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Oh Unhappy Day
From World War I until Gulf War II – these are the bookmarks that define the American Century. All through this period the United States enjoyed economic, military, and political ascendance, and by the time Germany surrendered in 1945, the United States was the preeminent global power in so many dimensions that it truly “owned” the 20th century. In the realm of finance, American supremacy was symbolized by the AAA rating accorded its government securities, a rating the United States has enjoyed since 1917.
Now the United States has lost its AAA rating, and deservedly so. It has shown itself incapable of dealing with many serious financial and economic problems, One of its two major political parties has deliberately – yes deliberately – attempted to force a default on US Treasury securities, so that it can engineer its vision of a fiscally prudent America, one in which it is forbidden ever to raise taxes on wealthy people. This despite the fact that, other than corporations, wealthy people are the only source of incremental tax revenue for a government desperately in need of cash flow.
This is a disgrace, an eternal shame on the American political leaders who allowed this situation to develop. But one man above all others stands out as responsible for this tragedy: George W. Bush. George Bush came into the presidency with so much money in the treasury that it was possible to see the national debt retired completely if he continued on a path of budget surpluses. Instead, he chose the opposite. He initiated a series of massive tax cuts that were heavily skewed towards rich people and corporations. Within his two terms, he managed to rack up a level of deficit spending that exceeded the combined deficits of all previous presidents. This deficit spending – which was really nothing more than a give-away of the nation’s wealth to rich people – now weighs like a pair of cement boots on a country desperate to keep its head above water.
He had accomplices. He had an imbecilic Vice President in Dick Cheney, who asserted that “deficits don’t matter.” Cheney said that he learned this lesson from Ronald Reagan, the patron saint of the modern Republican Party, who certainly shares some of the culpability for his naïve adoption of “supply-side economics”, a get-rich-quick scheme that promised tax cuts would be met by even greater tax revenues as the private sector put its “own money” to work expanding its business and hiring people. It never worked that way in reality. The private sector squandered the money on useless luxuries, while corporations enriched their executives with bonuses for their assiduous efforts at out-sourcing American jobs to Asia. The gulf between the wealthy aristocracy and everyone else has grown to such an extreme that the US ranks ahead of Brazil and Mexico in terms of economic disparity.
George W. Bush presided over the largest wealth transfer in the history of the country. He also presided over a political party that made it a mortal sin ever to increase the taxes of the wealthy, thus locking in this discrepancy among the classes, and allowing a nepotistic oligarchy to arise. This is certainly one way to destroy a democracy, and the results are now evident for all to see. The Congress is composed of millionaires, and is funded by corporations, who engineer tax breaks for themselves while they close down plants in the US and ship them overseas. The Republicans block every effort to raise taxes or in any way shift the tax burden away from the middle class and poor people, and back on to the wealthy. They are happy, however, to carve away the social safety net, because that comports with their belief that social spending is a waste of money on the lazy and ungrateful masses.
Historians will argue whether the economic, military and political decline of the United States in the 21st century was inevitable, given the rise of China and other emerging markets powers. Certainly there are sound arguments in favor of this view – look at the troubles Europe is having maintaining its living standards in the face of so much intense economic competition from Asia and elsewhere. But if you accept that the United States was inevitably going to have to share power with other nations in this century, the US still had the means to control how this happened. The US could have created a gentle process of shared political and military power, avoiding confrontation with China, India, Russia or other countries, and developing ways in which regional conflicts of any sort could be managed in a multi-polar world. Economically and financially, the US could have kept its financial house in order and maintained its AAA rating for many decades more. This would have maintained the dollar as the reserve currency of the world.
None of this happened. The United States under George W. Bush brandished its unchallenged military might as a tool to recreate the world in its own image, especially that part of the world that sold oil to an energy-dependent America. George Bush went to war – he always wanted to be a war president to ensure his place in history as one of the greatest presidents of all. His wars, however, were paid for not with cash raised from taxes, but with borrowing, because as Ronald Reagan taught us, “deficits don’t matter.” Bush compounded this error by giving away hundreds of billions of dollars every year in tax revenue that the wealthy were expected to pay. He authorized very costly tax holidays and deferrals for corporations. In essence, he bankrupted the Treasury. That is the only way you can describe it when you consider that just a week ago the US Treasury, at the height of the debt ceiling crisis, had only two or three days worth of spending money left in the cash till.
The only defense Bush has is to argue that the practice of borrowing for current needs was well established at the federal government by the time he got to the White House. But this is a defense which damns the Republican Party, because all of the ramps up in the public debt were initiated by Republican presidents, especially Ronald Reagan and George W. Bush. The periodic retreats into fiscal rectitude were initiated by Democratic presidents, especially Bill Clinton.
This isn’t to paint the Democratic Party as fiscal saints. Plenty of Democratic Congressmen have enjoyed loading up budget bills with their favorite programs, financed only by debt. But at least the party seriously followed pay-as-you-go principles when in control of the Congress. The Republicans have recently discovered the virtues of this approach, but their goals are not really to balance the budget, as much as to destroy the domestic social safety net. The wealthy and corporations still get a free pass under Republican austerity programs, while the poor and middle class pay a larger and larger bill.
No, things did not have to turn out this way. Whether by malicious design, economic naïveté, or intellectual laziness, George W. Bush forced the nation down this path. The first serious consequences of his presidency are now upon us, with the loss of premier financial status. Next up, probably several years down the road, will come the loss of the dollar as the globe’s reserve currency. Americans will enjoy for the first time paying for oil in someone else’s currency.
When you hear Republicans and Democrats argue over who was responsible for the loss of our AAA rating – pointing fingers at Barack Obama or the Tea Party congressmen - take a step back a minute. Think what might have been if the Supreme Court had awarded the presidency to Al Gore in 2000. It won’t take long for you to realize that, along with trillions of dollars of debt we owe to the rest of the world, we should reserve a special debt of loathing for George W. Bush.
