Climate of Economic Chaos

Republican policies directly caused the Recession of 2008. And they want to continue those policies, because they make rich people richer.

Both the Democratic and Republican Parties have always supported a free enterprise system. But Democrats have always defended a larger federal government role in regulating and stimulating the economy. This was nowhere more visible than during the administration of Franklin Delano Roosevelt, who said in his second inaugural address, “We have always known that heedless self-interest was bad morals; we know now that it is bad economics.” However, since Roosevelt’s time, the Democrats have largely defended free enterprise, especially during the economic boom times under Bill Clinton.

The difference is that Republicans have fiercely defended an extreme form of free enterprise, in which the federal government plays little role and in which corporations are not held accountable to standards of honesty and transparency. Even though Republicans generally oppose evolutionary science, they have embraced Social Darwinism, which is a nineteenth-century misconscrewing of Darwinism. They really believe that large financial corporations should be allowed to get away with whatever they can, so long as they do not use outright deceit in the manner of Bernard Madoff. No single person did more to usher in the Recession of 2008 than Republican Senator Phil Gramm, who spearheaded the Gramm-Leach-Bliley Act of 1999. This act effectively repealed the Roosevelt-era controls over what financial corporations could do. During the Bush years, financial corporations took wild risks with other people’s money.

When the inevitable collapse began in 2008, the federal government had to bail out major financial corporations. This was necessary because of Republican-led financial policy, but the Republicans blamed President Obama for the bailouts. Under Obama’s leadership, and despite overwhelming Republican opposition, Congress enacted sweeping controls over financial corporations; in particular, banks can no longer do whatever they like, without warning, to credit card customers. The role of Republican deregulation in causing the 2008 recession is recounted in the book Blunder and Plunder by Dean Baker.

Democrats are far from blameless in the failure to solve the underlying problems. Barack Obama wants to solve the underlying problem, which is the greed of Wall Street. But all of his financial advisors come from Wall Street and want to make sure that, when they return, they can again make a killing at the expense of the American people.

The current difference between Democrats and Republicans on financial issues is that Republicans insist that the wealthiest Americans (those earning over a quarter million dollars a year individually or a half million as a family) need a permanent tax break. Republicans insist that it is these wealthy individuals who sustain small business. But we are not talking about business taxes. We are talking about income taxes—that is, the money that chief financial officers bring home from their corporations. What small business pays its CEO over a quarter million dollars a year? I suppose that by “small business” Republicans must mean anything smaller than ExxonMobil. Republicans further insist that rich Americans invest in the American economy. This is partly true, but not as much Republicans claim. In 2009, Americans (mostly the wealthiest ones) invested $1.3 trillion outside the US. Rich Americans have, as a whole, no particular “invest in America” patriotism.

The result, now and even more in the future, is a climate of financial chaos in which rich people will weather the storm just fine but in which millions of middle-class Americans will remain unemployed.

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