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Deal Breakers | The Nation

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Deal Breakers

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George Gilder, for example, in his 1981 classic, Wealth and Poverty, celebrated the generosity and altruism of entrepreneurs, whom he described as creative geniuses eager to share their gifts with humankind rather than as selfish capitalists driven by economic gain. He also believed in ESP, and took special pride in his ability to locate the queen of spades in a deck of cards without looking. Jude Wanniski, another leader of the movement, saw tax rates as the prime mover of history. In his magnum opus, The Way the World Works, he wrote that even sobbing infants were actually learning about supply and demand: "When the baby screams all the time demanding attention, even when fed and dry, he discovers that mother also remains in the other room and perhaps even closes the nursery door. The tax rate is 100 percent, also yielding zero attentiveness." Over the years, Wanniski swung further away from respectable politics, meeting with Louis Farrakhan of the Nation of Islam (he approved of Farrakhan's advocacy of black enterprise), comparing Slobodan Milosevic to Abraham Lincoln and defending Saddam Hussein in the run-up to the Iraq War. He hired the disciples of Lyndon LaRouche at his economic consulting firm, arguing--rightly--that they were not "trained in demand-model economics." Eventually even the movement institutions disowned him. But they continued to profess the supply-side faith, right up to the Bush tax cuts.

About the Author

Kim Phillips-Fein
Kim Phillips-Fein teaches American history at the Gallatin School of Individualized Study at New York University. She...

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So how did the ideas of these characters come to be the governing wisdom of the Republican Party? Chait suggests that during the 1970s, their ideas resonated with the business lobby at a moment when corporations were organizing to defend themselves against the criticisms of the counterculture and the consumer movement, which accused business of creating faulty and dangerous products, profiting from the Vietnam War and polluting the country's air and water. Since that time, the political significance of the business community has only grown, and Chait argues that it is the real constituency for the Republican Party. Occasionally, lobbyists organize populist pageants to claim a broader base for the program. Chait tells of a memo that circulated before a 2001 rally in support of the Bush tax cuts: "If people want to participate--AND WE DO NEED BODIES--they must be DRESSED DOWN, appear to be REAL WORKER types, etc." Hard hats were passed out to the lobbyists who came. But such antics aside, it's clear who benefits.

To understand the ascendancy of the right, Chait suggests we go back to the 1950s, when intellectuals like Richard Hofstadter and Daniel Bell dismissed conservatives as "crackpots" and paranoiacs, displaced small businessmen suffering from "status anxiety" who lashed out against a new world of technological modernity and bureaucratic organization. Recent scholars working on the conservative movement have rejected the psychological turn of the "radical right" thesis of the 1950s, trying instead to get inside the minds of conservative activists and treat them with respect, if not always sympathy. But Chait argues that "the Hofstadters and Bells were on to something"--the right really is radical, Manichean, ideological and paranoid. The real problem of modern America is the loss of the reasonable, moderate center embodied by the 1950s intellectuals. In a sense, both Chait and Krugman identify with the liberals of that earlier era, scandalized by the perversions of the radical right, with the difference that today the radicals have escaped from the farm and are running the country. Restoring the New Deal is a project of political conservation, a defense of how things used to be before the country was derailed by a nutty conservative cabal.

The problem with this pastoral tale is that it makes the New Deal seem too easy and too natural, as though it was the norm and recent history the aberration. In fact, the reforms of the New Deal--the passage of legislation giving workers the right to organize unions, the creation of a public system of social insurance for the elderly, the introduction of regulation of the stock exchanges, the national minimum wage, the expansion of progressive taxation (although this truly broadened only during World War II)--were won at a moment when capitalism faced the most prolonged, pronounced crisis in its history. The business class of the United States was at its nadir in terms of public prestige during the 1930s, challenged by a militant labor movement, the alternative model of the Soviet Union and the spread of radicalism of various stripes at home. The New Deal was partial and incomplete, a fragmentary welfare state, and yet it could be created only when it seemed capitalism was on the verge of collapse.

Moreover, even though it is true that the parties did not clash openly over the political economy during the 1950s, the economic order eulogized by Krugman never elicited a genuine or complete consensus. Southern and Southwestern states partly exempted themselves from the high-tax, high-wage economy of postwar liberalism, passing right-to-work laws to limit union strength and keeping state and local taxes low to lure capital from the North. Many companies in the North and Northeast tried to find ways to resist labor and the state even at the height of postwar liberal power, doing their best to weaken their unions and funding conservative think tanks. In short, the central institutions of the New Deal were under attack throughout the postwar period, and in fact had eroded substantially by the 1970s. The difficulty of creating the New Deal in the 1930s, and the conflict that it caused even in the '50s and '60s, suggests that it will not be easy to return to it today.

Chait's and Krugman's sense of themselves as the moderates fighting back a wave of radical libertarians also obscures just how far the center has shifted. After all, the right has no monopoly on love for the market model. The esoteric philosophies of Wanniski and Gilder gained credibility at a time when rational choice theory and Chicago School economics were winning converts in academia. The Democratic Party may not have pursued cutting income tax rates with the zeal of the Republicans, but under Clinton in the '90s the Democrats enthusiastically embraced the free market, passed welfare reform and debated the privatization of Social Security years before Bush brought it up. The business mobilization that Krugman and Chait decry has shaped the modern Democratic Party, too--and may do so especially in 2008, if the recent shift of corporate donations from the Republicans to the Democrats continues. (In late October the New York Times reported that healthcare companies have donated $6.5 million to the Democratic presidential candidates, compared with $4.8 million to the Republicans.) In 1946 Harry Truman proposed a national healthcare system resembling Canada's; the resistance of the American Medical Association and Southern Democrats doomed it to failure. But today, even Krugman--who believes that "in purely economic terms, single-payer is the way to go"--has joined the Democratic presidential candidates in advocating the more "politically feasible" solution of mandated coverage, or "a universal health care system run through private insurance companies."

Moreover, if conservatives aren't the only politicians to have embraced the free market, the victories of free-market economics can't be explained solely in terms of the opportunistic attempts of leaders to link conservative economic and social agendas. The beliefs of social scientists to the contrary, there is nothing simple or automatic about how people come to define their economic interests. Especially in the absence of organizations like labor unions, which can offer an alternative understanding of how the economy operates, it should not be surprising that the vision of the marketplace itself exercises a certain deep appeal, even for people who do not benefit from the policies it prescribes. After all, the market model suggests that individuals exercise tremendous power over their own destinies. It argues that people can determine their economic fates. It provides a way of connecting one's actions to the larger outcome of social and historical processes. These ideas have their own logic and their own attraction, quite aside from the politics of cultural backlash with which they are frequently joined.

Indeed, perhaps the most striking difference between the conservative activists and intellectuals who built the right and modern-day liberals like Krugman and Chait is how tentative the latter are when it comes to offering a new vision of how to go about "putting material things in their proper place" and fashioning a relationship between the individual and the state that can foster liberty and equality. When Goldwater (OK, Bozell) wrote The Conscience of a Conservative, he knew he was calling for a dramatic change in the country's direction. Ronald Reagan in 1980 also claimed to want to break with history. But these contemporary liberals insist that they are not calling for anything particularly far-reaching; their politics are to be found in the past, in the moderate consensus, in the New Deal. They want to move forward but only by moving back. The internal weaknesses and flaws of the New Deal, or of postwar liberalism, which might seem manifest in the ease with which it was ultimately dismantled, seem to trouble them not at all. Yet if the conservative movement has any political lesson to teach to those who disagree with its motives and goals, it should be that sometimes only a willingness to be radical really brings about change.

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