But because the first “economic stimulus” was much too small in scale and too limited in scope, the Obama administration undermined the legitimacy of government action. The president never proposed a second stimulus. In fact, his 2010 State of the Union address proposed spending cuts, as the president indicated that too big a federal deficit, which had reached 10.1 percent of the economy in his first year, could produce a double-dip recession.42
Conservative economists allied with the Republican Party argued that “public spending would be offset by a fall in private consumption and investment”—which was wrong theoretically, as the quick experiment of the economic stimulus demonstrated. They argued too that fiscal restraint gives private businesses the confidence to grow investment, something Krugman called “sheer ignorance” and political opportunism, as we wait for the “confidence fairy.” Mark Blyth in Austerity called it “zombie economics.” In fact, “everyone [who] cut their budgets as their economies shrank” saw “their debt loads get bigger, not smaller.” Austerity had the perverse consequence of having “the poor paying for the mistakes of the rich.”43
So, at this fragile juncture “the very serious people” talked about “growth-friendly consolidation,” “cutting the welfare state in the name of producing more growth,” and “preemptive tightening.” The German elites believed wrongly that fiscal recklessness had produced the financial crisis, so “fiscal prudence” made this a morality play in which austerity is “penance,” even if it made no economic sense.44
The “very serious people” in 2010 weighed in from the OECD: “The U.S. government should immediately move to slash the budget deficit,” and “the Federal Reserve should raise short-term interest rates and dramatically by the end of the year.”45 The European Central Bank called for “confidence inspiring policies” that “will foster economic recovery.”46
The Greek crash was a red flashing light for all those who thought this accumulating debt would not come with a price. The Greek story is longer and more complicated than that, but Ireland, Spain, and Portugal, each with 23 percent unemployment, would also pay a big price for this imposed austerity.47
The long-term unemployed and their pain would be the face of this pathetic recovery and failure to act boldly. Ultimately, U.S. unemployment would stay above 7.8 percent for forty-six months, the worst employment conditions since the Great Depression.48
Yet the failure of the government to act with greater boldness, the palpable unfairness, and the failure to educate the public allowed the elites to shift from “unemployment to a focus on debt and deficits.” Elites gave “ominous warnings about the danger of excessive debt” and leaders of both parties believed rising debt represented “an existential threat.”49
Congress created the National Commission on Fiscal Responsibility and Reform, chaired by former senator Alan Simpson and Erskine Bowles, colloquially known as Simpson-Bowles, which met starting in April 2010 and issued its report on December 1, 2010. The commission had equal representation from both parties, including Congressman Paul Ryan, and its recommendations were never taken up by the Congress. Nonetheless, it strongly reenforced the elite conviction that reducing government deficits was the highest priority.50 It legitimated the urgency of cutting government spending.
The new GOP House had their mandate to stop the spending and get to the budget austerity that America needed.
Unemployment was stuck at 7.8 percent at the end of 2010 and the economic stimulus of federal spending and tax cuts was set to expire in the coming months, yet the Tea Party candidates ran on a “Pledge to America” that committed them to cut federal spending by $100 billion. The Republican caucus and leadership agreed to press for $61 billion in cuts this year, which disappointed the Tea Party freshmen. And when that bold spending cut was passed by the House, it was quickly dispatched to the dustbin by a U.S. Senate controlled by the Democrats. Speaker of the House John Boehner was determined to get to the amount of $61 billion in increments of $6 billion with every budget extension and at every opportunity, but the freshmen viewed this incrementalism as a slap in the face. Each step of the budget process was taking the Congress toward a train wreck.51
South Carolina’s four freshmen huddled in a basement conference room with Congressman (“You Lie”) Joe Wilson to decide whether to vote against the speaker just two months into the new Congress. Each recited from scripture and Jeff Duncan read from Isaiah: “He gives power to the faint, and to him who has no might he increases strength.”52 The speaker proposed a one-week continuing resolution that included $10 billion in domestic cuts but funded the Defense Department for a year. However, a growing group of Tea Party members voted no, to the applause of outside Tea Party groups.
The U.S. Treasury announced that August 2, 2011, was the deadline when the United States would begin defaulting on its debts, unless the debt limit was raised. Even though threatening to not raise the debt limit and jeopardize America’s credit rating has never been seen as permissible by either party, these times were different. The House passed its answer, “Cut, Cap and Balance”: it cut the deficit in half immediately, capped future federal spending to 18 percent of GDP, and required passage of the Balanced Budget Amendment—if the debt ceiling was to be raised. It was tabled three days later in the Senate.
The near impasse created a super committee that would, by September 8, find $1.5 trillion in deficit-reducing measures. The Republicans would not accept any revenue-increasing measures and the Democrats would not accept steps to disproportionately cut domestic spending. The predictable impasse would mean a mandatory sequestering of the budget starting in 2013. The cuts would be made equally from defense and domestic spending that the conservatives tried unsuccessfully to undo.53
The GOP leadership turned to Democrats in the House and passed three appropriations bills on November 17. A stunning 101 House Republicans voted against the speaker, and the alienation of the Tea Party Republicans was now locked in.54
The Senate Minority Leader Mitch McConnell and Vice President Joe Biden reached a deal that ended the Bush tax cuts for those earning over $450,000 per year, but two thirds of House Republicans voted no. This Congress was set to be the most unproductive Congress in history, but that missed the real story. The Tea Party members and activists cut federal spending and pushed America into a period of austerity.55
When President Obama in a joint session address urged the Congress to support the American Jobs Bill, he repeatedly called out, “Pass the Jobs Bill.” But it was dead on arrival, and the president would get no further economic stimulus out of the Congress.
