Who Gets Hit With the Tab for the Great Recession?

By Robert L. Borosage

Governor Scott Walker and a gaggle of Republican governors assault the right of workers to bargain collectively in states across the country. Teachers get laid off as school budgets are cut across the country. Colleges hike tuitions and shut down course offerings. Public workers face furloughs, layoff, cuts in health care and pension benefits. Congress is tied in knots about how much and what to cut. And Republican and bipartisan pressure to go after Social Security and Medicare is escalating.

We should be very clear about what unites these stories, for these struggles will say much about what kind of America emerges from the rubble of the Great Recession.

Who gets stuck with the bill for the Great Recession?

From the tea party Republican caucus to the Obama White House, leaders of both parties have moved from worrying about the recovery to worrying about how to pay for the costs of the Great Recession. With 25 million Americans in need of full time work, this is bipartisan folly. With Japan melting down, the Middle East erupting, energy and food prices soaring, housing prices and starts sinking, states and localities enacting brutal budget cuts, it is callously irresponsible, risking a double dip recession that will explode public deficits.

But that's where we are -- focused on who pays for the mess. Wall Street excess and conservative deregulation (by law and lassitude) blew up the economy, causing the Great Recession. The bankers were bailed out. Working families took the hit from the downturn -- in lost jobs, lost savings, weakened pensions, declining home values, pay and benefit cuts.

The recession blew a large hole in public finances at every level. Tax revenues plummeted. Expenses -- from unemployment insurance to food stamps to public health -- rose. Public pension funds suffered investment losses. States and localities face severe deficits with a mandate to balance their budgets. At the federal level, the recession doubled the national debt, and drove deficits up to 10% of GDP (much of this the result of plummeting tax receipts).

Now the question is who pays for the damage?

The Republican position is clear and consistent at every level of government. They want to send the bill to teachers, cops, seniors, kids, the poor and the vulnerable. From Governor Walker in Wisconsin to Governor Kasich in Ohio and across the country, Republican Governors and conservative legislators are pushing for deep cuts in education, jobs programs, and public health programs (particularly Medicaid). They are slashing spending while seeking in many cases to cut taxes for corporations and the affluent.

That's true at the federal level as well. Republicans went to the mat to extend tax breaks for millionaires in December, and now are threatening to close down government to slash spending on education, jobs programs, energy and the environment, and public health for the remaining months of the FY 2011 budget. And for next year's budget, they are girding themselves to take on the core insurance programs -- Social Security, Medicare and Medicaid -- that provide the most vulnerable Americans -- seniors, the widowed, the disabled -- with some modicum of security.

We aren't buying what they are peddling

This agenda is immensely unpopular. Americans have rather clear and sensible ideas about how to cut the deficit. They want Social Security and Medicare protected. They oppose cuts in education.

They don't like tax hikes on families that are already suffering pay cuts. With the growing and extreme concentration of income and wealth, voters support tax hikes for the richest Americans, imposing a surcharge on incomes above a million dollars. With Wall Street's casino wrecking ruin, they support taxes on bank profits, and a financial speculation or transaction tax to slow computer driven speculation. With the Pentagon spending about as much as the rest of the world combined spends on their militaries, they'd start with cuts in the defense budget, as well as subsidies for Big Oil and other corporate interests.

The more people become aware of the Republican agenda, the less they like it. In Wisconsin, Governor Walker hoped he could cram his legislation through a legislature under Republican control before people knew what hit them. But when workers mobilized, and Democratic Senators left the state, the voters got a chance to look at the Governor's program -- and his popularity plummeted. The same would surely be true of the public's reaction to the cuts demanded by the House Republicans in Washington, were we ever to have a pitched battle over them.

Dismember the Opposition

That reality requires the second front in the conservative offensive: a frontal assault to weaken the ability of organized people to counter the power of organized money.

Doing the bidding of corporations, banks and the wealthy insures that conservatives will have well stocked campaign coffers and deep independent expenditure money pots that can fund air and ground wars in support of their actions. Citizens United, the ruling written by the conservative gang of 5 on the Supreme Court, opened the floodgates to corporate money. Its effect -- like that of Reagan firing the Patco workers -- was as much symbolic as substantive, making it clear to corporate CEOS that this was the moment to go all in.

