Midterm Mythology

What are we really voting on next Tuesday? The major issues in our democracy have been obscured behind layers of political white noise and an avalanche of innuendo. Long gone are the days when you could simply support or oppose abortion, supply-side economics, the nuclear triad, or welfare for the poor. The last two years have seen mounting campaigns against phantom enemies; conservative political operatives in particular have learned well the lessons of airborne electronic warfare. In that martial field the production, via chaff or digital signals, of false targets is a principle way to hide your own airplane.

And so politicians in this new American theater of operations have mastered the art of the straw man. Build him up and tear him down; just so long as the public doesn’t know the difference between the real subject and the red herring. The mythology of this midterm cycle began with, and has been mastered by, Republicans. But Democrats have fought back, usually clumsily, with their own brand of subterfuge. Regardless of who takes the tactical battles this Tuesday, our democracy has been dealt a stunning strategic setback this cycle. A brief summary of this campaign’s myths and legends follows after the break…what follows after the election is anybody’s guess.

The Bailout

This isn’t an Obama-brand socialist plot, although you couldn’t tell from the average conservative campaign mailer or ad. The bailout of big banks, investment firms, and financial products insurance companies more formally called TARP (Troubled Assets Relief Program). This measure was crafted by the Bush Administration and passed, with a large bipartisan majority, in October of 2008…more than three months before President Obama’s inauguration. Despite this fact, almost half of all Americans believe that the bank bailout was passed during the Obama Administration.

Democrats and House Republicans (strange combination isn’t it?) joined to force changes in the original TARP, which the Bush Administration had written as a $700 billion check with zero oversight. The changes added oversight, and withheld one half of the fund, in order to observe the effect and make changes based on performance and need. The Obama Administration redirected some of the funds away from the big banks, and towards direct mortgage renegotiation and the auto industry. The mortgage program has been a failure, while the auto bailout has been an unmitigated success. One may make their own judgment on the design, implementation, and spirit of TARP, but I would encourage all to learn the facts about how it was passed and who-dunnit.

The Stimulus

The American Recovery Act, which has been conflated by conservative commentators into some kind of TARP, The Sequel, certainly does have a bailout component. It is nothing less than a bailout out of the working class economy that was, sadly, far too small. Some 40% of the law was given over to the largest working class tax cut in history, but how many of us noticed it? The big problem with big tax cuts is that they don’t tend to resonate in the economy. Big business and the wealthy have benefited from massive tax cuts over the last thirty years, but most of that cash has stayed in their big bank accounts. Please note that Wall Street is doing just fine, even as Americans still suffer without jobs.

The Stimulus did have a large positive effect on the economy because it pushed almost $500 billion into the hands of contractors, construction workers, teachers, and fireman within a two year span. This had the effect of putting a cap on unemployment and bringing the technical end of the recession months before it would have otherwise. The reason the plan was too small, and by extension, the reason the real recession lingers, is because state and local governments spent those two years cutting their spending by close to $500 billion. This recession won’t end until the $2 trillion in demand lost as a result of the housing crash is replaced. The Republicans propose replacing it via tax cuts to large businesses and top end workers (think doctors, lawyers, and big league ballplayers). That plan is nothing new, in fact, it was the plan they used in the Bush Administration; if you like it, more power to you.

The Deficit

Our budget deficit has two long-term drivers; the exchange rate advantage of nations like China, which feeds the trade deficit, and the state of health care costs in our nation, now in their 4th decade of perpetual explosion. In the present, our deficit is driven largely by this recession. You are undoubtedly being bombarded by ads, in whatever state you reside in, about exploding state costs and reckless spending. This is, almost certainly (in most states), utter horse dung. State and local revenues have been hit harder than those at the federal level, where tax revenue is several hundred billion per year below pre-recession projections. The loss of tax revenue is combined on all levels with higher costs associated with public assistance. And before any of you talk about slackers and handouts…these folks HAD jobs before the recession and they are gone now!

State and local governments were abused before the recession reduced income and sales tax levels, much of their budgets being drawn from the property taxes now assessed on real property with plummeting values. Whether your governor and/or legislature is Republican or Democrat, your state’s current budget problems are probably out of their hands. Ads to the contrary by otherwise qualified candidates should be considered lies. Coming back to the federal budget, the annual deficit picture is interesting to consider in light of the news coverage. George W. Bush’s eight budgeted fiscal years ran 2002 through 2009; here are the annual deficits:

  • 2002-$409.5 billion
  • 2003-$589.0 billion
  • 2004-$605.0 billion
  • 2005-$523.0 billion
  • 2006-$536.5 billion
  • 2007-$459.5 billion
  • 2008-$962.2 billion
  • 2009-$1.785 trillion

I, as most of you know, did not support either the Iraq War or the Bush Tax Cuts. The effect of those two items is clear in the deficits between 2002 and 2007. However, given Iraq as a mission of need and the cuts as an honest trial of supply-side economics, the consistency of the deficits shows a commitment to solid principles. That is an important point, because it contextualizes the explosion in annual deficits we see during President Bush’s final two fiscal years. They are unquestionable results of the crashing U.S. economy. Now lets look at President Obama’s first fiscal year.

  • 2010-$1.471 trillion

President Barack Obama, he of the Stimulus and socialism, fiscal irresponsibility and government takeover, posted a smaller annual deficit than did President Bush. Surprised? Look carefully, read thoroughly, and step lively, for the mythology of the midterms is hiding behind every story. Vote this Tuesday…if you haven’t already!

The Rational Middle is listening…