The End of Economics: Down Reagan's Rabbit Hole
At the end of the Cold War, historian Francis Fukuyama stirred a few months of lively controversy — and eventually embarrassed himself — by declaring the “end of history.” Despite Fukuyama’s example, however, I suspect the first person to declare 2011 the beginning of the “end of economics” will be seen as a prophet.
The gradual death of economics as a serious element of public policy dates to 1981, when new president Ronald Reagan embraced the supply-side ideas of George Gilder. “Reputable economists” mocked Gilder’s theory as “trickle-down economics.” But it scored a big hit among free-market fundamentalists who saw too much money churning through the U.S. economy without first passing through their sticky fingers.
In spite of reality, supply-side theory is still with us. Skeptics, of course, were right. In 30 years, nothing has trickled down. I haven’t gotten a penny. Neither have you. Money directed to the rich, as it turns out, clings to the rich.
Meanwhile, the average U.S. family’s net wealth — adjusted for inflation —has not changed. At all. The top one percent of earners are 176 percent better off than they were pre-Gipper, but income for the middle of America’s middle class grew just 21 percent, or about 0.8 percent a year. Better than nothing? Maybe, except that most of this growth came from one-income families becoming, by necessity, two-income families.
The current evolution of trickle-down incorporates a kind of bleak magical thinking. Right-wing economics today conjures intimations of Alice growing small by drinking a potion and then growing freakishly large by eating a cupcake.
This conservative solution includes six elements: a) tax-free corporate power, b) unregulated financial speculation, c) offshore manufacturing (and engineering, and design, and R&D, and customer service, and banking), d) unchecked development and e) union-busting, with f) no government role whatsoever. You could say (if you were cynical) that the 21st-century Lobbyist State has swallowed the Security State whole, after which it got the Welfare State drunk, sodomized it and drowned it in the bathtub.
Among the Lobbyist State’s victories have been the housing bubble, the Crash of 2008, the near-death of the U.S. auto industry and the nation’s rollercoaster plunge from a $230 billion surplus (in 2000) to a $1.3 trillion deficit.
Since the outset of the Bush Depression in 2008, the standard conservative plan for rescue has been austerity for the masses, an approach tested by Herbert Hoover from 1929-1932 and, recently, by governments in Britain and Greece. In both countries, the results have been a no-growth economy accompanied by riots in the streets, accompanied by teargas and collateral fatalities. In other words, Herbert Hoover all over again.
OK, but this is only half the story. While right-wing theories have been discrediting themselves in practice, right-wing propagandists have labored tirelessly to trash all other economic remedies. And they’ve done a bang-up job — destroying the reputation of programs like, for instance, President Obama’s national recovery act.
“Reputable economists” estimate that the stimulus created some two million jobs. They say it prevented a double-dip recession and kept unemployment under 12 percent. The same guys faulted Obama for compromising on a stimulus that was too small. It worked, they say, but only well enough to halt the decline, not turn it around.
This is not a popular perception. For three tiresome years, the public has heard louder voices — Rush Limbaugh on talk-radio, the minions of Roger Ailes on Fox News, plus Romney, Paul, Palin, Perry, etc. — shouting over and over — without evidence — that the stimulus “failed,” creating no jobs and worsening the recession.
But never mind. Propaganda always prevails. Its next target is Obama’s jobs plan, which blends tax cuts, public works, budget cuts, and the wonderful idea of an infrastructure investment bank. “Reputable economists,” as well as public opinion, tend to agree that all this is pretty good (except, again, it’s not big enough).
The right wing, preferring chaos, cries foul. Obama’s GOP critics insist that, in a healthy economy, government never raises taxes on the rich or stops punishing the rest of us for our sins. It does nothing to close the loopholes that guarantee annual IRS refunds to GE and Bechtel. Nor does it wage the sort of “class warfare” that might imperil the jet set’s comfort or lessen the day-to-day fear that haunts 15 percent of American working families who are trying to survive on less than $22,500 a year.
The current right-wing attitude, as Obama notes, is “my way or the highway.” And the right wing is going to win — to the dismay of “reputable economists,” for whom Republican intransigence conjures the theater of the absurd. Call it Ionesconomics? The invisible hand of Samuel Beckett? Or are we all just trapped in a Lewis Carroll spoof?
I write “reputable economists” in quotes because, ay, there’s the rub. Ain’t no such thing any longer. Theories that have more or less helped us understand the economy over the years — from Adam Smith to John Maynard Keynes to Milton Friedman and Paul Krugman — are roadkill. They’ve been hit, and run over, by our so-called “Tea Party” nihilists and their politician sock-puppets. We are captives of a cult whose economic philosophy makes “survival of the fittest” sound like “blessed are the merciful.”
Until sometime this year, capitalist theory reluctantly presumed some government role in the economy — for taxation, interstate commerce, the common welfare, etc. In today’s end-of-economics Tea Party era, we kiss all that goodbye. Virtually every elected Republican in Washington has signed in blood Grover Norquist’s lifetime pledge never to approve any tax for any reason (a pledge which, if it had been in effect in 1941, would have prevented us from counterattacking after Pearl Harbor).
America has somehow fallen into a rabbit hole down which no economist is reputable. Our econ profs now are a mad hatter named Boehner and a big white bunny named McConnell. They keep saying (and we keep believing) that if we make everything smaller, pretty soon everything’s — boing! — gonna get bigger.
Or, as Lewis Carroll once said to Grace Slick: “DRINK ME… EAT ME.”