Reacting to Trump’s incompetent attempt at winning a trade war, on top of his reckless deficit-raising tax cuts, markets have begun to tremble and economic forecasters to utter the dreaded R-word — RECESSION.
This was entirely predictable. In fact, we’ve repeatedly had to sit through this horror show before. For over a century Republicans have used their time in power to let capitalism off the leash, relaxing rules on investment and banking, cutting taxes but not spending, running up whopping deficits until the inevitable crash arrives.
Typically the Republican smoke machine is fired up in an effort to blame the Democrats for the mess. Even when that doesn’t work and the Democrats retake power, they are left with the thankless task of cleaning it up. And doing so inflicts pain on innocent bystanders who wind up forgetting who make the mess and blaming the cleaning crew not the vandals. During this phase the Republicans begin to bleat about big government, tax and spend liberals, and socialism.
The Gilded Age ended with a painful crash beginning in the 1890s which ushered in reform, but the lesson wasn’t learned. Laissez faire folly was all the rage again as the Twenties roared. When the crashed arrived, Hoover refused to react aggressively, though he did sign the Smoot-Hawley tariff act that made the problem worse.
The laxity before the crash and the refusal to act forcefully to minimize it made the election of FDR inevitable, but the pain of a worldwide Great Depression lasted a decade as Democrats tried to dig out from the rubble. In Europe, the backlash to the economic collapse gave rise to authoritarian demagogues and a World War.
Reagan’s sunny supply-side nonsense left Clinton a giant deficit to pay down, ditto the Bush crash of 2008 that Obama had to try to recover from, hampered by a refusal by Republican lawmakers to cooperate.
As a result the Great Recession shrank the ranks of the middle class. Eight million jobs were lost, credit scores downgraded, 2.5 million businesses closed, and six million homes were foreclosed in the decade following. Lives were ruined or stunted; the banks lived to profit another day, and to lobby against regulation.
Lingering resentment for the villains escaping punishment and the victims being permanently scarred ought to have tainted the Republicans forever, yet along came Trump spouting populist slogans only to enact the same kind of rob from the poor to enrich the rich policies justified by the long-ago discredited supply side fiction.
He also set out to roll back laws enacted to prevent the financial industry from creating another bubble or preying on consumers. As a result of this disregard for flashing warnings, he has managed to run up the largest debt in American history and saddle taxpayers with annual deficits of $1 trillion a year for as far as the eye can see.
If, as seems likely, the latest reckoning for Republican greed and fecklessness is now upon us, the Democrats might be wise to let the Republicans remain in charge long enough to take the blame for the painful cure for a change, but they are the slightly more responsible party so will be left to put out the fire that the arsonist party has thrown gasoline on.
The biggest risk is that some Democrats are now preaching not just an anti-supply side or anti-laissez faire gospel, but an anti-capitalist ideology. Instead fixing a dangerously unfettered capitalist, they seem ready to ditch the system with nothing to put in its place.
Several seem to believe government can enact trillions of dollars worth of worthwhile programs — free college, universal healthcare — all either by magic or by taxing the top one-tenth of one percent. A more equitable tax system is surely needed in order to ameliorate the growing wealth inequality that is corrosive to the survival of faith in both democracy and capitalism, without which they can cease to survive.
Banks and businesses must be regulated to protect the financial and physical health of the public, but without being so draconian as to kill the goose that lays the golden eggs of paychecks, profits, and dividends that millions rely on for their daily bread and a secure retirement.
Unregulated capitalism can easily turn malign as recent events have proven, but access to capital is required to start a business, buy a home, pay for an education and generally power a growing, inventive, entrepreneurial, economy. Investment produces jobs, allows employees to grow their personal wealth via 401ks or IRAs, to save for college via 529 plans.
The country doesn’t need less capitalism. In fact, more of its citizens require access to its benefits and power for good. What is needed is a regime that imposes safeguards on abuses. Even Adam Smith saw that to be true. Obvious evils come from capitalism if government has abdicated its regulator function, but many less obvious goods come from its smooth functioning.
Democrats would be wise to recall that even in the depths of the Great Depression, when plenty of extreme remedies were offered across the political spectrum, the country rejected both the discredited Republicans who had allowed crazy capitalism to crash the country and the later rise of the isolationist, anti-semitic, fascist-leaning America First party, but also the loony left which included Marxists, Trotskyites, the Townsend Plan, the Share the Wealth demagoguery of Huey Long, and the anti-semitic ranting of Father Coughlin.
Compared to them the social welfare liberalism of Roosevelt was moderate and offered a democratic capitalism that would attempt to use the private benefits of a market economy to provide society with the public benefits of less inequality, more opportunity and greater security for the many.