Perspectives: A Review of 2010
(Swans - December 13, 2010) I could not help but notice the voting public's amnesia in this election year. Just in 2008, they had voted for "change" in the presidential election (i.e., they had voted for progressive governance) yet in this year's congressional election, they voted for (if the pundits are to be believed) less government. We have been told by the corporate media that the Tea Party movement was the political force that has transformed government: despite the fact that the movement has simply put more establishment Republicans in the majority in Congress. We have political "change" again and so far it seems that the president is buying the Tea Party propaganda of bloated government by aiming to freeze pay raises for federal workers. (1)
So is this where we stand: that in order to balance the federal budget or cut expenditures, we should cut pay raises for government workers as well as re-enact tax cuts for the wealthy? I'm not sure if this is smart government, as we well know that tax cuts create budget deficits. In the American history course I teach, I have been reinforcing this during my discussions of the Reagan administration in the 1980s: massive tax cuts led to budget deficits, which eventually led to tax increases ("read my lips" Bush Sr. raised them in his administration and President Clinton also raised them). Reagan and subsequently Clinton believed that attacking government programs such as welfare was the path towards sustainable government.
I am still somewhat at a loss to see how tax cuts encourage growth: this is the argument continually advanced by the Republican Party as the medicine for a sluggish economy. We had tax cuts during Bush Jr.'s administration but job growth stagnated. Even Vice President Dick Cheney has admitted this much. (2) Nevertheless, apparently the perpetual solution for a sluggish economy will always be tax cuts and cuts in government services or cuts in the pay of government workers: solutions that have still not proven to work.
I think the real crisis right now still lies in the banking industry. While TARP funds have been repaid, bank failures continue to unfold. (3) Bank of America, the largest US bank, is still weighed down by bad mortgages it assumed when it purchased Countrywide. (4) The problem is that if banks need an additional bailout, they won't get one in this political environment. So failures of some very large banks are still possible and could further hamper economic recovery.
And the amnesia sets in again. Recall how earlier this year the Obama administration tried to propose financial reform legislation and how Republicans opposed it. (5) These Republicans, such as John Boehner of Ohio, are about to assume the mantle of power in the new Congress, and these are the same Republicans who supported less federal oversight of the banking industry (which of course landed us in the economic situation that we are now in). So the lesson of 2010 is that voters gave new life to Republicans whose policies of tax cuts and cuts in government services/payroll do not help the economy: there is simply no necessary connection between increased tax cuts for the wealthy and investment spending. Nevertheless, the ascension of these politicians to power is the result of the Democrats' failure to produce jobs as well as sell the public on why they deemed the bank bailouts necessary in the first place.
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About the Author
Harvey E. Whitney, Jr. is a Ph.D. student in history at Florida State University. His main areas of concentration are the history of science, environmental history, intellectual history, the academic culture wars, and the relations between technology and culture. To learn more, please visit his Web site at http://hewjrtaken.t35.com/. (back)
2. "Vice President Cheney Admits Bush Tax Cuts do NOT create jobs," Daily Kos, December 5, 2010.
3. Failed Bank List on the Web site of the Federal Deposit Insurance Corporation (FDIC). As of November 19, 2010, 149 banks have failed in 2010.
4. "Bank of America still feeling drag from purchase of mortgage firm Countrywide," by Steven Mufson, The Washington Post, December 3, 2010.