As we steel ourselves for the bail out of a failing financial system, it’s time to review the rhetoric of fiscal responsibility. For nearly three decades, the GOP has succeeded in hanging the “tax and spend” label on the Democrats. Accepting that premise has likely enabled this painful fleecing.
Commentary By: Daniel DiRito
While the details haven’t been disclosed, it appears that the powers that be are considering a plan to bail out Wall Street…in a big way…on the backs of the American taxpayer. Troubling as this sounds, it may be the only viable solution. Regardless of the eventual solution, one thing is clear, the losses will be large.
I want to focus on an analysis of the aftermath and the philosophy that led us to this point. I want to do so because I lived through the Savings & Loan scandal and I’ve been convinced for more than two years that the housing bubble, the artificially low interest rates, the lack of proper oversight, and the associated paper “equity” borrowing it fueled would lead to this type of meltdown.
Having established this backdrop, I want to make the case for driving a stake through the heart of trickle down economics, tax cuts for the wealthy, and the meme that the “tax and spend” Democrats are fiscally irresponsible.
Here’s the deal. The existence of large sums of money in the U.S. economy is a given…it has always been there and it will likely continue to be there (though eight years of GOP malfeasance will make digging out from under the enormous debt a formidable obstacle). With that said, we must begin to consider politics and the inevitable debate about what we will do with the money.
By and large, the party that succeeds in holding power and driving public sentiment gets to decide where the money goes. Without a doubt, the GOP has won this battle for the better part of the last thirty years. In doing so, they have succeeded in attaching the “tax and spend” label to the Democrats…driven primarily by highlighting the Democrats desire to fund and insure existing safety net programs (Social security, Medicare, Welfare, and Unemployment benefits…as well as expand others (Healthcare).
At the same time, the GOP has chosen to foster an economic structure that is weighted towards large corporations and the wealthy. Part and parcel of this approach has been the undermining of labor unions, the refusal to increase minimum wages, the willingness to ignore the huge number of uninsured, allowing the influx of illegals to provide cheap labor, and a willingness to accept the growing divide between the haves and the have nots.
So let’s step back for a moment to the S & L scandal (the late 80′s, early 90′s)…the last instance when profits were privatized and losses were socialized. Rampant real estate speculation and a lack of regulation of the financial industry made a number of investors very wealthy while saddling taxpayers with approximately 123 billion dollars of debt. As an aside, it should be noted that numerous investors were building commercial properties and apartments with no intention of ever managing them…they were simply milking the unregulated financial system.
Now let’s take a look at the GOP’s objections to any form of universal healthcare put forth by the Democrats. The argument suggests that it would cost anywhere from 60 to 100 billion dollars annually. At the same time, it must be noted that the Bush tax cuts enacted in 2001 have been projected to cost 2.5 trillion dollars over ten years…and we’re also spending approximately 120 billion dollars annually on the war in Iraq. As to the costs of the current Wall Street bail out, it’s difficult to determine the damages. For the sake of this argument, I’m going to estimate that the final tally will approach a trillion dollars.
Now lets calculate the total dollars these items represent. If we assume that only half of the tax cuts were unwarranted (they went to the very wealthy), we have 1.25 trillion. Let’s add in 600 billion for five years of the Iraq war (we’re being conservative). That leaves the 120 billion lost on the S & L scandal and the trillion dollars we’re assuming will be lost on the Wall Street meltdown. Taken together, this totals just under three trillion dollars.
OK, now lets see how many years have passed since the S & L scandal. We’ll use 1985 as our start date (again we’re being conservative), which equates with 23 years. For this exercise, we’ll go ahead and round that to 25 years.
If we take our 25 years and assume it would have cost 100 billion dollars per year to fund universal healthcare, that brings us to a total of 2.5 trillion dollars. Note that the use of 100 billion per year is also an extremely conservative number as it would have been far cheaper to provide in the earlier years.
As you can see by a simple review of the numbers, we had enough money to fund universal healthcare for the last 25 years…with nearly a half trillion dollars to spare. Unfortunately, we didn’t have universal healthcare. Instead, those of us that have had healthcare insurance, paid for it for 25 years…and we also received a meager tax cut for the last seven years. If you look at the total dollars the average family received in tax cuts for these seven years, I suspect one would be lucky if it would have paid for three or four years of healthcare insurance (we’re completely ignoring the deductibles and copayments).
So if we look at the rhetoric of the GOP for the last 25 years, they want us to believe that any consideration of universal healthcare would have been irresponsible. They’ve repeatedly told us that the Democrats would raise taxes and spend money we didn’t have…on programs we couldn’t possibly afford.
However, if we look at the numbers above, the only thing we received for supporting this philosophy for managing our government’s finances (our money), was minimal tax cuts…promised nearly every election cycle (surprise, surprise?). At the same time, those in charge squandered three trillion dollars of our money on tax cuts for the extremely wealthy, an unwarranted war, and two episodes of enabling unregulated and painful financial disasters.
In the end, you can slice it any way you like…but you can’t disregard the fact that the money was there to provide universal health care…or any number of other programs designed to benefit all Americans. In the interest of being fair, all of the blame can’t be placed on the GOP, since the Democrats went along with many of these ill-advised expenditures…or the policies that enabled them.
Regardless, it’s also true that the Democrats frequently did so because voter sentiment demanded it. In other words, voters bought into the rhetoric that the GOP would let us keep more of our money and the Democrats would undoubtedly take more of it away from us. Since we know that all politicians cater to the whims of voters in the hopes of winning elections, it’s no wonder the Democrats have acquiesced and appeared amazingly weak. They’ve been on the wrong side of the argument and they’ve failed to convince voters otherwise.
That brings us to where we now stand. If we voters fail to recognize what has happened in the last 25 years as a result of enabling the rhetoric and the policies of the GOP, we do so at our own peril. It’s time for us to demand that our money be spent on programs that serve the greater good; not the ones that line the pockets of the greedy and the wealthy. The money is there…it has always been there…it’s time we elect politicians that have the interests of all Americans at heart…politicians who will be honest stewards and spend our money wisely.
If we don’t, let me be the first to predict the next financial scandal. Unless we choose a different course, it will invariably happen as soon our memory of the last one fades and we resume our role as gullible voters who settle for false promises and paltry tax cuts. Rest assured, once the coast is clear, the greedy will gladly step in and bust the bank again…while their bullshitting benefactors turn a blind eye.
Cross-posted at Thought Theater