THERE’S PLENTY OF “SHOCK AND AWE” ON THE HOME FRONT:
Rolling Back the 20th Century
Liberal activists gasped at the variety and dangerous implications (the public might have been upset, too, but was preoccupied with war), while conservatives understood that Bush was laying the foundations, step by step, toward their grand transformation of American life. These are the concrete elements of their vision:
§ Eliminate federal taxation of private capital as the essential predicate for dismantling the progressive income tax. This will require a series of reform measures (repeal of the estate tax, a large tax cut, and a rollback on taxing dividends have already been accomplished). Bush has proposed another: establishment of new tax-sheltered personal savings accounts for the growing “investor class.”
Congress appears unwilling to swallow some of this, at least this year, but their introduction advances the education-agitation process. Future revenue would be harvested from a single-rate flat tax on wages or, better still, a stiff sales tax on consumption. Either way, labor gets taxed, but not capital. The 2003 Economic Report of the President, prepared by the Council of Economic Advisers, offers a primer on the advantages of a consumption tax and how it might work. Narrowing the tax base naturally encourages smaller government.
§ Gradually phase out the pension-fund retirement system as we know it, starting with Social Security privatization but moving eventually to breaking up the other large pools of retirement savings, even huge public-employee funds, and converting them into individualized accounts. Individuals will be rewarded for taking personal responsibility for their retirement with proposed “lifetime savings” accounts where capital is stored, forever tax-exempt.
Unlike IRAs, which provide a tax deduction for contributions, wages are taxed upfront but permanently tax-sheltered when deposited as “lifetime” capital savings, including when the money is withdrawn and spent. Thus this new format inevitably threatens the present system, in which employers get a tax deduction for financing pension funds for their workers. The new alternative should eventually lead to repeal of the corporate tax deduction and thus relieve business enterprise of any incentive to finance pensions for employees. Everyone takes care of himself.
§ Withdraw the federal government from a direct role in housing, healthcare, assistance to the poor and many other long-established social priorities, first by dispersing program management to local and state governments or private operators, then by steadily paring down the federal government’s financial commitment. If states choose to kill an aid program rather than pay for it themselves, that confirms that the program will not be missed. Any slack can be taken up by the private sector, philanthropy and especially religious institutions that teach social values grounded in faith.
§ Restore churches, families and private education to a more influential role in the nation’s cultural life by giving them a significant new base of income—public money. When “school choice” tuitions are fully available to families, all taxpayers will be compelled to help pay for private school systems, both secular and religious, including Catholic parochial schools. As a result, public schools will likely lose some of their financial support, but their enrollments are expected to shrink anyway, as some families opt out. Although the core of Bush’s “faith-based initiative” stalled in Congress, he is advancing it through new administrative rules. The voucher strategy faces many political hurdles, but the Supreme Court is out ahead, clearing away the constitutional objections.
§ Strengthen the hand of business enterprise against burdensome regulatory obligations, especially environmental protection, by introducing voluntary goals and “market-driven” solutions. These will locate the decision-making on how much progress is achievable within corporate managements rather than enforcement agencies (an approach also championed in this year’s Economic Report). Down the road, when a more aggressive right-wing majority is secured for the Supreme Court, conservatives expect to throw a permanent collar around the regulatory state by enshrining a radical new constitutional doctrine. It would require government to compensate private property owners, including businesses, for new regulations that impose costs on them or injure their profitability, a formulation sure to guarantee far fewer regulations [see Greider, “The Right and US Trade Law,” October 15, 2001].
§ Smash organized labor. Though unions have lost considerable influence, they remain a major obstacle to achieving the right’s vision. Public-employee unions are formidable opponents on issues like privatization and school vouchers. Even the declining industrial unions still have the resources to mobilize a meaningful counterforce in politics. Above all, the labor movement embodies the progressives’ instrument of power: collective action. The mobilizations of citizens in behalf of broad social demands are inimical to the right’s vision of autonomous individuals, in charge of their own affairs and acting alone. Unions may be taken down by a thousand small cuts, like stripping “homeland security” workers of union protection. They will be more gravely weakened if pension funds, an enduring locus of labor power, are privatized.
Looking back over this list, one sees many of the old peevish conservative resentments—Social Security, the income tax, regulation of business, labor unions, big government centralized in Washington—that represent the great battles that conservatives lost during early decades of the twentieth century. That is why the McKinley era represents a lost Eden the right has set out to restore.
Grover Norquist, president of Americans for Tax Reform and a pivotal leader in the movement’s inside-outside politics, confirms this observation. “Yes, the McKinley era, absent the protectionism,” he agrees, is the goal. “You’re looking at the history of the country for the first 120 years, up until Teddy Roosevelt, when the socialists took over. The income tax, the death tax, regulation, all that.” (In foreign policy, at least, the Bush Administration could fairly be said to have already restored the spirit of that earlier age.
Justifying the annexation of the Philippines, McKinley famously explained America’s purpose in the world: “There was nothing left for us to do but to take them all, and to educate the Filipinos, and uplift and civilize and Christianize them, and by God’s grace do the very best we could by them, as our fellow men for whom Christ also died.”)
