The Economy - Part IV

Following 9/11 and the identification of Al Qaeda as the perpetrators, I assumed that George Bush had to do two things to have a chance at re-election in 2004. He had to destroy Al Qaeda and bring Bin Laden to justice and he had to scrap his tax cuts, which were, by all objective measures, aimed toward business and the wealthy. He did neither and managed to squeak by a second time to win in 2004. So much for my political astuteness.

Bush's legacy, however, is another matter. During his first term, he effectively destroyed American foreign policy and the post WWII western coalition that had essentially brought down communism. During his second term, he effectively destroyed the United States' leading role in the global economy and, although the jury is still out, much of that economy itself. Whatever international participation there was in the fiasco called the American economy and however deluded western intelligence may have been regarding the threat posed by Iraq, we began the Bush Presidency as the global military and economic leader and leave the Bush Presidency with our leadership in both in shambles. From the present perspective, Bush may go down in history as the worst President we have endured.

Bush managed to win the Presidency based on two factors; in 2000, a conservative, pro-Bush Supreme Court overruled the Florida Supreme Court and handed him the election. While I remain one of the few Democrats who believes that Bush "probably" actually won Florida, had events taken their usual political course and the Supreme Court decided against interference in the Florida State electoral system, Gore would have probably become President.

In 2008, Bush pulled out another "squeaker," with the deciding state switching from the electoral votes of Florida to the electoral votes of Ohio, although he did escape from becoming a "minority President," by carrying the overall popular vote by 500,000. Kerry's defeat was based on both the "fear" campaign waged by Republicans, coupled with intra-Party friction among Democrats. [I would contend that the Clintons preferred a Bush victory in order to clear the way for a Hillary nomination in 2008.]

Both of these elections will, hopefully, someday be seen as "aberrations" within our democratic system. But in 2008, the choices are incredibly clear. Whatever one thinks of the Obama policies (foreign policy, the use of military force, taxation, universal health care, etc.), McCain has offered no substantive change from Bush foreign and domestic policy.

"Winning" in Iraq and bringing home the troops with "honor" might be termed the "feel good strategy." McCain had the opportunity to reformulate the Bush Doctrine of pre-emptive war and offer a substantial new approach to foreign policy and the use of military force. He did neither. Outside of his claim of being correct on the tactics of the "surge" in Iraq and the need for a similar surge in Afghanistan, McCain's foreign and military policy is based virtually entirely on: "I have more experience; trust me." In the absence of offering alternatives to the Bush policies, one must assume that he concurs - i.e.silence is affirmation. The McCain goals of "victory" and "honor," lack definition and do not constitute in themselves a "strategy." Lacking such a strategy, McCain fails as Commander-in-Chief.

As the campaign shifted away from Iraq and Afghanistan toward the economy and what voters apparently believe is of a more urgent priority, McCain's arguments have been similar and offer little more than the standard Republican matra of supply side and trickle down economics. If Bush, in 2004, managed to get re-elected with the message of: "I've made mistakes, but Kerry will make more," based on foreign and military policies, McCain seems to be trying the same tactics in 2008 regarding the economy.

As with the wars in Iraq and Afghanistan, McCain's arguments with Bush on the economy are not strategic differences, but tactical. On the former, McCain never questions the policies of Bush or the decision for pre-emptive war (he doesn't discuss it); on the latter, the economy, it's simply more of the same. Indeed, McCain apparently believes he can right the economy by vetoing Congressional earmarks, freezing government expenditures (except for defense and entitlements...which compose 75% of the total budget) and providing additional tax breaks for corporations and the wealthy.

In other words, by pursuing strategies basically identical to Bush, he will somehow achieve better results, through small tactical changes. This fails to address the magnitude of our current economic problems.

Reaganomics, which has steered the Republican Party since Reagan, died with the recent Greenspan testimony before Congress, in which he noted that he did not foresee the errors of the banks and had assumed they would have been more protective of their stockholder interests - in other words, the free, unregulated market failed.

Ironically, the recent $700B+ bail-out of what-to-date has been a bailout of failed banks and financial institutions, approximates in dollars the Bush 2001 tax cuts. Looked at another way, the 2001 tax-cuts designed to stimulate real economic growth, instead were "blown" via the bubble of an over-valued real estate market, kept alive by ignoring basic lending rules, easy credit, and shady - if any - accounting practices.

Worse, the objective position of the United States-in-the-world has not changed and has probably gotten worse. Two of the three "axis of evil" are still in place. Al Qaeda is growing. Bin Laden is still at large. Domestically, incomes haven't risen, credit is virtually gone, home foreclosures increasing, unemployment growing, energy prices rising over the long term, infrastructure ignored, etc., etc. So what's the answer? More of the same?

We have, I believe, reaching "the tipping point." Four more years of essentially Bush policies will put this country into economic Depression.

This is not an indictment of the theories of free enterprise; supply side economics may work (and, in the past, has worked). But, in a global economy, it will not work for the middle class or the poor, unless accompanied by real growth in GDP and wages, instead of the phony growth in overvalued assets and easy credit.

At this juncture, it is important to shift economic policy back to a national focus. The fastest way to recovery is to temporarily step back from free markets, until they can be reformed, and to utilize taxation as a means for redirecting capital back to neglected national infrastructure and the creation of meaningful employment. The reason is simple. We cannot afford to continue to pursue national goals which demand expeditures far in excess of income. The best means of increasing that income, over the long run, is through the economic restoration of the middle class, so that they once again assume an important role in the overall tax burden.

Next: Why 40% of Americans pay no taxes.