Journalists are understandably captivated by the government shutdown and the looming confrontation over the debt ceiling. Those are certainly dramatic stories. But another, quieter drama has been playing out for years in homes and communities across the country, as millions of jobs and trillions in wealth have been lost to Republican economic folly.
Now the Republicans are doing their best to make things even worse. Their budget stance offends many Americans’ sense of morality, since they’re asking poor and middle-class Americans to subsidize the luxuries of the wealthy and the profits of powerful corporations.
But in the end the country may reject their ideology for an even simpler reason: We can’t afford it anymore.
Millions Left Behind
The story begins with the financial crisis and recession of 2008. Reports say that the incoming Obama administration reduced its proposed stimulus because it thought Republicans would reject the actual level of spending needed to rescue the economy. The resulting stimulus package saved or created millions of jobs, but the country remained in the grip of an ongoing recession that limited both job creation and wage growth. Further stimulus spending became politically unfeasible after Republicans won the House in 2010.
The result? Wealth inequality has become worse since the crisis. The top 1 percent of American earners saw their income increase by a staggering 32 percent in 2012, even as millions of others remained mired in an ongoing de facto depression. For the first time since they began tracking the numbers a century ago, the wealthiest 10 percent of the country captured more than half its total income.
It didn’t have to be this way. A number of jobs proposals were put forward that would have helped the “99 percent” obtain more jobs and strengthen its wage base, including the Economic Policy Institute’s “American Jobs Plan” and our own “Citizens’ Commission on Jobs, Deficits and America’s Economic Future” (from the Institute for America’s Future).
These programs would have created jobs and strengthened the economy for everyone, while also enhancing education and funding urgently needed repairs to the nation’s infrastructure. We still need those investments, and they would still create jobs.
Wrong Way Out
Unfortunately, spending cuts, not job creation, became the main topic of Washington debate. This misguided fixation became much worse after Republicans recaptured the House in 2010, leading to the 2011 budget showdown and the disastrous cuts that followed.
How damaging were those cuts? Economist Adam Hersh estimated what the jobs figures might have been without the destructive austerity cuts agreed upon after the last showdown with the GOP. U.S. employers would have added more than 260,000 jobs last month, according to Hersh, and the unemployment rate would have fallen below 6 percent. The economy would have added 8.2 million jobs since the end of 2010, 2.4 million jobs than it actually did.
And that’s without stimulus spending, solely by avoiding the austerity cuts demanded by Republicans in the last budget confrontation. Add in needed spending on jobs and growth and we would be experiencing a full recovery.
The Ghosts of Republicans Past
Republicans have passed one extremist budget after another since winning the House in 2010. Those budgets, with cuts in the $1.2 trillion range, would have led to catastrophic double-dip recession and major additional job loss had they passed the Senate and been signed into law.
The GOP’s budgets would have also had an enormous disruptive effect on society, with cuts to a bewilderingly wide range of programs: Emergency storm warnings. The Small Business Administration. State and local law enforcement.
But even without their extreme budgets, the nation is haunted by the ghosts of past Republican choices. Their 2011 confrontation with the other branches of government cost Americans an estimated $2.4 trillion in household wealth. And while some of that has since been restored, their current actions could cost even more.
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Geographically, large chunks of the nation are still mired in unemployment. As economist Heidi Shierholz notes, “There has been very little improvement in the hires rate since its low of the recession in June 2009, four years ago.” That’s when the hires rate fell dramatically. It has yet to recover. And as Shierholz also explains, “there has been no sustained improvement whatsoever in the hires rate for two years.”
Shierholz also observed that, even after four years of recovery, “we’re just a fifth of the way out of the hole left by the Great Recession.” And yet, instead of debating ways to repair the damage, Republicans are determined to do more harm than ever.
The List of Demands
Democrats have already agreed to the Republicans’ original economic demand: an extension of sequestration’s spending cuts. Those cuts have cost the nation an estimated 900,000 jobs. But that’s not enough for the GOP. Their most famous demand this time around is a delay in implementing Obamacare, although that’s by no means their only demand.
Republicans have also demanded a jobs-crushing “balanced budget amendment” and trillions in additional spending cuts. Some of their other ideas are both socially harsh and potentially very damaging to the economy: Environmental deregulation could lead to another costly spill like BP’s in the Gulf of Mexico. Financial deregulation could rob Americans of their savings and lead to another recession, or worse. (Past deregulation on Wall Street cost the U.S. economy an estimated $12.8 trillion, according to a study by Better Markets.)
Even the GOP’s call for food stamp cuts will cost people their jobs and reduce the national wealth, by leaving impoverished families even less to spend on the basics of life. (A compendium of House Republican demands can be found here.)
According to conservative estimates the Republican shutdown is costing the economy $1.6 billion per week, a figure which doesn’t include the ripple effect in lost investment and growth. Those ripples could be seen Gallup’s consumer confidence figures, which last week took their biggest plunge since Lehman Brothers collapsed and triggered the 2008 global crisis.
Consumer confidence is what drives consumer spending in goods and services – the kind of spending that creates jobs. Last week’s plunge means the Republican shutdown is almost certainly losing American jobs already.In addition, the stock market continues to take a hit as investors worry about economic uncertainty.
And today Republican brinksmanship has pushed the yield for Treasury bonds to their highest point since the height of the crisis in 2008 – which, in plain English, means that investors are losing confidence in the government’s ability to repay its debts. That increases borrowing costs for the government (so much for Republicans’ professed concern for lowered spending), and for everyone else as well.
They’re right to be concerned. Republicans now seem poised to fire the biggest cannon of all: a debt default. As Bloomberg News reports, that move is seen as “a catastrophe dwarfing Lehman’s fall.” The International Monetary Fund (IMF) warned that a U.S. default would “seriously damage” the global economy. It “would have major consequences,” said the IMF’s chief economist, adding: “… it could well be that what is now a recovery would turn into a recession, or even worse.” (emphasis ours)
The only people dismissing the harmful effects of a default are the ones who have been wrong all along.
Democrats haven’t been blameless. The President spent far too much time echoing the Republicans’ deficit-fixated austerity rhetoric. Senate Democrats could have been tougher. The party could have done more to explain why we need investment in jobs and growth, and how the GOP’s financial agenda hurts most Americans.
But those sins seem trivial when compared to the harm Republicans have done, and continue to do, to the national economy. That’s the real economic story, and it should be told every day until the GOP is reined in and the nation is restored to economic health.
The Republicans’ extremism is morally out of step with Americans. Democrats need to stand firm against it and explain the real story to the American people. But what may hurt Republicans most in the end is cold economic reality. The Republican Right is just too expensive for America.