But the right employs a highly selective memory. McKinley Republicans, aligned with the newly emergent industrial titans, did indeed hold off the Progressive advocates of a federal income tax and other reforms, while its high tariffs were the equivalent of a stiff consumption tax. And its conservative Supreme Court blocked regulatory laws designed to protect society and workers as unconstitutional intrusions on private property rights.
But the truth is that McKinley’s conservatism broke down not because of socialists but because a deeply troubled nation was awash in social and economic conflicts, inequities generated by industrialization and the awesome power consolidating in the behemoth industrial corporations (struggles not resolved until economic crisis spawned the New Deal).
Reacting to popular demands, Teddy Roosevelt enacted landmark Progressive reforms like the first federal regulations protecting public health and safety and a ban on corporate campaign contributions. Both Roosevelt and his successor, Republican William Howard Taft, endorsed the concept of a progressive income tax and other un-Republican measures later enacted under Woodrow Wilson.
Intentions Are Clear
George W. Bush does not of course ever speak of the glories of the McKinley era or acknowledge his party’s retrograde objectives (Ari Fleischer would bat down any suggestions to the contrary). Conservatives learned, especially from Gingrich’s implosion, to avoid flamboyant ideological proclamations. Instead, the broader outlines are only hinted at in various official texts.
But there’s nothing really secretive about their intentions. Right-wing activists and think tanks have been openly articulating the goals for years. Some of their ideas that once sounded loopy are now law.
For the first time since the 1920s, Congress, the White House and the Supreme Court are all singing from same hymnal and generally reinforcing one another. The Court’s right-wing majority acts to shrink federal authority, block citizen challenges of important institutions and hack away at the liberal precedents on civil rights, regulatory law and many other matters (it even decides an election for its side, when necessary).
Bush, meanwhile, has what Reagan lacked—a Reaganite majority in Congress. When the Gipper won in 1980, most Republicans in Congress were still traditional conservatives, not radical reformers. The majority of House Republicans tipped over to the Reaganite identity in 1984, a majority of GOP senators not until 1994. The ranks of the unconverted—Republicans who refuse to sign Norquist’s pledge not to raise taxes—are now, by his count, down to 5 percent in the House caucus, 15 percent in the Senate.
This ideological solidarity is a central element in Bush’s governing strength. So long as he can manage the flow of issues in accord with the big blueprint, the right doesn’t shoot at him when he makes politically sensitive deviations (import quotas for steel or the lavish new farm-subsidy bill).
It also helps that, especially in the House, the GOP leaders impose Stalinist discipline on their troops. Bush also reassures the far right by making it clear that he is one of them. Reagan used to stroke the Christian right with strong rhetoric on social issues but gave them very little else (the man was from Hollywood, after all). Bush is a true believer, a devout Christian and exceedingly public about it. Bush’s principal innovation—a page taken from Bill Clinton’s playbook—is to confuse the opposition’s issues by offering his own compassion-lite alternatives, co-opting or smothering Democratic initiatives. Unlike Clinton, Bush does not mollify his political base with empty gestures. Their program is his program.
Ideology may provide the unifying umbrella, but the real glue of this movement is its iron rule for practical politics: Every measure it enacts, every half-step it takes toward the grand vision, must deliver concrete rewards to one constituency or another, often several—and right now, not in the distant future. Usually the reward is money.
There is nothing unusual or illegitimate about that, but it sounds like raw hypocrisy considering that the right devotes enormous energy to denouncing “special-interest politics” on the left (schoolteachers, labor unions, bureaucrats, Hollywood). The right’s interest groups, issue by issue, bring their muscle to the cause. Bush’s “lifetime savings” accounts constitute a vast new product line for the securities industry, which is naturally enthused about marketing and managing these accounts. The terms especially benefit the well-to-do, since a family of four will be able to shelter up to $45,000 annually (that’s more than most families earn in a year). The White House has enlisted Fortune 500 companies to spread the good news to the investor class in their regular mailings to shareholders.
Bush’s “market-friendly” reforms for healthcare would reward two business sectors that many consumers regard as the problem—drug companies and HMOs. Big Pharma would get the best of all worlds: a federal subsidy for prescription drug purchases by the elderly, but without any limits on the prices. The insurance industry is invited to set up a privatized version of Medicare that would compete with the government-run system (assuming there are enough senior citizens willing to take that risk).
The biggest rewards, of course, are about taxation, and the internal self-discipline is impressive. When Reagan proposed his huge tax-rate cuts in 1981, the K Street corporate lobbyists piled on with their own list of goodies and the White House lost control; Reagan’s tax cuts wound up much larger than he intended. This time around, business behaved itself when Bush proposed a tax package in 2001 in which its wish list was left out. “They supported the 2001 tax cuts because they knew there was going to be another tax cut every year and, if you don’t support this year’s, you go to the end of the line next time,” says Grover Norquist of Americans for Tax Reform.
