Old Medicine for New Ills

The recent crisis in the financial markets outed not only a Francophonic fraud, but also Republican rigidity. When banks need to “write down” their loans because assets securing the loans have lost value, money disappears from the economy. That money must quickly be replaced if markets are to remain secure. The quickest, most effective way to keep enough money circulating is for the government to take measures to get money to those who are most likely to spend it. Unsurprisingly, those most likely to spend their money are those too poor to pay any income tax. And those least likely to spend are those who have more than enough money to pay their bills, and who do pay income tax, especially the wealthiest Americans.

Yet the Republican response was to endorse tax rebates that don’t benefit the neediest, and to urge extending the Bush Administration tax cuts for the wealthy, due to expire in 2010. John McCain was a notable proponent of the latter measure. Now if those tax cuts promoted continued economic growth in the first place, why are we facing a recession now? If the Bush tax cuts were the economic panacea their advocates claimed, we would be worried about inflation, not recession.

Republican economic thinking is consistent no matter what the economic circumstances: cut taxes on the wealthy and those with the largest incomes. Yet this inevitably hurts the middle class and the poor, on whom both economic and social stability depend.