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| Sorry, Dad, but your Republican Party has ruined the U.S. economy. |
My family were staunch Republican supporters for many years. Growing up, I only heard about how irresponsible the "tax and spend" Democrats are. They waste our money and spend "pork" on their supporters and don't serve the interest of the country. And yet, the last 2 presidents who reduced the national deficit were Bill Clinton and Barack Obama.
Republicans believe that if you increase the wealth of the richest families in America, their spending will trickle down to lower income families. We'll all benefit if the wealthiest families benefit. But that has never happened.
The time of greatest economic prosperity in U.S. history was the 1950s. Dwight Eisenhower was President. He was a Republican and everyone believed his policies were responsible for that economic growth. But the truth is that his administration inherited an economy that was already booming.
The Great Depression deprived millions of families of wealth and income. President Roosevelt - a Democrat - was elected to office in 1932. Over the next several years he persuaded Congress to finance the New Deal, creating millions of jobs for Americans across the country.
The New Deal took the edge off the Depression but it didn't solve all the country's problems. Hunger and homelessness were reduced but it would not be until America entered World War II that the country returned to full employment.
Economists teach that the Depression only ended in 1946. The factories may have been turned back on but they built weapons, ammunition, and materials for the war. Millions of men were drafted into service.
And there was rationing. So much rationing that people couldn't spend their money on many things. And price controls ensured there would be no inflation. So people saved their money in the bank - or they invested in war bonds.
They saved and saved and saved money for years. And they earned interest on their war bonds.
By the time the war ended, everyone was ready to spend money. And that is how the U.S. economy became a consumer economy. Families had tens of thousands of dollars in savings.
But wait - where did all that money come from in the first place?
It came from Congress. It came from the U.S. Treasury. It came from government borrowing. Yes, the U.S. economy boomed because in the 1930s and 1940s the U.S. government sold billions upon billions of dollars in bonds. When the Roosevelt administration left the Gold Standard in 1933, it enabled the U.S. government to run on deficit spending.
Our entire economy has depended on government deficit spending ever since 1933. Prior to that time the government could only print as much money as it could replace with gold reserves held in Fort Knox or New York City. But after leaving the Gold Standard the United States could print even more money - because that money was now backed by debt.
Many people believe the U.S. didn't leave the Gold Standard until 1971, but that's not true. The U.S. government held the price of gold to $35 an ounce from 1933 to August 15, 1971. That was when President Nixon (a Republican) decided to unlock the price of gold. In other words, the U.S. government would no longer insist on paying exact $35 for an ounce of gold.
Until that time, private citizens could not own gold bullion. They could own jewelry and art made of gold but not bars, ingots, or coins made of gold. President Gerald Ford (a Republican) signed a law that allowed private citizens to own gold bullion again.
These changes in how the United States government treated gold turned it into a valuable trading commodity, subject to the vagueries of market speculation. The price of gold rises and falls as demand and supply rise and fall.
The government doesn't rely on gold for its wealth any more. Now the U.S. government issues debt to raise the money it needs. Every year Congress passes laws that set a limit to how much money the government can borrow for its needs. These limits are not determined by economic science but by political negotiation between the two major parties, the Democrats and the Republicans.
Meanwhile, Trickle Down Economics has failed to produce the common family wealth that Republicans promised it would. Instead, a change in the I.R.S. tax code in the 1980s created the resources that drove new economic investment in the 1980s, 1990s, and 2000s.
That was the introduction of tax-deferred investing plans. Although usually called 401(k) plans, there are other, similar plans. Tax-deferred investing sounds like a great opportunity for everyone. And as companies realized their pension plans were becoming too expensive to finance from their profits, they began offering tax-deferred investing plans to more employees.
Tax-deferred investing comes with a penalty. If you withdraw your money before retirement age for anything but a limited number of emergencies, you must pay a 10% penalty on top of whatever taxes you owe for that withdrawal.
The 10% penalty makes tax-deferred investing very expensive and unprofitable. In hard times people withdraw money from their 401(k) plans to cover their expenses. But those emergencies are not excluded by the I.R.S. tax code.
As Americans invested more wealth in their tax-deferred savings, that money was used to fund new startups and loans to large corporations. They built factories, office buildings, and shopping malls. For over 20 years America experienced a new economic boom based on private investment.
That created the illusion of a successful Trickle Down Economics policy, but the trickle effect didn't reach very far. Wealthy families pay private service providers like housekeepers, contractors, and other employees less-than-generous salaries. And it ends there.
America's economy boot-strapped itself with money borrowed from hard-working people like you and me. But the CEOs of the companies we financed with our savings rewarded themselves and their cronies with generous stock option plans that they denied to the employees who made their companies profitable.
Republicans took credit for all the private-funded economic growth but did nothing to protect the workers who funded that growth. Corporations exploited employees' wealth, or preyed on low income consumers. The banking system collapsed in 2007 after the millions of bad loans they made started failing, thus triggering the Great Recession.
The Bush Administration proposed expensive bailout deals for the banks and auto industries. Republicans hated these ideas but they lost control of Congress just long enough for the incoming Obama administration to pass the deals. And the United States government made a profit from saving America's largest corporations.
The plan paid for itself - and it was originally a Republican plan. But Republicans buried their heads in the sands and claimed this was bad for the economy, bad government, and something that must never happen again.
And that is why the U.S. economy has struggled so much during 2020. The Republicans refuse to do what is right for the country. They will do anything to increase the wealth of billionaires who obviously don't need help. They won't do anything to help the hard-working citizens of the country, including the 60 million people who regularly vote Republicans back into office.
