Legal Commentary

Death of Reaganism

We can't tell yet just how painful this economic crisis will eventually get, but it's fair to say that there'll be some of us who suffer pretty badly.

There's going to be plenty of bad news, so I'd like to start concentrating on the silver linings in this economic cloud. When Rep. Darryl Issa opposed the Paulson bailout plan last week on the grounds that it would put "a coffin on Ronald Reagan's coffin," he was pointing out something we all should cheer: the death of Reaganism.

Reaganism describes the political climate that I've lived in ever since Ronald Reagan took office in 1981, at just about the time that I grew old enough to become politically aware. I think of it as a mix between right-wing economics and a "sunny optimism" that (a la Walt Disney) has little to do with reality. It's a mix of neoclassical economics and infantile consumerism.

Ever since Reagan, the idea that government intervention in "the free market" is harmful has been the default ideological position that politicians have had to genuflect toward in order to get elected. Republicans have been the dominant political party in the age of Reagan because they embraced the free-market orthodoxy most energetically. Bill Clinton was a Democrat, but he won elections by telling us that "the era of big government is over" and governed as a welfare-cutting, NAFTA supporting center-right politician.

Whatever else has happened over the past 30 years, we've repeatedly rewarded politicians who've told us that tax cuts and free trade would make us prosper. We've ignored calls for raising the minimum wage, watched without much interest as unions decayed, embraced the Wal-Mart business model of low-wage, part-time jobs in exchange for cheap merchandise imported from China, and wimpered ineffectually at the inevitable consequences of a health insurance system placed in the hands of the market -- namely, rising premiums and a growing number of people without health insurance.

As we continued to send Republicans and free-market Democrats to Washington, we didn't pay much attention to the fact that year-by-year the regulations that governed the financial industry were getting scaled back. "Voluntary regulation" was advocated so often that we forgot how oxymoronic a thing it was.

At the same time that we were dismantling the protections of the regulatory state, we were taking huge risks by living beyond our means. Our real wages weren't going up, but dammit, we weren't going to do without -- especially since our politicians always seemed more worried by slowdowns in consumer spending than by declines in the household savings rate. We refinanced homes to go on vacation or buy that new SUV; we ran up credit card debt, we spent everything we made and then some. As our households went, so did our government: running deficits almost every year and piling up trillions of dollars in debt. No politician who would actually raise taxes or cut spending was allowed to survive.

When George W. Bush decided to take us to war, he told us to go shopping. More household and government debt accumulated.

The specific etiologies of this credit crisis weren't all foreordained, but how could we have avoided a serious correction when housing prices were so out of control? (Via angry bear.)

Reaganism was unsustainable because the free-marketeerism and consumerism that it was based on are not grounded in reality. Free markets on a national or global level aren't self correcting, and they are disruptive:

We are now learning what countries across the developing world have experienced over three decades: unstable and inequitable neoliberal economics leads to unacceptable levels of social disruption and hardship that can only be contained by brutal repression. Add that to the two other central charges against deregulated capitalism: first, it may create wealth but it does not distribute it effectively; and second, that it takes no account of what it cannot commodify - neither the social relationships of family and community nor the environment, which are vital to human wellbeing, and indeed to the functioning of the market itself. Ultimately, neoliberal capitalism is self-destructive.

Consumerism is built on irresponsible hedonism -- both for CEOs with golden parachutes and for hockey moms with plasma-screen TVs bought on home equity loans.

Now that reality has caught up to us, we can forgive Darryl Issa for sticking to his conservative principles in opposing the bailout, and rejecting the modern Republican principles of socializing the risk while privatizing the benefits. Was the bailout a good idea? Depends on whether you trust the Bush/Paulson/Frank leadership team (I remain suspicious). We're probably in for a lot of pain, but thankfully, Reaganism is now dead.

Full post as published by Glorfindel of Gondolin on October 06, 2008 (boomark / email).