posted November 14, 2010
Historical Parallels and the 2010 Midterm Elections

What do Jimmy Carter, Bill Clinton and Barack Obama have in common? It’s not that they were all Democratic Party presidents. That’s obvious. But sometimes the less obvious is by far the more revealing. Consider the following interesting parallels among the three:

First, all came into office as a result of Republicans and corporations wrecking the economy as a consequence of policies benefiting business and wealthy investors. All three then failed to clean up the mess, lost badly in their first midterm elections, and then turned ‘right’ to govern as moderate Republicans.

In the 1970s it was Richard Nixon who pushed through pro-business tax cuts, devalued the US dollar, imposed a freeze on wages, and promoted union busting in the construction industry. The result was accelerating inflation, the collapse of several key banks, followed by the deep recession of 1973-75, falling wages and rising job loss-not to mention Watergate and other scandals.

Enter Jimmy Carter in 1976 with both houses of Congress firmly in the hands of Democrats. After failing to check inflation or reduce unemployment by much during his first two years in office, 1977-78, Carter quickly caved in as business opposition intensified. He then moved right and governed his last two years as a moderate Republican, refusing to push Labor positions on union picketing rights or jobs and advocating business friendly tax cuts. The outcome of his ‘rightward’ shift was Ronald Reagan.

Reagan once again proceeded to wreck the economy, creating an even worse recession in 1981-82, attacked unions even more aggressively than Nixon, provided $752 billion in business and investor tax cuts, passed policies undermining pensions and creating tens of millions of part time and temp jobs at the expense of full time permanent jobs. The result was housing crisis of 1985-89, collapse of thousands of savings and loans at a cost of $500 billion to taxpayers, a financial implosion of the corporate junk bond market, a recession in 1990-91, and annual federal government budget deficits in the hundreds of billions of dollars for the next three decades.

Enter Bill Clinton in 1992, again with Congress firmly in Democratic party hands. After a brief failed attempt to clean up the Reagan mess and pass healthcare reform, Clinton was trounced in the 1994 midterm elections and lost Congress. Like Carter, he then similarly moved right after his first two years to govern as a moderate Republican. For the rest of his term in office from Clinton we got ‘free trade’ via NAFTA, special trading rights for China, and the loss of tens of millions of jobs as a consequence of both. We got pro-business tax cuts, pension contribution ‘holidays’ for businesses creating a crisis in defined benefit pension plans, accelerating costs of healthcare as health insurance companies were given a free pass to raise prices, welfare reform, proposals by his administration to invest social security in the stock market, the dot.com bubble and financial bust, and the recession of 2001. Clinton’s major economic ‘claim to fame’ was that he balanced the US budget one year. But he did that by diverting hundreds of billions of surplus money from social security payroll taxes to the general US budget.

Then came George W. Bush in 2000. What followed was even greater tax cuts for businesses and investors-more than $3 trillion worth during his first term alone. The weakest job growth in the decade since the 1930s. More ‘free trade’ via CAFTA. Millions more jobs lost to China. Policies encouraging pensions collapse. More proposals to privatize social security. More runaway healthcare costs and inflation. And a housing bubble and subsequent financial collapse in 2007-08, leading to the worst economic recession since the 1930s, with massive job losses and millions of foreclosures for homeowners.

Then came Obama, yet a third time promising change. And once again, a third time, with a House and Senate firmly in Democratic control. Once more the result was a failed clean up the mess followed by major Democratic losses in the midterm elections and growing evidence by the day of yet another pending ‘right’ shift by a Democratic president and his party.

Upon entering office in 2008 Obama moved briskly to bail out the banks and large corporations, to the tune of more than $5 trillion. Banks were allowed to get all the money they needed from the Federal Reserve at zero interest rates. Auto companies got nearly $100 billion. Insurance companies more than that. Meanwhile homeowners were unable to even get their mortgage rates modified a few interest points. After 3.5 million foreclosures in 2007-08, in 2009 3.2 million more homes were foreclosed. In 2010 even more are projected, as around 3.4 million will lose their homes. Corporate profits and stock prices, on the other hand, have returned to pre-crisis levels, banks sit on $1 trillion in cash and refuse to lend, and non-bank businesses enjoy a cash hoard of $1.84 trillion and refuse to invest in job creation. Today more than 25 million American workers are still effectively unemployed.