The need to lift the debt ceiling was now the primary point of leverage for the House Republicans. Speaker Boehner’s plan proposed $1.2 trillion in cuts and spending caps to raise the debt ceiling to the end of the year. It created a bipartisan super committee of twelve members of Congress to find another $1.8 trillion in savings that could not be amended by the Congress. The Tea Party members balked. The cuts were not big enough, and they would not support raising the debt ceiling. This time, the members went to the chapel and Mick Mulvaney read from Proverbs 22: “The rich rule over the poor, and the borrower is the slave to the lender.”56
The White House and Congress were at an impasse with just days left before a potential default and government shutdown. Again Biden and McConnell reached an agreement. The president got the debt ceiling increase, but to get it, spending was cut by $1 trillion over the next decade, as Congress created annual spending caps on discretionary federal spending caps. If the caps were exceeded, the government would implement across-the-board cuts to both defense and nondefense spending. It created a super committee to find another $1.5 trillion in deficit reduction.
The Tea Party members voted against this deal. The cuts were not drastic enough. The cuts were not permanent, and there was no requirement that Congress pass a balanced budget amendment.57 Yet they shifted the trajectory of federal spending toward deficit reduction and crowded out any debate about how to g
row the economy with increased investment.
The budget caps and the acceptance of the virtues and value of austerity produced sustained yet constrained increases in domestic discretionary spending over the decade to follow. The percent of the budget devoted to domestic discretionary spending was 23.4 percent in 2008–2010, but dropped to 21.8 percent in 2012—the first budgets shaped by the Tea Party’s battle—and averaged 20.3 percent between 2013 and 2017.58 They successfully produced a decade of federal budget austerity, when the economy desperately needed investment spending.
The idea that America could make public investments just evaporated in this era. From 2010 to 2018, the American Society of Civil Engineers’ rating of America’s infrastructure dropped to D+, and for highways, the 2017 report stated that there was an $836 billion deficit in capital needs, meaning America couldn’t even keep up with repairs of its own roads. For the first time ever, this Congress could not reauthorize the Highway Bill.
And do not lose track of the assault on spending in the states after 2010. All but four states in the country cut state spending and public services when the financial bubble burst, the economy contracted, and jobs disappeared. But the Tea Party came to power after the financial crisis was stabilized and the country was slowly gaining new jobs. So public sector employment had stabilized, but not in the states where the GOP had newly gained control: the twelve most solidly red states accounted for over 70 percent of the public-sector jobs eliminated in 2011.59
The Republican-controlled states led the way, slashing spending beyond what was needed and declining to use their “rainy day” funds to forestall cuts. In Texas, the Republican-controlled legislature, fueled by Tea Party supporters, passed a $172 billion two-year budget, an 8.1 percent decrease from prior spending levels. The budget cut $4 billion from public schools and $1 billion from higher education and financial aid to more than 40,000 students, and eliminated 5,600 state employee jobs. In the face of a $23 billion shortfall and a no-tax-increase budgetary policy, Governor Rick Perry and his allies in the legislature refused to avail themselves of more than $3.2 billion of the $9.7 billion rainy-day fund. GOP-controlled states oversaw a 22 percent decrease in education spending while state schools’ tuition rose 31 percent on average.60
While education spending was cut almost everywhere to balance budgets, twelve states simultaneously cut corporate taxes and taxes on the wealthy, ensuring spending cuts would be larger than necessary. Accordingly, Louisiana, South Carolina, and Iowa joined Texas in refusing to use their massive rainy-day funds to avoid drastic cuts in state spending on vital public services. These GOP-controlled states have since gone a step further, seeking to lock in the new spending levels and legally bar future tax increases through constitutional amendment.61
In this brave new world, unemployment insurance—a state-administered, contributory program that provides workers up to twenty-six weeks of benefits if they lose their job without cause—was now seen as “welfare.” That equation was only affirmed when millions were thrown out of work by the financial crisis and many remained unemployed through the Great Recession. Republicans determined that extended unemployment benefits removed the incentive to work. While the national unemployment rate stood at 9 percent at the worst of the Great Recession in 2009–2010, the U.S. Chamber of Commerce lobbied for unemployment insurance reform, “pressuring workers,” in the Economic Policy Institute’s words, “to take any job offered, no matter how low the wages or how poor the conditions.”62
The GOP-controlled states enthusiastically stopped the countercyclical spending in time of economic downturn and assured the states affirmed the austerity the Tea Party imposed nationally.
