Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes you can do these things. Among them are a few Texas oil millionaires, and an occasional politician or business man from other areas. Their number is negligible and they are stupid.

If there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation’s public debt-- if honestly reckoned to include municipal bonds and the $7 trillion of new deficits baked into the cake through 2015-- will soon reach $18 trillion. That’s a Greece-scale 120 percent of gross domestic product, and fairly screams out for austerity and sacrifice. It is therefore unseemly for the Senate minority leader, Mitch McConnell, to insist that the nation’s wealthiest taxpayers be spared even a three-percentage-point rate increase.



More fundamentally, Mr. McConnell’s stand puts the lie to the Republican pretense that its new monetarist and supply-side doctrines are rooted in its traditional financial philosophy. Republicans used to believe that prosperity depended upon the regular balancing of accounts-- in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses, too. But the new catechism, as practiced by Republican policymakers for decades now, has amounted to little more than money printing and deficit finance-- vulgar Keynesianism robed in the ideological vestments of the prosperous classes.



This approach has not simply made a mockery of traditional party ideals. It has also led to the serial financial bubbles and Wall Street depredations that have crippled our economy. More specifically, the new policy doctrines have caused four great deformations of the national economy, and modern Republicans have turned a blind eye to each one.



The first of these started when the Nixon administration defaulted on American obligations under the 1944 Bretton Woods agreement to balance our accounts with the world. Now, since we have lived beyond our means as a nation for nearly 40 years, our cumulative current-account deficit-- the combined shortfall on our trade in goods, services and income-- has reached nearly $8 trillion. That’s borrowed prosperity on an epic scale.



[...]



Soon, the neocons were pushing the military budget skyward. And the Republicans on Capitol Hill who were supposed to cut spending exempted from the knife most of the domestic budget-- entitlements, farm subsidies, education, water projects. But in the end it was a new cadre of ideological tax-cutters who killed the Republicans’ fiscal religion.



Through the 1984 election, the old guard earnestly tried to control the deficit, rolling back about 40 percent of the original Reagan tax cuts. But when, in the following years, the Federal Reserve chairman, Paul Volcker, finally crushed inflation, enabling a solid economic rebound, the new tax-cutters not only claimed victory for their supply-side strategy but hooked Republicans for good on the delusion that the economy will outgrow the deficit if plied with enough tax cuts.



By fiscal year 2009, the tax-cutters had reduced federal revenues to 15 percent of gross domestic product, lower than they had been since the 1940s. Then, after rarely vetoing a budget bill and engaging in two unfinanced foreign military adventures, George W. Bush surrendered on domestic spending cuts, too-- signing into law $420 billion in non-defense appropriations, a 65 percent gain from the $260 billion he had inherited eight years earlier. Republicans thus joined the Democrats in a shameless embrace of a free-lunch fiscal policy.



The third ominous change in the American economy has been the vast, unproductive expansion of our financial sector. Here, Republicans have been oblivious to the grave danger of flooding financial markets with freely printed money and, at the same time, removing traditional restrictions on leverage and speculation. As a result, the combined assets of conventional banks and the so-called shadow banking system (including investment banks and finance companies) grew from a mere $500 billion in 1970 to $30 trillion by September 2008.



But the trillion-dollar conglomerates that inhabit this new financial world are not free enterprises. They are rather wards of the state, extracting billions from the economy with a lot of pointless speculation in stocks, bonds, commodities and derivatives. They could never have survived, much less thrived, if their deposits had not been government-guaranteed and if they hadn’t been able to obtain virtually free money from the Fed’s discount window to cover their bad bets.



The fourth destructive change has been the hollowing out of the larger American economy. Having lived beyond our means for decades by borrowing heavily from abroad, we have steadily sent jobs and production offshore. In the past decade, the number of high-value jobs in goods production and in service categories like trade, transportation, information technology and the professions has shrunk by 12 percent, to 68 million from 77 million. The only reason we have not experienced a severe reduction in nonfarm payrolls since 2000 is that there has been a gain in low-paying, often part-time positions in places like bars, hotels and nursing homes.



It is not surprising, then, that during the last bubble (from 2002 to 2006) the top 1 percent of Americans-- paid mainly from the Wall Street casino-- received two-thirds of the gain in national income, while the bottom 90 percent-- mainly dependent on Main Street’s shrinking economy-- got only 12 percent. This growing wealth gap is not the market’s fault. It’s the decaying fruit of bad economic policy.

Dwight Eisenhower broke the Democrats' two-decades-long hold on the White House in 1953 when John Boehner was just 4 years old. But when Boehner was 5, Eisenhower wrote something young John B. probably missed but might do well to go back and read today. Eric Cantor wouldn't be born for another full decade, and Paul Ryan... well, not only hadn't he read any of the Ayn Rand books that shaped his stilted intellectual development-- his bible,, wasn't published until 1957-- he had almostto go before being birthed. The source of this quote from President Eisenhower I'm recommending to our Republican friends is his presidential papers, Document #1147, November 8, 1954:Now David Stockman is more of Boehner's generation, just a couple years his elder. In fact, Stockman was elected to Congress from Michigan in 1976 and served until being appointed Director of the Office of Management and Budget by Ronald Reagan in 1981. He was considered a radical supply-sider, devoted his years in office to dismantling "the welfare state," and his known for his economic mumbo-jumbo-- even he admitted "trickle down" was just a ruse to bring down the tax rate for the wealthiest Americans, and was quoted saying, "None of us really understands what's going on with all these numbers," very much a Paul Ryan of his day This weekend Stockman wrote an OpEd for the NY Times . I know Boehner brags that he doesn't ever read anything by economists , but I bet Cantor and Ryan saw this... and flipped out. He blames, not just Bush, but Republican ideology for the economic catastrophe we find ourselves in.If some of the Blackberry Boys want to find a despicable Republican to claim is the intellectual of the right, they might consider shying away from a blithering idiot like Paul Ryan and moving over to someone who is at least coherent, albeit incorrect (wetalking about Republicans after all)-- someone like Stockman. Besides, his whole fraud case was dropped , and he never served a day in prison. I wonder if a crook like Ryan will be able to say that whenold enough to be collecting Social Security... that is, if he's prevented from dismantling it by then.

Labels: David Stockman, Eisenhower, Paul Ryan