There is a reason why it has taken so long to emerge from the Great Recession. And the Republican leaders of the House and Senate with their new majorities exemplify why we have barely emerged from it.
They continue to attempt to downsize government and regulations of any kind, including Dodd-Frank, when it was the lack of adequate regulation during Republican GW Bush’s term that caused the financial meltdown and Great Recession. This is while the lack of government spending on basic public works projects has been a major drag on economic growth.
There was a consequent output decline of more than 6 percent of GDP from the Great Recession—that’s 6 percent of the now $16 trillion in goods and services that were never produced, while some 8 million workers lost their jobs causing incalculable damage to families and communities.
Yet Republicans still intone the same rote messages that regulation of any kind is harmful.
"The administration’s biggest hit on the economy has been the aggressive over-regulation that has descended on virtually all of American private enterprise and that’s the reason we’ve had such a slow recovery after the Great Recession of 2008," said new Senate Majority Leader Mitch McConnell. "It’s reasonable to assume that we’ll be pushing back against this bureaucratic excess across the board."
And House Speaker John Boehner quickly listed his major priorities–“Fix our broken Tax Code, address the debt that’s hurting our economy and imprisoning the future of our kids and grandkids, reform our legal system, reshape our regulatory policy to make bureaucrats more accountable, and give parents more choices in a system that isn’t educating enough of America’s children.”
But Republicans haven’t helped. They have fought almost every growth stimulus program, and tanked the economy to boot, with the debt ceiling debacle that shut down government and downgraded the government debt.
Now they want to do it again with their new majorities. In an attempt to keep their diminishing power base, they restrict voters’ right, collective bargaining and oppose minimum wage programs of any kind that would increase household incomes.
They believe supply stimulates demand, which is supply-side economics, when it is exactly the opposite. Producing ever more things without the means to buy them depresses prices, which depresses profits.
Whereas boosting incomes increases the demand for goods and services that stimulates supply and profits, which comes from increased household incomes. So when they oppose raising the minimum wages and collective bargaining, they are literally restricting the growth of household incomes, and so growth.
And the result is a very deflationary environment that becomes a vicious circle. Falling prices that in turn mean falling incomes and rising unemployment. It’s as simple as that, yet Republicans don’t seem to get it.
It has also led to the greatest income and wealth inequality since 1928–the last time we had a Great Depression.
Harlan Green © 2014
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