It is hard to imagine a more important or relevant question. What is so strange is that no one is asking it. It is as though the very question has been banished from public discourse. It is almost impossible to imagine, for example, David Gregory on “Meet the Press” asking a Republican leader how their present positions differ from those that have gotten us into trouble. And God forbid anyone suggest these policies might get us into trouble again.
Whatever their faults, the Republicans have presented their basic economic policy with remarkable clarity and consistency. Since Reagan, their agenda has never been in doubt. They proposed smaller government, lower taxes, less regulation, free trade and a fierce hostility to anything smelling like inflation even in the most distant future. With this they promised a new era of dynamic entrepreneurship with growing prosperity for all. A promise – in spite of everything that has happened – that we still hear.
Of course, for most of us these policies did not bring the promised new era of prosperity. Rather we got two quite different results: First, the devastation of the middle class. Since 1980 middle class income has stagnated. To the extent that they produced any prosperity it was confined to a very small class of people at the very top. Corporate profits and management compensation have soared. The salaries and wages of everyone else lost ground. In sheer scale we have seen the largest shift in wealth and income in American history, perhaps in the history of any large industrialized country. Second, it produced the worst economic crisis in 70 years.
The connection between these two things, the economic stagnation of the middle class and the subsequent financial crisis, has yet to sink into the public consciousness. It has, however, been noted by a number of economists and was most recently explained with remarkable clarity by Simon Johnson and James Kwak in their book “13 Bankers.”
As the middle class economic fortunes declined, consumer spending held up sustained by a decline in savings and massive borrowing. In effect, Wall Street maintained the illusion of prosperity by force-feeding middle class consumers with debt. It was certain to collapse, and it did.
Of course the Republicans were not alone in promoting these policies; they had a lot of enthusiastic help from Democrats. In fact, so broad was the acceptance of these policies that they acquired the name of “the Washington consensus.” Not only were they given unquestioned acceptance in Washington, but it became the policy of the U.S. government to promote them around the world. The Democrats never matched the ideological fervor of the Republicans; for them it was less a matter of deep conviction than posturing for campaign contributions. They could and occasionally did wander away from the true faith.
The general media have noticed one relevant aspect of the question: the Republican leadership is increasingly in the hands of the more extreme elements of the party. The moderate Republican has become virtually extinct. But consistent with their obsessive focus on political process to the exclusion of substance, the media seem unwilling to ask what this means in terms of economic policy.
At the very heart of the Republican economic policies was not just conservative politics, but a blind devotion to the concept of the “rational market.” Is there any evidence that this is gone? What happens if this gets cranked up a few notches? (And, please, this is not just a matter of financial reform.) Can’t someone just ask these guys what they intend to do? And what kind of results they expect? Isn’t this what journalists are supposed to do?