Their patience has already been rewarded. The antitax movement follows a well-defined script for advancing step by step to the ultimate goal. Norquist has organized five caucuses to agitate and sign up Congressional supporters on five separate issues: estate-tax repeal (already enacted but still vulnerable to reversal); retirement-savings reforms; elimination of the alternative minimum tax; immediate business deductions for capital investment expenses (instead of a multiyear depreciation schedule); and zero taxation of capital gains. “If we do all of these things, there is no tax on capital and we are very close to a flat tax,” Norquist exclaims.
The road ahead is far more difficult than he makes it sound, because along the way a lot of people will discover that they are to be the losers. In fact, the McKinley vision requires vast sectors of society to pay dearly, and from their own pockets. Martin Anderson has worked through the flat-tax arithmetic many times, and it always comes out a political loser.
“The conservatives all want to revolutionize the tax system, frankly because they haven’t thought it through,” Anderson says. “It means people from zero to $35,000 income pay no tax and anyone over $150,000 is going to get a tax cut. The people in between get a tax increase, unless you cut federal spending. That’s not going to happen.”
Likewise, any substantial consumption tax does severe injury to another broad class of Americans—the elderly. They were already taxed when they were young and earning and saving their money, but a new consumption tax would now tax their money again as they spend it. Lawrence Lindsey, Bush’s former economic adviser, has advocated a consumption-based flat tax that would probably require a rate of 21 percent on consumer purchases (like a draconian sales tax). He concedes, “It would be hitting the current generation of elderly twice. So it would be a hard sell.”
“Leave me alone” is an appealing slogan, but the right regularly violates its own guiding principle. The antiabortion folks intend to use government power to force their own moral values on the private lives of others. Free-market right-wingers fall silent when Bush and Congress intrude to bail out airlines, insurance companies, banks—whatever sector finds itself in desperate need. The hard-right conservatives are downright enthusiastic when the Supreme Court and Bush’s Justice Department hack away at our civil liberties. The “school choice” movement seeks not smaller government but a vast expansion of taxpayer obligations.
Maybe what the right is really seeking is not so much to be left alone by government but to use government to reorganize society in its own right-wing image. All in all, the right’s agenda promises a reordering that will drive the country toward greater separation and segmentation of its many social elements—higher walls and more distance for those who wish to protect themselves from messy diversity.
The trend of social disintegration, including the slow breakup of the broad middle class, has been under way for several decades—fissures generated by growing inequalities of status and well-being. The right proposes to legitimize and encourage these deep social changes in the name of greater autonomy. Dismantle the common assets of society, give people back their tax money and let everyone fend for himself.
Is this the country Americans want for their grandchildren or great-grandchildren? If one puts aside Republican nostalgia for McKinley’s gaslight era, it was actually a dark and troubled time for many Americans and society as a whole, riven as it was by harsh economic conflict and social neglect of everyday brutalities.
Autonomy can be lonely and chilly, as millions of Americans have learned in recent years when the company canceled their pensions or the stock market swallowed their savings or industrial interests destroyed their surroundings. For most Americans, there is no redress without common action, collective efforts based on mutual trust and shared responsibilities. In other words, I do not believe that most Americans want what the right wants. But I also think many cannot see the choices clearly or grasp the long-term implications for the country.
This is a failure of left-liberal politics. Constructing an effective response requires a politics that goes right at the ideology, translates the meaning of Bush’s governing agenda, lays out the implications for society and argues unabashedly for a more positive, inclusive, forward-looking vision.
No need for scaremongering attacks; stick to the well-known facts. Pose some big questions: Do Americans want to get rid of the income tax altogether and its longstanding premise that the affluent should pay higher rates than the humble? For that matter, do Americans think capital incomes should be excused completely from taxation while labor incomes are taxed more heavily, perhaps through a stiff national sales tax? Do people want to give up on the concept of the “common school”—one of America’s distinctive achievements? Should property rights be given precedence over human rights or society’s need to protect nature? The recent battles over Social Security privatization are instructive: When the labor-left mounted a serious ideological rebuttal, well documented in fact and reason, Republicans scurried away from the issue (though they will doubtless try again).
To make this case convincing, however, the opposition must first have a coherent vision of its own. The Democratic Party, alas, is accustomed to playing defense and has become wary of “the vision thing,” as Dubya’s father called it. Most elected Democrats, I think, now see their role as managerial rather than big reform, and fear that even talking about ideology will stick them with the right’s demon label: “liberal.” If a new understanding of progressive purpose does get formed, one that connects to social reality and describes a more promising future, the vision will not originate in Washington but among those who see realities up close and are struggling now to change things on the ground. We are a very wealthy (and brutally powerful) nation, so why do people experience so much stress and confinement in their lives, a sense of loss and failure? The answers, I suggest, will lead to a new formulation of what progressives want.
My own conviction is that a lot of Americans are ready to take up these questions and many others. Some are actually old questions—issues of power that were not resolved in the great reform eras of the past. They await a new generation bold enough to ask if our prosperous society is really as free and satisfied as it claims to be. When conscientious people find ideas and remedies that resonate with the real experiences of Americans, then they will have their vision, and perhaps the true answer to the right wing.
This article is republished with permission from the May 12, 2003 issue of The Nation magazine. Visit thenation.com to review the latest issue. Subscribe for 1 year (47 weekly issues) for $35.97.
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This story was published on June 4, 2003.