Print this post.Why Republicans Gain as the Economy Falters
By Steve Max | October 13, 2010
[print_link] Overlooked in the recent rise of the Tea Party and the Republican Right is the way these groups have learned how to grow and thrive on the failures of capitalism. The Democrats, in contrast, remain tied to its successes. With capitalism performing particularly poorly at present, it is no wonder that the Right is gaining momentum while the Democrats and their labor and progressive allies are often on the defensive.
Consider this: To implement traditional Democratic values and programs, elected officials from the President to the smallest town council member need to operate in a well-functioning economy. Employment must be high, the number of people dependent on the safety net must be low, and tax revenue must be rising to keep pace with government costs. Nowhere is this happening today. The Republicans now, on the other hand, do not have to govern at the national level (nor in twenty-six states) and are therefore free to obstruct, criticize, and attack without producing any improvement or having any plan at all. They are growing in strength on the basis of fear, insecurity, and social dislocation generated by the failing economy. If crime rises, Republicans gain. If American workers compete for jobs with undocumented immigrants, Republicans gain. If teachers oppose layoffs, Republicans gain. If Democrats suggest halting steps to slow global warming, Republicans shout “job killers.”
BELOW: GOP leadership grabing media attention. Among the scumbags (from L) : Coburn, Kyl at podium, Sessions and Inhofe.
Even when and where they do actually have to govern, Republicans continue to build strength as capitalism falters. They simply deflect anger to the Democrats for obstructing the (crackpot) Republican program: privatize everything, deregulate everything, eliminate social programs, end collective bargaining, destroy the public sector, and cut taxes. Because, up to a point, Democrats often do obstruct such plans — and rightly so — it is easy to claim that the Republican program for prosperity is not getting a chance to work its magic.The Democratic response is usually to take the bait and rush into the trap. For example, in New York State, the Democratic candidate for governor, Andrew Cuomo, is running ads promising to fire 20 percent, or roughly 26,000, of our state employees. Meanwhile, ads sponsored by our junior senator Kirsten Gillibrand say that she “took on” her own party to block congressional pay increases. Her ads, which also reach parts of Connecticut and New Jersey, are not exactly a gift to embattled Democratic congressional candidates.
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Behind this dilemma is a basic ideological problem. There is a common perception among Democrats, Republicans, and the general public that the natural tendency of capitalism is toward ever increasing growth rates, except for occasional periods when that doesn’t happen. In such down times, Democrats believe that a little spending and tinkering with the financial system will get growth back on track. Republicans believe that the system isn’t working because someone messed it up and they know who. Both views are totally wrong.
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Growth in Real GDP(Percent Change)
Source: Data from U.S. Bureau of Economic Analysis, “National Income and Products Accounts,” in John Bellamy Foster and Fred Magdoff, “Financial Implosion and Stagnation: Back to the Real Economy” (Monthly Review, December 2008) and “The Great Financial Crisis — Three Years On” (Monthly Review, October 2010).
The natural tendency ofmature capitalist economies is not toward increasing growth rates, but toward stagnation as the chart below shows. The dynamic growth that once characterized the American economy is now taking place in countries such as India and China where industrial capitalism and manufacturing is still in its youth. Given this tendency toward stagnation, only the most massive government intervention can change the outcome — as many economists, including Paul Krugman, have consistently argued.
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For example, rebuilding our entire infrastructure on a green energy basis would not only save the planet, but also save the economy for many decades to come. While such a level of intervention is economically possible and environmentally necessary, the Republican onslaught has so intimidated the Democrats that it is politically highly unlikely to happen. Another approach to the jobs problem, reducing the size of the work force through four years of free compulsory college, lowering the retirement age to sixty and shortening the workweek, seems equally unlikely. In fact, the Administration may be heading toward raising the Social Security retirement age, thus increasing unemployment and boosting Republican prospects ever further. To make matters worse, the President and Democratic candidates at every level are promising to improve the economy and create jobs, something no party can deliver under current economic/political conditions. This sets them up for further failure.
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What must the Democrats do now? Tell the truth. Tell the truth about capitalism and the economy. It has never worked particularly well and it is worse now. (There will be a small improvement in the next few years as the recession cycle goes round again, but we have seen that the recovery after each recession rarely reaches the level of the previous recovery and jobs continue to disappear.) The Democrats need to say that they are the party that believes in protecting people from the outcome of the free market while the Republicans believe that suffering is good for you and everyone else but the wealthiest. The Democrats need proposals that will bring security to all working people, those with jobs and those without, such as a job loss protection program that provides several years of unemployment benefits, medical care, retraining, and, if required, mortgage or rent subsidies to prevent loss of home. Make Republicans campaign against that. Democrats need to popularize big programs to restart American manufacturing. The massive solar energy plants to be built on federal land in California and the GM Volt electric car being built in a nationalized plant are only two examples of what can be done.
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Given the tendency toward stagnant growth rates, there is not likely to be any dramatic improvement in federal and state tax revenues. Democrats are increasingly unable to govern in the face of rising deficits that serve as another point of Republican attack. Taxes on the rich must be raised, but that requires fighting another ideological battle. Wealthy investors, the right-wing narrative has it, are the engine of economic growth. If their wealth is taxed away and wasted by government, we will all suffer the consequences of falling employment and income. The truth is that, as of the end of March 2010, U.S. venture capital firms were sitting on $81.6 billion of uninvested cash. Private equity funds were holding $485 billion in uninvested cash.
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Indeed, 2009 saw the lowest investment in the past ten years, showing that in recessions when investment is most needed, the rich quite logically hoard their cash.
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Corporations are doing something similar. The New York Times(10/3/10) reports that companies such as Johnson & Johnson, PepsiCo, and IBM, have been borrowing huge amounts of cash at low interest rates but not spending it:
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Corporations now sit atop a combined $1.6 trillion of cash. . . . When will they start spending that money — in particular, by hiring? That is part of what has become the great question of this long, jobless recovery: When will corporate America start to feel confident enough to put its cash to work, building factories and putting some of the nation’s 14.9 million unemployed to work?
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It is simply untrue that super-rich individuals and corporations are starved for cash and that public policy should be aimed at enriching them still further. Indeed, government has an obligation to tax away not only this inactive wealth, but also wealth tied up in financial speculation that adds nothing to the economy.
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Government has the absolute obligation to use these taxes to pay for schools, hospitals, transportation, infrastructure, public health, and all the necessary things that serve each and every one of us while putting money in the pockets of working people and growing our economy.
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Steve Max may be contacted at < stevemax@mindspring.com >