Romney should be challenged on how his agenda differs from the Bush agenda.
Mitt Romney has clinched the Republican nomination so it’s time to ask what a Romney administration would be like. Since everyone agrees that the election will be about the economy, it makes sense to start the campaign off with that. Well, we have a model for what Republican economic policy is like: it is the George W. Bush Administration. Bush was elected on the same platform Romney advocates: globalization, deregulation, privatization and cuts in taxes and government spending.
So what happened when Bush was elected? As is normal, President Bush did not get the full-bore conservative agenda promised in the campaign. But we got a good bit of it. The deviations from that agenda such as the prescription drug giveaway to the pharmaceutical industry were political payback. That always happens.
But the hard-core Republican drive to minimize government is the center of it all. Romney wants to continue the basic drive to privatize governmental functions, globalize manufacturing and deregulate the financial sector. Romney intends to build on what Bush began. Indeed, we can expect it all to happen again. Even if it didn’t turn out too well.
In the year 2000, the incoming President George Bush took over a booming economy. He inherited a federal budget surplus of $236 billion, an unemployment rate of 4% and an average GDP growth rate for the previous four years of 4.4%. And the Dow was at 11,250. The economy was as good as it gets.
George Bush should have dampened the economy with increased taxes. Instead, like most Republicans, he ignored the Keynesian lessons of the Great Depression. He stimulated a bubble economy by cutting taxes and giving away the surplus. Romney’s proposals to balance the budget in the midst of a weak economy reflect the same kind of perversity and refusal to learn from history.
The Keynesianism that the Republicans reject is straightforward logic. A recession is by definition the existence of idle resources. So you put those resources to work by cutting taxes and increasing spending. Is that so hard to understand?
Keynesian spending clearly works, as the post-World War II period proved. Wartime deficit spending and borrowing more than doubled the national output and left the national debt at 125% of GDP. That military spending put purchasing power in the hands of the working class when they had no opportunity to spend. Beginning in 1946, a mountain of saved up aggregate demand poured into the economy. This incredible stimulus created a boom that carried us into the late 1960s. In fact, the constant military spending of the Cold War, called military Keynesianism, has worked to smooth out the economy ever since.
President Bush and the Republicans rejected that solution and we got a financial crisis and a Great Recession. When Bush left office, the deficit was $458 billion (or $1.4 trillion depending on how you look at it). The unemployment rate had grown to almost 10%, GDP growth had dropped to a -3.5% and the Dow eventually fell to 6600.
This was not your run-of-the-mill postwar recession that a little Keynesian fiscal and monetary policy had earlier cured so easily. Now, the heritage of the Bush years – stagnant wages, a collapsing housing market and burdensome consumer and student debt – had undermined aggregate demand. This Great Recession will be with us until we reconstitute the wealth of the middle class.
That is not what Romney would do. The Romney agenda of privatization and globalization is a repeat of the Bush agenda and is designed to do exactly the opposite of what is needed. It will force prices up and wages down and shift even more income from wages to profits, undermining any economic recovery.
The Republicans actually seek the privatization of virtually the entire public sector. The Republican proposals on Social Security, Medicare, public transit, and public education will turn over ownership and the right to set prices to corporate control. Again, this is perverse, hurting those most in need and those least able to afford medicine and education. The middle-class will get only the healthcare and education that falling wages can afford.
Globalization, the WTO and the drive to so-called free trade are means to discipline the workforce and cut wages. They do this by forcing American wage earners into competition with developing country wages and working conditions. The treaties being negotiated protect intellectual property, monopoly rights, patents, and trade secrets which are the tools the rich use to maintain their wealth. They do not protect worker rights to safe working conditions and decent wages.
A Romney administration would cut spending in a slow economy. Like Bush, it would be exactly the opposite of what is needed. Romney would continue to work to cut government and put the burden of uncertain times on the individual. The middle-class would sink even deeper as the country becomes further divided into haves and have-nots.