But even the most sophisticated Orwellian ad and Astroturf campaigns have a hard time overcoming the opposition of organized people. So conservatives have set out systematically to weaken or destroy the opposition.

That's why core worker rights are under assault in states across the country. This isn't about balancing the budget; it is about weakening the ability of workers to resist. Unions are the most potent opponent of the conservative agenda. With private sector unions weakened by globalization and the all out corporate assault on them over the last three decades, public employee unions -- teachers, cops, fire fighters, nurses -- are the leading edge of the opposition, and the leading target of the new attack.

But it isn't just unions. In states across the country, efforts are underway to strip students of their right to vote on their campuses, hoping to suppress the votes of the young. Various forms of requiring voter ID at the polling booth are being revived, seeking to depress the votes of seniors, minorities and the poor. Acorn, the most effective minority voter registration operation, is hit by a dishonest sting operation, ending with federal spending cut off. Planned Parenthood, a respected women's organization with chapters across all 50 states, is another target, with an attack on its funding now underway. Tort reform is aimed at trial lawyers, a leading source of liberal funds, curbing both their ability to bring actions and to collect damages.

The Big Kahuna

The stakes in this debate go far beyond getting public budgets in order. At stake is what kind of a society and economy we will build coming out of the worst economic downturn since the Great Recression.

Will we set in place the priorities and programs that can rebuild a broad middle class -- or will we return to the pre-recession economy with Gilded Age inequality increasing, and the middle class an endangered species?

Central to this is whether the democracy can rescue government from the clutches of predatory corporate interests and turn it back once more to an instrument of the common good. Will we bring our budget into balance by putting people back to work, and enacting progressive tax reform that sends the bill to those who helped create the mess, or balance it by cutting spending on education and other areas vital to providing opportunity to all? Will we take on the entrenched corporate interests that feed off government subsidy and privilege -- or go back to business as usual?

These questions are posed each day in Congress. Cut funding for schools or cut subsidies to big oil? Cut health care for seniors and the disabled or cut subsidies to the drug and insurance companies that drive up health care costs. Invest in rebuilding America, or continue to squander resources policing the world? Cut Social Security benefits that workers have paid for or require the wealthiest Americans to pay a higher tax rate than their secretaries?

Here again, unions are central to the story. After World War II, unions represented about 35% of the private workforce. As productivity and profits rose and the country got richer, unions helped insure that workers -- union and non-union -- got a fair share of the benefits. We all grew together and created the great triumph of America -- an American Dream that was within reach of a broad middle class

But after 1980, with globalization, the corporate offensive on unions, the conservative era in our politics, unions declined dramatically to less than 7% of the private workforce. Productivity and profits continued to rise. Contrary to conservatives, America isn't broke. It generates more income now than it did a decade ago, and will generate more income in the next decades than it does now. America isn't broke but its working families are struggling.

That's because they no longer share in the increased profits and productivity they help to create. The richest 1% captures fully 23% of the income in the society, and has more wealth than 90% of Americans, while most households lost ground when the economy was growing in the last decade. If the right succeeds in destroying unions, it will surely accelerate the destruction of the middle class and our descent into ever greater inequality.

Conservatives are very clear about this. House Budget Chair Paul Ryan says the choice is between "European Social Democracy" and traditional American free enterprise. But he and his colleagues define social democracy to include the core institutions of middle class security and opportunity --

Social security, Medicare and Medicaid, pensions, living wages, affordable health care, public schools, affordable colleges, etc. They are intent on using this crisis to rollback as much of this as they can. They know it won't be popular so they are intent on crippling unions and other institutions that they know will stand in the way.

The fight in Wisconsin and elsewhere for the right to bargain collectively isn't divorced from the budget fights in Washington and the states. These are all part of a struggle for what kind of America we will build. No one can be a bystander in this debate.

By Robert L.Borosag
   President, Institute for America's Future
Posted: March 18, 2011