Pro-business bias survives economic bust
By
Max J. Castro Read Spanish Version
majcastro@gmail.com
Boasting
about the strength of the economy has been a staple of Bush
administration propaganda for a long time. In fact, while the rate of
economic growth and the level of unemployment have been pretty good
for the last few years, throughout the Bush era the economy has been
“strong and getting stronger” only for those at the very top of
the income distribution.
It
is a trend that began long before George W. Bush became president but
which has been aggravated by his policies. Since 1973 and especially
in the last ten years, those in the top one-tenth of one percent of
income earners have done spectacularly well. Those in the top one
percent of the income ladder have done very well, and those merely in
the top ten percent have made much less impressive but real gains in
income. In contrast, and in spite of vast economic growth, between
1973 and 2005 everybody else, the remaining 90 percent of the
population, experienced a significant drop in real income!
The
current administration’s policies of giving huge tax breaks to the
very rich, restricting government spending on middle class and low
income programs, and giving business a free hand in every sphere have
been a major factor in bringing about the obscene levels of
inequality in existence today. But these policies have done more than
just deepen inequality. By undermining regulation and oversight,
these policies have led to many corrupt and irresponsible business
practices, with results such as the Enron scandal and the current
sub-prime lending crisis.
The
regulatory mechanisms that emerged in the wake of the 1929 Wall
Street crash and the Depression of the 1930s were not the product of
a socialist conspiracy or anti-business ideology. They were
lifesaving devices for the capitalist system and the American
economy.
The
administrations that have run the country for the last three decades
seemed to have forgotten this and, in a frenzy of free market faith
that has been particularly intense during Republican rule but has
also been present during Democratic presidents, have poked huge holes
not only in the social safety but also in the economic and financial
safety net.
Now
the myth of a perfectly self-regulating market has burst, starting
with the housing market crisis and spreading through the economy.
Many analysts are predicting a recession. The Federal Reserve Board,
which usually acts with caution, was so alarmed as to carry out a
record decrease in interest rates in order to boost the economy and
prop up sinking stock market prices. The administration acted too,
but as usual it saw the drama of millions of Americans in danger of
losing their houses and their jobs as first and foremost an
opportunity to further its ideological agenda in line with the
interests of corporations and the very rich. The Democrats in
Congress pushed a different set of policies to ward off recession,
but in the end once more largely caved in to Congressional
Republicans and the administration.
Democrats
in Congress wanted to increase food stamps and extend unemployment
benefits, measures that would have helped those hurt worst by an
economic downturn but also the groups most likely to spend any
additional income quickly, exactly what is needed to give the economy
a quick boost.
Republicans
were adamant against this approach. The GOP’s priority was to
continue and expand tax cuts for business and the rich. The
Republican argument is that this will stimulate the economy by
encouraging investment.
Despite
controlling Congress, the Democrats ultimately gave in on almost
every issue except making the 2001 Bush tax cut permanent, which the
Republicans dropped. The compromise that was approved by the House of
Representatives and Speaker Nancy Pelosi does not include increased
funds for food stamps or unemployment benefits. It does include new
tax breaks for business investment. Pelosi did manage to obtain some
payments for those too poor to pay taxes and to reduce tax rebates
for households with higher incomes.
Despite
these small Democratic wins, the irony is that a program intended to
provide relief for a looming crisis caused to a significant degree by
policies wildly biased in favor of business is itself rife with some
of the same biases.
An
economy in which income is increasingly concentrated in fewer and
fewer hands and that withholds its rewards from the vast majority of
the population even in the best of times is not sustainable
politically, socially, economically, or morally. The lesson of the
compromise economic stimulus package is that neither Republicans nor
Democrats are ready to confront this reality.
