It seems fitting last year’s monumental presidential election gave way to such monumentally heated debates regarding the direction of our country. No president has inherited an economy in such disarray since Franklin Delano Roosevelt in 1932 and, while President Barack Obama won the election solidly, supposedly with a mandate for change from the American people, he now faces a partisan wall of substantial force keeping him from making good on the promises that got him to the White House. Washington has begun to increasingly resemble not so much government of the people, by the people, for the people as it does government of the monied interest groups, by the monied interest groups, and for the monied interest groups.
Meanwhile, the fledgling Republicans, being about as cooperative as a child forced to eat their vegetables, found new life as they opportunistically began the cries of “socialist,” “communist,” “terrorist,” “school child indoctrinator,” “foreign-born fraud,” etc. After all, this is politics. But what many conservatives (and especially the loud ones) fail to understand is that much of what the Obama administration seeks to do isn’t exactly radical. In fact, their agenda often follows proven historical patterns. Consider the top three domestic economic issues currently on the table:
Health care reform. As Republicans decry the administration’s attempts to reform our nation’s health insurance market, it is helpful to know this is a top policy priority for good reason. America’s health care system (which was created unintentionally as firms tried to sidestep wage restrictions in the 1930s) is unsustainable in every sense of the word. It consumes almost 20 percent of our Gross Domestic Product, with monthly premiums growing five times faster than wages.
Think of it on a micro scale – a husband and father who goes completely bankrupt paying for his chemotherapy treatments (even though he has insurance!) probably doesn’t have spare cash lying around to invest in the economy. Make no mistake: Without serious reform, health care is the next bubble to burst. Trying to fix the economy without handling health care is the definition of futility in action.
Unemployment. Yikes, yikes, and yikes. Unemployment continues to hover around 10 percent. This is beyond bad for the economy, leaving the output gap (how much the country should be producing versus how much it is actually producing) wider and wider by the month. And with the recent crisis finally stabilizing, the last thing businesses want to do is roll the dice by hiring more employees, which isn’t helping matters. A fresh injection of cash into the economy might be just the thing to help push them over the edge and create some new jobs.
Before you start gasping that more stimulus would ruin the country and increase debt, take a minute to think back to the Great Depression. Government fiscal policy did much to mitigate the effects of that crisis to some degree, but it wasn’t until America entered World War II that things turned around for good. Essentially, financing the war became an enormous government expenditure – or a colossal stimulus package. How big? Well, during the war the United States’ debt-to-GDP ratio reached a staggering 100 percent (right now it’s about sixty percent), and to my knowledge we were able to eventually balance the budget without any bouts of hyperinflation. So, when placed in that historical context, conservatives who argue that “the war got us out of the depression, not the government” might unwittingly be arguing for a second round of stimulus.
Financial Reform. After reckless speculating ruined America in the 1930s, the government regulated Wall Street to prevent future crises. Fifty years later, it became en vogue to deregulate the financial sector, and such policies continued through George W. Bush’s presidency. This was such a bad idea. Once the leash was off Wall Street, the reckless (and arguably immoral) behavior took over, leading to bubbles bursting all over the place, and culminating with the real estate bubble vaporizing the housing market and landing us where we are now.
Despite the current crisis before our eyes, conservatives continue to scream about the need for the government to keep their hands off Wall Street. Don’t believe that hype – the Obama administration’s quest to regulate big banks is not a step into socialism so much as it is a return to the way things were pre-1980. Ronald Reagan’s ideology that government is pure evil has had such marvelous staying power that we often forget the way things were before he took office. In the case of Wall Street, the trade off is clear: If we don’t want the government stilting up banks with bailout money, then we can’t let them get so large that their failure causes mass economic chaos reminiscent of the Great Depression – which is where we would have been without the Bush bailout and the Obama stimulus.
Despite these arguments, my guess is the name-calling and labeling will continue as Republicans seek to gain back the ground they lost in 2006 and 2008. However, evidence suggests the current administration is working to make sure there’s one label they can’t be identified with, the worst political and economic label imaginable – “the next Herbert Hoover,” the poster boy for foolishly waiting to see if the markets correct themselves. No matter what Fox News tells you, this isn’t about creeping socialism or some radical agenda; It’s about common sense.
Daniel Anderson is Rhombus’ resident armchair economist. He is not a radical socialist.
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