The enduring Republican victory

[People are still arriving here because they have received an email attributed to myself comparing President Obama to Adolf Hitler. They are also still calling my home, contacting the public affairs office of the Naval War College, and deluging another David Kaiser with emails. I did not write, and do not agree with, that fraudulent email. You may however be interested to read the following post. Meanwhile, here is the best explanation I've found of why that email is so incredibly popular.]

The Obama Administration's difficulties on the domestic front, I think, reflect a long-term shift in American opinion. In 1968, after 35 years of largely Democratic ascendancy which had created a relatively egalitarian economy and established a strong role for the government, the Republican Party, increasingly led after 1976 by its conservative wing, began its successful campaign to establish a national majority. Their strategy had two major aspects. The first--which was largely handed to them, as Lyndon Johnson himself realized, by the great civil rights act--involved picking up the southern white vote, which became nearly as reliably Republican as it had previously been reliably Democratic. The second involved a long campaign to change Americans' minds about the proper role of government. The Republican Party has temporarily at least lost its majority--but the enormous influence of that campaign remains.

We can see that influence reflected in three major, related issues: the economy, the federal budget, and health care. Taking the first two first, our economy has been (and is still being) enormously distorted by the enormous profits available to the financial industry. Because taxes on capital gains have become so low (and because some of the biggest players in the financial game, hedge fund managers, can evidently claim nearly all their income in that form), traders and private equity firms can make, and keep,enormous profits. Meanwhile, the federal budget defect--already swelled to gigantic size by eight years of George W. Bush--has doubled again because of the recession. (I strongly suspect, and hope to show, that one reason that federal revenues have become so recession-sensitive is that they are so largely composed of payroll taxes.)

Now the solution to both of these problems, is, actually, rather obvious: a return to high marginal tax rates--something between 50%, which is common in Europe,and 90%, which the US levied from the time of the Second World War until 1965--on high incomes--say, incomes of over $2 million a year--from whatever source derived. If quick profits will go the federal government, managers will no longer seek them. There will be far more incentive, as there was half a century ago, to re-invest profits in expanded firms, actually producing more, rather than fewer jobs. And we will have a prospect of a long-term reduction in the deficit.

Yes, by historical standards, this is obvious--but thirty years of Republican propaganda and lobbyists' contributions have made this solution not just impossible, but unmentionable. This morning's Washington Post informed me, to my amazement, that the Obama Administration does not even intend to allow various Bush tax cuts to lapse! We have found that enormous, largely untaxed incomes do not stimulate the economy: higher wages for average Americans do. But we can't even talk about this solution--it's comparable to suggestions that we stage a Leninist revolution, undo women's liberation, or bring back slavery.

Something even more striking is happening with regard to health care. Everyone seems to understand that we spend too much on it and can't afford to go on at this rate. But Republicans and lobbyists seem very close to having killed the public option because it would be a cheaper form of health care.. What we need, we cannot have. The broader problem is obvious. Cheaper health car4e means that many people will make less money out of health care--especially insurance companies and drug manufacturers. I have not heard even one participant in this debate suggest that there is something immoral about profiteering on medical care. Instead, the papers are filled with stories of the ways in which lobbyists are trying to make sure that a new bill will mean no less, and perhaps more, money for health care interests.

I am concerned by all this because I think that both the political future and that of the Obama Administration depend on facing these issues squarely. A health insurance "reform" that costs even more money will eventually have huge political costs for Democrats. Endless deficits with no end in sight will pose the same problem, and the collapse of yet another Wall Street bubble could easily return the Republicans to power. We cannot solve these problems without removing some of these taboos. The press, which consistently gives the most space to the shrillest voices on the right, has been no help either. The Administration has shown the courage to defy the conventional wisdom on several foreign policy issues, including missile defense and Iran, without apparently incurring political costs. Let us hope that it finds the courage to do the same on the far more critical domestic front.