DECONSTRUCTING GOVERNMENT
The Tea Party-Evangelical–dominated GOP disrupted and shifted the ideological posture of the House members to the right in unprecedented fashion, yet Democrats still controlled the White House and the U.S. Senate, though no longer with a filibuster-proof majority. So, the Tea Party elected leaders were left with the ugly tactic of going nuclear: threatening to close government, closing it—and using the gridlock to drive a polarization that stopped President Obama from doing more damage.
The states, however, were very different. After 2010, the GOP gained enough governors, executive branches, and legislatures to move the Tea Party’s anti-Obama and anti-government agenda. They passed immediate sweeping tax cuts for corporations, the energy companies, and the wealthiest, which were paid for with major cuts to public services. They relished cutting the largest state expenditure, education and teacher salaries, which meant breaking the power of the education unions.
The GOP won a deeper wave in 2014 when President Obama tried again to convince working people and the Democratic base that his administration had created millions of jobs and the economy was moving in the right direction. That out-of-touch strategy gave the GOP control in half the states and enabled them to escalate their efforts to deconstruct government.
This effort got a lot of help from the American Legislative Exchange Council (ALEC), which was funded by the Koch brothers and other conservative philanthropists, like the Coors, Olin, Scaife, Milken, and Bradley families. It was supported by the U.S. Chamber of Commerce and the National Association of Manufacturers, tobacco and pharmaceutical companies, and the fossil fuel companies that evolved over time. They got policy support from the Cato Institute, Mercatus Center, the Heritage Foundation, and Grover Norquist’s Americans for Tax Reform. And Americans for Prosperity helped mobilize in constituencies, buttressed by the Tea Party activists in 2010.63
After the 2010 wave election, the “troika” of ALEC, the State Policy Network, and Americans for Prosperity allied with the local Tea Party conservative activists to push “policy plagiarism” to a new level of success, as described by Alex Hertel-Fernandez’s State Capture. One third of the state legislators belonged to ALEC, which kept their sessions secret, particularly when meeting with the host companies. The legislators used thousands of prototype bills created by ALEC, and two hundred of them became law after the Tea Party took control in the states.64
REFORM STATES
The Koch brothers and their allies prioritized deconstruction of the government in Wisconsin and North Carolina because those states were key to unpicking the Democrats’ Electoral College majority, but, just as important, their leaders had once led efforts to reform politics and check corporate power, led in adapting to big social changes, and made deep investments in education and the university system.
Governor Robert La Follette of Wisconsin had achieved progressive reforms in the early 1900s that shaped the political culture of the state thereafter and the era of progressive reform nationally. La Follette believed government had to be a check on the railroads, utilities, and big businesses and the local party machine that they bought off. Wisconsin created a state minimum wage and unemployment insurance. It introduced the referendum to give voters’ a bigger say. And Wisconsin raised the compulsory school age to sixteen in 1920 and launched an experimental university system in 1927.65
North Carolina stood out from other southern states as more tolerant and forward-looking in the 1960s. New South governors, beginning with Terry Sanford, urged racial reconciliation, not resistance, during the civil rights era. They welcomed an alliance with business that supported their approach on race and education. Governor Jim Hunt was elected four times as the “education governor” in the 1970s through the 1990s. And uniquely in the South, he introduced public funding for the election of judges, along with early voting and same-day registration to expand the electorate.
Well, just two months after his election in 2010, Governor Scott Walker of Wisconsin proposed across-the-board tax cuts, but they barely disguised the $2.3 billion in tax cuts for the wealthy. Those earning over $300,000 a year got an $1,800 cut, while those in the middle of the range got just $200. The top 1 percent got $420 million over five years, and the owners of the Milwaukee Bucks got $400 million in tax breaks to build their new stad
ium.66
The consequences became clear before very long. The Walker administration cut $1 billion in payment to local governments. Then it cut $1 billion in public school funding.
Walker embraced the ALEC playbook like few others, enacting 148 new laws from its templates. Act 10, passed on June 29, 2011, was the most important in destroying the public sector unions in Wisconsin. It prohibited collective bargaining over anything other than wages. It prohibited the collection of union dues and required a 51 percent majority of an annual vote for a union to maintain its certification.67
And on March 8, 2015, Governor Walker signed the legislation that made Wisconsin of all places a “right-to-work state.” Within a short period, state and local union participation dropped from 50 to 31 percent. The National Education Association’s share of all contributions to state and local campaigns dropped from more than 5 percent in 2012 to under 2 in 2014 and 1 in 2016. The Koch brothers must have been proud.
Governor Walker went after the teachers and their union. His legislature cut teacher pay on average by 2.6 percent and their benefits by almost 20 percent over five years. They put further pressure on the public schools at the same time by giving mostly Catholic parents an annual tax deduction of $10,000 for Catholic school tuition.68
Wisconsin cut funding for the state universities by $250 million, putting it in the ranks of an elite set of GOP-controlled states who went after the universities, led by Louisiana and Pennsylvania, with Kansas and Wisconsin cutting per-student funding by $3,000 a year between 2011 and 2017.69 Governor Walker described the professors in the University of Wisconsin system as lazy and unwilling to work, and welcomed a culture war that empowered his assault on government.70
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