As the United States takes the measure of Barack Obama’s first year in the White House and looks beyond to what could be a difficult new decade, it might be useful to first stop and extract some lessons from the 2000s, which proved to be a lost economic decade for many Americans.
For the first time since the Great Depression, the United States experienced zero job growth in a decade. Zero. And zero is actually worse than it sounds since none of the preceding six decades registered job growth of less than 20 percent.
By comparison, the 1970s, which are often bemoaned as a time of economic stagflation and political malaise, registered a 27 percent increase in jobs. Yet, in part because of that relatively slow rise in jobs – down from 31 percent in the 1960s – American voters turned to Ronald Reagan and his radical economic theories of tax cuts, global “free markets” and deregulation.
Reagan sold Americans on his core vision: “Government is not the solution to our problem; government is the problem.” Through his personal magnetism, Reagan turned taxes into a third rail of American politics. He convinced many voters that the government’s only important role was funding the military.
Yet, instead of guiding the country to a bright new day of economic vitality, Reagan’s approach accelerated a de-industrialization of the United States and a slump in the growth of American jobs, down to 20 percent during the 1980s. The percentage job increase for the 1990s stayed at 20 percent, although job growth did pick up later in the decade under Democrat Bill Clinton, who raised taxes and moderated some of Reagan’s approaches while still pushing “free trade” agreements and deregulation.
Hard-line Reaganomics returned with a vengeance under George W. Bush – more tax cuts, more faith in “free trade,” more deregulation – and the Great American Job Engine finally started grinding to a halt. Zero percent increase.
Despite the painful statistics of the past three decades, Reaganomics remains a powerful force in American political life. Anyone tuning in CNBC or picking up the Wall Street Journal would think that these economic policies had enjoyed unqualified success.
Though the downward economic spiral can be traced over the past three decades, the facts are especially stark for the 2000s, the so-called “Aughts” or perhaps more accurately the “Naughts.”
“For most of the past 70 years, the U.S. economy has grown at a steady clip, generating perpetually higher incomes and wealth for American households,” wrote Neil Irwin in a Jan. 2, 2010, review of comparative economic data for the Washington Post. “But since 2000, the story is starkly different.”
As the Post article and its accompanying graphics show, the last decade’s sad story wasn’t just limited to the abysmal job numbers.
U.S. economic output slowed to its worst pace since the 1930s, rising only 17.8 percent in the 2000s, less than half the 38.1 percent increase in the despised 1970s. Household net worth declined 4 percent in the last decade, compared to a 28 percent rise in the 1970s. (All figures were adjusted for inflation.)
As grim as those numbers were, the overall economic legacies of Ronald Reagan and George W. Bush may be even worse.
Not only did the Great American Job Engine grind to a halt in the past decade, but the dire economic numbers were accompanied by massive increases in federal debt, part of a risky right-wing strategy to hamstring the government’s ability to ever address domestic problems in the future.
When Reagan took office, the total federal debt was still under $1 trillion ($909 billion). By the end of the 12-year Republican reign of Reagan and George H.W. Bush, the total debt had quadrupled.
The rise in the red ink leveled off under Democrat Bill Clinton. Amazingly, he left office with the federal budget in the black by $236 billion and with a projected 10-year budget surplus of $5.6 trillion.
The budgetary trend lines were such that Federal Reserve Chairman Alan Greenspan began to fret about the challenges the Fed might face in influencing interest rates if the entire U.S. government debt were paid off, thus leaving no debt obligations to sell.
But Greenspan’s nervousness was soon quieted. In 2001, George W. Bush seized the White House after blocking a full counting of legally cast votes in Florida, with the help of five Republican partisans on the U.S. Supreme Court.
Then, though lacking a popular mandate – Bush also had lost the national popular vote to Al Gore – Bush governed as if he had won by a landslide. He pushed through a new round of tax cuts weighted in favor of the wealthy and, after the 9/11 attacks, launched two open-ended wars on borrowed money.
By the time Bush left office in 2009, the annual deficit had gone to $1.3 trillion (from a $236 billion surplus). Total federal debt had risen almost $5 trillion to $10.7 trillion. And the projected 10-year budget outlook called for $8 trillion more in red ink.
Despite this record of economic failure – trillions more in debt but no net increase in jobs – many Americans appear to have learned no lessons from either the Bush-II presidency or the legacy of Reaganomics. Any thought of raising taxes, addressing long-term problems like health costs, or investing in a stronger domestic infrastructure remains anathema to large segments of the population.
Indeed, across the news media, it is hard to find any serious – or sustained – criticism of the Reagan/Bush economic theories. Far more blame is heaped on Obama for not having fully turned around the financial and economic crisis that he inherited.
Less than a year into Obama’s presidency, voters in Massachusetts may be on the verge of electing a conservative Republican in a special Senate election, according to some polls. That result would enable the GOP to filibuster every significant Obama initiative, from health care to job programs. Many pundits anticipate Republican victories in congressional elections next November.
Who’s to Blame?
Some of the fault for these Democratic political troubles can fairly be laid at Obama’s door, though surely not all.
Fearing a new Great Depression, Obama did continue Bush’s policies for bailing out large banks whose greed and recklessness contributed to the 2008 financial meltdown. Obama also alienated his “base” by rejecting calls for investigating Bush-era national security crimes, expanding the Afghan War, and accepting compromises on health-care reform.
Tactically, Obama was played for a sucker when he let health-care negotiations with “moderate” Republicans like Olympia Snowe of Maine drag on past his initial deadline of August. By slow-rolling the process, the Republicans bought time to organize right-wing populist opposition to the reform package and then marched the GOP (Snowe included) in lockstep behind a Senate filibuster of the legislation.
The unified Republican filibuster forced Obama and the Democratic leadership to make deals with conservative Democrats and Sen. Joe Lieberman, an Independent who seemed to enjoy bedeviling the legislative process. To get Lieberman’s support, the public option and other popular elements were jettisoned, causing many on the Left to denounce Obama as a sell-out.
Because of all the legislative delays, the health-care bill now hangs on the outcome of the Massachusetts election to fill the late Ted Kennedy’s Senate seat on Jan. 19.
More generally, few Americans appear to be paying any heed to the lessons of the past three decades. Instead, many are simply reprising the same mistakes.
Republicans and the Right are determined to protect the Reagan-Bush legacies by blocking Democratic domestic legislation that might take the country in a different direction. To stop that possibility, they continue to whip up anti-tax, anti-government furies.
Meanwhile, the Democrats still come across as flaccid protectors of an Establishment that many Americans understandably hate. And the American Left mostly sits in the bleachers booing all the players, rather than getting into the game.
As this new decade dawns, the U.S. political process seems resistant to the one of most obvious lessons of the past three decades: Simply put, Reaganomics didn’t work. As George H.W. Bush once commented – when he was running against Reagan in the 1980 primaries – it is “voodoo economics.”
Yet, the fact that the United States has embraced “voodoo economics” for 30 years and refuses to recognize the statistical evidence of Reaganomics’ abject failure suggests that the larger lesson of this era – and especially this past lost decade – is that the U.S. political process is dysfunctional.