate Crimes]

Screwed 4.0 will spare no one.

[Superlurker]

It's more out of wack than you state. The top tax rate during Ike's administration was 91-92%.(http://en.wikipedia.org/wiki/Income_tax_in_the_United_States)

[Emil Pulsifer]

In fact, the top federal personal income tax rate was 91 percent from 1946 through 1963. It went to 70 percent from 1965 through 1981. Then it was 50 percent during most of Reagan's administration, until 1987 when it went down to the Clinton era rate of 39 percent.

Here's a link with detailed charts for those who don't trust Wikipedia:

http://www.taxfoundation.org/publications/show/151.html

Regarding deficits and debt, while Mr. Talton has a point, it's a bit of a straw man argument, since many of those seriously concerned about these issues are not pointing to current levels relative to GDP -- which are still close to historical levels with understandable deviations due to the Great Recession (lower revenues and higher outlays for unemployment insurance, etc.) -- but rather are pointing to deficits and debt projected by the government to reach record levels in the next 10 years.

Heavy debt CAN cause problems and suck much needed revenues into debt-service (interest payments). I am running out of online time right now but wanted to chime in.

[Jim Hamblin]

Excellent discourse, but some of it reminds me of Moondog's "ABANDON HOPE" poster. Somehow, we've managed to muddle through our various episodes of denial, greed and overall stupidity. Are we now fully marinated in pessimism?

[Emil Pulsifer]

P.S. Actually, I don't think that big cuts are on the table so much: though they'll be called for in the abstract, when it comes to the big money many Republicans will be just as reluctant to cut much beloved entitlements as Democrats; the elusive "waste and fraud" will eventually dominate the rhetoric if pressed.

What I suspect is not a big income tax raise on upper earners but a VAT tax, which is kind of a national sales tax only sneakier, since it enters at each point in the production chain -- cost to producers to be passed along to consumers, of course. That might be economic poison in an environment of already weak demand, though.

[Emil Pulsifer]

P.S. Take a look at this chart from the NYT -- be sure to click on the button that reads "Hide mandatory spending" to see what's left.

http://www.nytimes.com/interactive/2010/02/01/us/budget.html

[Emil Pulsifer]

Here's a great article on why projected deficits and debt pose a huge problem, from the center-left Center on Budget and Policy Priorities. See especially Figure 1 showing debt as a percentage of GDP.

http://www.cbpp.org/cms/index.cfm?fa=view&id=3049

Note that the problem isn't Obama's stimulus package or other spending and that the problem would exist regardless of who won office:

"Rising health care costs are the single largest cause of rapidly rising expenditures, and ongoing reform of the health care system is absolutely fundamental to any solution. The two main sources of rising federal expenditures over the long run are rising per-person costs throughout the U.S. health care system (both public and private) and the aging of the population. Together, these factors will drive up spending for the “big three” domestic programs: Medicare, Medicaid, and Social Security. Growth in those programs accounts for all of the increase in federal spending as a share of GDP over the next 40 years (and beyond)."

[Emil Pulsifer]

This is interesting in light of recent news articles about tax revenue levels:

"Rising costs throughout the health care system exacerbate the long-term budget problem in two ways. As is well known, they increase federal spending directly by raising the cost per beneficiary of providing health care through Medicare and Medicaid. Less well understood is that rising health costs raise deficits even further by eroding the tax base. Because of tax preferences for employer-sponsored health coverage and certain other health care spending, when health care costs grow faster than the economy, the share of income that is exempt from taxation increases and the revenue base shrinks."

The CBPP article notes that:

"For the past 30 years, costs per person throughout the health care system have been growing approximately two percentage points faster per year than per-capita GDP. Our baseline projections assume this pattern will continue through 2050. Over time, the fiscal consequences of this rate of growth in health costs are massive."

[soleri]

Emil, one of the frustrations about the health-care debate was the neglect by the professional media and political class of this fiscal time bomb issue. Instead of gently prodding the citizenry to understand the scope of the problem, the debate itself was largely centered around focus-group tested talking points. We wasted a year pitting one set of phantoms against another.

That conversation is not entirely irrelevant, however. The (mal)distribution of resources is central to the nature of political theory. The Tea Party agitprop illustrates the phenomenon. What the white-right is really saying is that the undeserving (i.e., minorities) are getting too big a slice of the national pie. Why not simply answer that slur? Because the right managed to hide their real concern behind the screen of fiscal rectitude.

If we're lost in a hall of mirrors, that's the price we pay for a system with imperfect (and decaying) buffers. It used to be a given that politicians understood basic reality. Sarah Palin's ascent suggests that may no longer be the case. I'm not sure there's a way to massage a tetchy popular psyche anymore. Basic agreements are now suspect. That's why the future no longer connotes something exciting and positive.