A decade and a day ago, this country was on a path to invest in its future, rebuild its infrastructure, and pay down the debt incurred after decades of weapons buildup during the Cold War. Not everything was perfect, but as far as debt reduction went, we were on the right path.
Then, on June 7, 2001, the federal government gave up on planning for the future. It wasn't the Head in the Sand Act, but when President Bush signed the Orwellian-named Economic Growth and Tax Relief Reconciliation Act, he made it official: the government was less concerned with ensuring future prosperity than currying favor with wealthy campaign donors.
The bill's proponents pushed the bogus "trickle down" economic theory, which holds that lower tax rates for the wealthy will cause economic growth. When the wealthy get wealthier, the theory goes, that extra income will be used to create businesses, jobs, and pay raises, and end up in the hands of the middle class and workers. The economic hucksters were half right. Thanks in part to government policies, income levels for the wealthiest 400 taxpayers more than doubled between 2001 and 2007.
But it was all a mirage. While the rich got richer, median household incomes dropped 4 percent during President Bush's time in office. Low interest rates blunted the effects of this income drop, as cheap credit made the middle class think that they were doing better than their parents. And, just when many analysts thought that the economy was at its strongest, the whole facade came crashing down.
Within two years, the country was mired in two wars, which swiftly turned into extensive nation-building endeavors, without asking the wealthiest in our society to sacrifice to pay for them. Military spending surged, increasing 81 percent between 2001 and 2010. In all, President Bush increased the federal budget by 104 percent, including a 96 percent increase in discretionary spending. Meanwhile, bridges collapsed and states, facing increased costs without additional revenue, tightened budgets, causing public schools and libraries to face dramatic cuts. When the financial deregulation of the 1990s caused Wall Street to implode, triggering a global economic downturn in 2008, the crisis further reduced revenues and prompted a massive bank bailout package. It also required hundreds of billions of dollars in emergency financing to keep businesses open and to provide a safety net, however modest, for the disadvantaged.
Now, a decade into this devastating economic experiment, elected officials are talking about the need to dismantle social safety networks that millions of Americans depend on, like Medicare and Medicaid, give up on implementing clean drinking water and other environmental protections, and fundamentally remake the role of government, just to pay the bills. Even the idea of government lending a helping hand to citizens struck by tragedy is being questioned. House Majority Leader Eric Cantor said that he would not extend aid to the devastated town of Joplin, Missouri -- where a deadly tornado has left over 100 dead -- without finding a way to offset it through budget cuts.
Despite the overwhelming evidence that the lowest tax rates for the wealthy in decades failed to lead to meaningful growth, that deregulation led to our current economic situation, and that the tax cuts and economic slowdown are responsible for the majority of the federal budget deficit, the party that pushed these disastrous policies is pursuing what Ezra Klein called "now-more-than-everism." Essentially, they're saying that with the economy in shambles, we need to do more of what caused the crisis in order to solve the crisis.
Lowest tax rates since the 1950s not enough to stimulate growth? Cut them further. Deregulation led to economic meltdown? Blame any remaining regulations and eliminate those, too. Stressed social services leave some people in poverty? Slash funding and claim that basic benefits don't help the economy.
In the wake of the Great Depression, President Roosevelt's administration pursued innovative economic policies that alleviated the worst of the hardship and addressed the root causes of the collapse. The Works Progress Administration provided jobs that put people to work building up America's infrastructure and protecting the environment. Stringent new regulations on banks and protections for consumers reduced the incentives for risk and kept the markets stable for decades. The administration did this while running large budget deficits and serving as the lender of last resort because Roosevelt and his advisers rightly believed that is the government's role in a financial crisis.
Such policies are needed once again as our country faces an increasingly severe revenue crisis. Importantly, we can get ourselves back on track in ways that not only are fiscally sound, but good for the environment.
We must end corporate polluters' ability to pawn the true costs of their pollution off on the rest of society. The health care, environmental cleanup, and other costs created by pollution -- externalities -- ought to be paid by the polluters. A carbon tax is one of the most important "polluter pays" policies that we could implement to generate much-needed revenue and help eliminate the deficit, as well as reduce climate pollution.
Additionally, investments in clean energy and cleaner transportation alternatives can create jobs, stimulating the economy and generating new revenues. And policies that limit harmful currency speculation, such as a Tobin tax on large currency trades, can raise revenues that can both pay down the debt and address urgent priorities like climate change.
Obviously, we should cut the fat and waste in government spending where it exists. The chief example is stopping tens of billions of dollars of wasteful subsidies to polluting industries. But at the same time, we must realize that much of what the government does, such as enforcing the Clean Air Act to protect Americans' health, is good for the public, and we must prevent cuts to such urgent priorities. Instead of making harmful cuts, we must prioritize raising revenue; we should use innovative methods, like a carbon tax, as well as more traditional measures, such as a sensible income tax rate for the wealthiest few -- there's no reason Warren Buffett should be paying a lower tax rate than his secretary. Importantly, we need to reform our tax code so that it's free from corporate loopholes.
Far from being broke, the United States is the wealthiest country in the world. We have the resources we need to invest in true priorities, so long as those with the most in our society contribute their fair share.
Today, on the tenth anniversary of the Bush tax cuts, people are calling their members of Congress to stop playing games and start solving problems. You can join them here: http://action.foe.org/p/dia/action/public/?action_KEY=6994