Bush's Game of Duck, Duck, Goose Ends

With both Congress AND the White House solidly in the Neo-liberal corner, the conservative Republicans enjoyed an exceptional opportunity to impose their philosophy on the nation. Under Reagan, they had been restrained by a Democratic Congress; under Clinton, by a Democratic president; George H.W. Bush’s heart was never with them and he had a Democratic Congress.
But now—in 2001—with the younger Bush in the White House—a man both friend and foe called more of a Reaganite than Reagan himself—their day had dawned. They pushed through a massive tax reduction—over a trillion and a third in revenue would be denied the federal government each year. You couldn’t repeal the New Deal, but you could starve it to death.
There was no way federal programs like Medicare, Medicaid, Social Security and other manifestations of what they called a welfare state could be maintained with so little tax money. They offered more and more inducements to privatize pensions and health care.
They even attempted to make it necessary for citizens to be responsible for investing their own Social Security money. “Look,” they said, “the stock market has gone up ten thousand points in just a few years—had you invested that money in the market, your Social Security would be worth hundreds of thousands if not millions of dollars more”.
Nobody made much of a point of the fact that the huge stock market gains basically stopped under young Bush. The irrational exuberance for technology stocks that had come a cropper in 2000 was now transferred into real estate. Repeal of Glass Steagall Act under Clinton allowed banks to take risks that would have imposed conservatorship on a private individual.
This was good. Republicans had become Jeffersonians. “That government governs best which governs least.” Away with regulation—just another part of big government. Government is bad; greed is good. It was like tearing the bottom out of a boat when you are miles out to sea.
Americans bought it. They mortgaged themselves to houses at prices they could not afford—we’ll all be rich bye-and-bye! They took out second mortgages to finance one of the largest spending sprees in history. To remodel a kitchen cost the price of a very nice house less than fifty years before. They poured their retirement hopes and dreams into an all but unregulated stock market that they believed could only go up. (Ah, where were Jim Fiske and Jay Gould?)
Oh yes, as if it were a gift to conservative Republicans, there came the bombings of 9/11. This led to wars in Afghanistan and Iraq—however necessary or unnecessary—that cost billions and billions more on an ever declining federal revenue base.
Then, in fall, 2008, someone tore up the last layer on the bottom of the boat. Water gushed in. Someone realized there were no life preservers (regulations) and trillions worth of dreams, homes and retirement funds were lost in months. It seems Wall Street had been full of Jim Fiskes and Jay Goulds, after all.
The only thing a lot of people still had to be thankful for is that Congress had stopped short of privatizing Social Security. For the rest of the market, nobody has yet counted how many bad loans banks are sitting on today, how long the Chinese will go on supporting the dollar, how long the Fed can afford printing money and buying treasuries.
The cost of the recession cannot be computed merely in jobs lost—what about pay cuts, slashed hours—all of these impinge dangerously on a market 70% driven by consumer spending. The boat is sunk; we are all swimming; how far?
More later.