The recovery from the Great Recession has been shamefully unequal. For the wealthy, it’s been vigorous. For most of us, it’s been slow. For too many, it’s been imaginary. Now, Republicans, as they are wont to do, are trying to turn back on us an issue in which they are culpable and that involves a constituency about which they care not at all. The weak recovery has become a Republican talking point – sans the part about how good the wealthy are doing. Trump has a new ad out that alludes to it, and we’ll see a lot more such ads before this is over. Democrats need to remind people why the recovery was necessary, and they need to pin the blame for the slow pace of the recovery where it belongs: on the Tea Party and the Republicans.
The short version is that deregulation and non-regulation combined with other factors to bring on the Great Recession of 2007. Expansionary fiscal and monetary policies turned that around until 2010, when a Koch funded labyrinth of anti-tax groups coalesced around the anti-debt Tea Party. The electorate, astonishingly, gave them enough seats in congress to threaten the one act that could quickly destroy the economy: default. In return for not forcing default, they got spending cuts that would, instead, destroy the economy in slow motion.
The long version begins with the Reagan administration. Reagan’s deregulation of the banking industry and all the deregulation since (in much of which Democrats were complicit) undid the work done after the Great Depression to prevent a repeat occurrence. The inevitable result was a banking and financial sector that took ever greater risks with other people’s money.
It started early with the Savings and Loan crisis during Reagan’s own administration, with its awkwardly obvious connection to deregulation. It culminated (we can hope) in the Great Recession. Deregulation was not the only cause of the Great Recession, but it was, at least, the enabling factor and more if we include, as part of the deregulatory milieu, lax regulatory enforcement and the failure to apply regulations to new banking “tools.” That failure was due, largely, to Alan Greenspan assuring congress that derivatives, credit default swaps and securitization of loans, were being conducted by professionals and, therefore, were in no need of regulation or oversight.
Thus we built the tower that came crashing down when Lehman Brothers was allowed to go under by the George W. Bush administration, precipitating the Great Recession. This was no minor down-turn. This was the worst economic crisis since the Great Depression, and it was scary enough that a Republican administration hastily implemented a bank bailout – a Republican administration. The Troubled Asset Relief Program (TARP) authorized the Treasury Department to spend $700 billion to that end. That saved the banking system, but it added a lot of new debt to the debt already piled up by Bush’s wealth-weighted tax cuts.
In 2009, under President Obama, Congress authorized a $787 billion stimulus package: “If TARP was the bail out for Wall Street, then the stimulus was the bail out for Main Street.” The stimulus included both tax cuts and increased government spending. It also added to the debt.
Neither the TARP nor the stimulus were without problems. But, the TARP was necessary, and it worked. The stimulus was necessary, and it worked. By one 2010 estimate, government intervention “probably averted what could have been called Great Depression 2.0 …. [W]ithout the government’s response, GDP in 2010 would be about 11.5% lower, payroll employment would be less by some 8½ million jobs, and the nation would now be experiencing deflation.”
So, if they worked, why are we, the non-wealthy we, still limping along? For that, we have to go back to the beginning of the Bill Clinton administration. Jeff Nesbit, writing in Time, gives a stunning account of what can only be described as The Rebellion of the Plutocrats. Incensed that a Democrat could be elected president, “Philip Morris money commingled with Koch money” to spur the “orchestrated, well funded, and deliberate” creation of “anti-tax front groups in a handful of states that would battle any tax that moved.”
Thus, both a network and a funding channel were in place when along came Dick Armey and the Tea Party. In 2010, they launched campaigns of simplistic slogans about taxes and debt. That was sufficient to get them representation in congress. The result was the debt-ceiling travesty of 2011 and the sequestration of 2013. Sequestration was the “compromise” extorted by the Tea Party in return for not forcing the United States to default. It was a draconian set of budget cuts would kick in automatically should the House and Senate not reach a budget deal “to cut $1.5 trillion over 10 years.” They didn’t, and it did.
Just two years into the stimulus, one which some economists warned was too small to begin with, it was gutted by Republicans trying to force us down the path of the same austerity that had savaged Europe for years. The results were predictable. During the recovery from the Great Depression, Roosevelt turned away from expansionary policies too soon and brought on the recession of 1937. In 2013, the turn from expansionary policies slowed the recovery to a crawl. Deficit-spending stimulus vs. job-killing austerity is an argument that has been kept alive not by economics but by politics.
We have to keep relearning what history has taught us not because we don’t understand the economics but because that understanding runs contrary to dearly held political dogma. Finally, though, the truth is being told thoughtfully and vigorously.
Robert E. Scott, at the Economic Policy Institute. Daniel Marans, at the Huffington Post. Josh Bivens, at the Economic Policy Institute. Robert J. Samuelson, at the Washington Post.Republican economic dogma created a quagmire which they, now, are trying to blame on Democrats. That never must be allowed to stand. Anytime any Republican brings up the sluggish recovery, and that would be about every hour until the election, every Democrat has to stay forcefully on topic.
The recovery was doing reasonably well, at first. If you don’t like what’s become of it, talk to the Tea Party. They’re the ones who wrecked it before it reached the middle class. Talk to the Republican Party, which gleefully egged on the Tea Partiers hoping to make President Obama fail. Together, they knocked the recovery off the tracks by slashing government spending at a time when that was the exact wrong thing to do. Whether willfully or ignorantly, the Tea Party and the Republicans wrecked the recovery and bare the blame for its sluggishness.