There’s clearly a pattern here. 1978, 1994 and 2010-all major midterm election losses following majorities and historic opportunities for Democratic presidents and Congress to fundamentally change policies and to clean up economic crises. The pattern is one convenient for Corporate America: Republicans create the mess. Democrats then fail to clean it up. Democrats are subsequently blamed for the mess itself, thus paving the way for another round of more of the same Republican-Corporate direct rule and policies. The problem, however, is that over the past three decades it’s becoming more obvious that with each round the mess gets bigger, more serious, and more difficult to resolve.

What the pattern suggests strongly is that Democrats and their presidents are increasingly inept and ineffective. Even with sufficient majorities they are consistently unable to deliver. That growing ineptitude is perhaps the strongest argument in favor of a creating a Labor party. If the Democratic party cannot deliver, not once but three times in the last three decades, what more evidence is needed to create another party? In normal situations, three strikes and you are ‘out’. The Democrats have had their ‘three strikes’. Now it’s time for real change, not just empty talk of change as we’ve seen the past two years.

The trade unions threw more than $200 million in members’ money in the recent midterm election, and more than twice that in 2008. What did they get for it? Card check didn’t even get out of committee. Union members were threatened with having to pay for the Obama health care bill by taxing union health insurance premiums. And with no public option in the healthcare bill, those same premiums nonetheless are now being raised by insurance companies 10-25% this year as a general rule. Obama’s $787 billion stimulus bill provided less than $50 billion for direct job creation, while more than $225 billion went to business tax cuts that have been pocketed and not used to create jobs. And despite hundreds of billions given to States and school districts in the original stimulus package, more than 250,000 public employees have lost their jobs thus far in 2010. In short, not a very good investment for half a billion dollars of union members’ dues money.

In conclusion, there’s one more interesting historical parallel worth noting. When FDR entered office in March 1933, like Obama he too focused first on bailing out the banks. But after a short recovery following the bank bailouts in March 1933 the economy again faded by the end of 1933. It then stagnated further in 1934 with no sign of sustained recovery, much like has happened in 2009-2010. Facing midterm elections in November 1934, FDR and his advisors did something Obama recently did not in 2010. They drew up plans for the New Deal: for a Works Progress Administration (WPA) program that directly created 8 million jobs (equal to 30 million in today’s labor force). Programs like the Home Owners Loan Corporation (HOLC) to save and keep homeowners in their homes. To create a social security retirement system shielded from corporations and stock markets. To help unions organize (Wagner Act) and to protect wages from falling (Fair Labor Standards Act). And so forth. FDR then appealed directly to workers, farmers, and consumer households-not to so-called ‘independents’, as today’s business press and Democratic party advisers are recommending Obama (like Carter and Clinton before) should do. The new programs generated excitement and a belief that recovery was not only for banks and corporations. The result was Democratic party gains in 1934 midterm elections, not losses.

The 2010 midterm election was not a mandate for Republican policies. Polls show fewer Americans support the Republican solutions than even the Democrats’. The election was rather a clear statement that what the Democrats have delivered to date was far less a ‘change’ than the electorate had ‘hoped’ for and expected, with more than 25 million still jobless and home foreclosures projected to exceed 10 million by end of this year. It is furthermore a fact that, of the more than 60 million who voted for Obama and Democrats in 2008, barely 29 million voted for them in 2010. More than 30 million stayed home. Compared to a drop of only 12 million for Republican candidates in 2010, to 42 million.

If the Democrats and their presidents are no longer interested in appealing to those harmed most by the current crisis with programs and solutions to the crisis that are clear and convincing, that are more than empty platitudes about ‘change’, then certainly a Labor Party should do so. For it is a fact that the two wings of the parties of business-i.e. the Republicans and Democrats-are in the process of fracturing over the longer term. That is already clear on the right, as the Tea Party drives a wedge into the Republican, to emerge eventually at some point perhaps as its own independent political party. It is also only a matter of time when a similar process occurs on the left within the Democrats as well, as either wings of the two parties of business prove unable to resolve the current crisis. As the saying goes, perhaps now is the time ‘to seize the moment’. It is clearly time to begin building an independent party of Labor.

Jack Rasmus

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