… well, one could argue it’s here now, just getting more visible day by day.
Thank goodness Billmon at the Whiskey Bar hasn’t stopped blogging. This clear and comprehensive post titled Building A Bridge To The 19th Century is about how Bush’s tax cuts have exacerbated and accelerated the economic inequalities in North America, and shows us just how useful it has been to “give middle-class voters back their money”.
In other words, the economic structure (which is to say, the social structure) of Old Deal America has been at least partially recreated. But that means workers and employers are once again confronting each other directly across the table. If wages need to be frozen, or cut, to keep them in line with the global competitive realities, or to meet Wall Street’s relentless demands for earning growth – employers will have to do it. Inflation isn’t going to do the job for them. Conversely, if workers want a raise, they’re going to have to fight for it. The New Deal social convention of “X plus inflation” won’t do it for them.
This is the economic reality we’ve been living with since at least the early ’90s – although the bubble years temporarily obscured it and the post-9/11 years temporarily distracted everyone’s attention. It’s what the world the supply siders and the McKinley conservatives have been struggling to create (or I should say recreate) since the early days of the Reagan revolution.
The trade off for returning to the Old Deal, we’ve been told, will be greater economic efficiency and faster growth. But that still leaves the hoary Old Deal question of who benefits most from that trade off. It’s a question that will become even more urgent if the promised faster growth isn’t fast enough to satisfy that vast American middle class I mentioned earlier.
More to the point, growth – no matter how fast – may not deliver the kind of social and political peace it did during the New Deal era, not if the process of slicing the economic pie is going to be returned to the workplace – the original cockpit of the class struggle.
Bushonomics hasn’t so much created the problem as aggravated it. The underlying trends were all well entrenched when Bush took office, and are driven more by the incremental changes since the ’70s – declining union strength, increased global trade, disinflationary monetary policy, etc.
But by using fiscal policy (i.e. tax cuts) to further skew income distribution towards the tip of the economic pyramid – at a time when real wage growth has been particularly stagnant – Bush has given the process another shove forward. If nothing else, he’s generated an economic expansion with some definite 19th century qualities to it – luxury above, relative austerity below.
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