The liberal reward of labour, therefore, as it is the necessary effect, so it is the natural symptom of increasing national wealth. The scanty maintenance of the labouring poor, on the other hand, is the natural symptom that things are at a stand, and their starving condition, that they are going fast backwards.
– Adam Smith, The Wealth of Nations
Governments throughout history have struggled with how to address the issue of poverty—from biblical times through the bread meted out to the poor in ancient Rome to the “War on Poverty,” waged as part of President Lyndon B. Johnson’s “Great Society.” That war took a chilling turn after the 1960s, and especially after President Ronald Reagan’s infamous characterization of welfare recipients as “Welfare Queens” to push his economic agenda. Reagan would however not be the last Republican to threaten the prosperity of the United States by attacking the poor.
The war finally came to an inglorious end with passage of the Personal Responsibility and Work Opportunity Act of 1996, which added a work requirement to eligibility for government aid, and transferred responsibility for administration of welfare programs to the states. It did however not bring an end to poverty, and the current Republican agenda has put aside any pretense of addressing the issue of poverty to wage war on those who live in poverty—with potentially devastating consequences to our economic recovery.
At its most basic level, welfare— health care, food stamps, child care assistance, unemployment, cash aid, and housing assistance—is an economic “stimulus” that either offsets costs, or provides direct cash and a cash equivalent needed for food, clothing and shelter. Essentially then, the money thus available for living expenses is then devoted to consumption by those who live from hand to mouth. While those living in poverty, four out of five of whom are “working poor,” have the least to spend on consumption, they nonetheless represent a large segment of the consumer class that is growing consequent to the economic downturn.
Far from being Keynesian, the participation of consumers in the economy is the fundamental driving force in creating prosperity—it’s what creates jobs. A dollar spent to purchase goods and services is a dollar spent, and it does not matter where it came from. If, as Republicans are fond of pointing out, someone living in poverty buys a microwave, a television, or new shoes for their child, because the food stamps they receive afford them the ability to do so, not only are the food stamps helping keep farmers and their laborers in business, but the consumer goods manufacturer, the trucker who carries the goods to market, the retailer and their respective employees benefit as well.
Having already suffered reductions in benefits by the states, further threats to reduce both the welfare and ability to contribute to economic growth through consumption now looms at the federal level. Both the budget proposal by Paul Ryan (R), House Budget Committee Chairman and Vice Presidential candidate, and Mitt Romney, the Republican presidential candidate, threaten further reductions, including additional cuts to health care. In the end, balancing the budget will require that they take over 24 percent of the budget out of circulation in the economy—$852 billion—by eliminating welfare and Medicaid expenditures.
Spending has become the GOP mantra. Spending, spending, spending is wracking up the national debt. Spending is burdening our children with our debt. Spending is sending us toward a fiscal cliff—replete with debt clocks that show how rapidly the debt is increasing. They deny that billion dollar tax giveaways to oil companies that pay no taxes and make multi-billion dollar profits contribute to the problem. They deny that their fraudulent rationale for allowing millionaire and billionaire investors to pay lower tax rates than consumer class wage earners are part of the problem. What if there actually were no problem as they posit it though?
The fact of the matter is that the national debt nearly doubled under George W. Bush, increasing from $5.67 trillion to $10.02 trillion. That debt did not—repeat, did not—result from an increase in spending on the programs that the Republicans want to cut, not at least until the economy collapsed due to their reckless fiscal policies. While launching the US into two costly wars, and enacting Medicare Part D, they simultaneously cut taxes—and fell back on the “borrow and spend” policy inaugurated by the Reagan administration.
As for the debt, few economists believe it is not manageable, and some even posit that it is desirable. Nobel laureate economist Paul Krugman, in example, poo-poos the naysayers by declaring, “while debt can be a problem, the way our politicians and pundits think about debt is all wrong, and exaggerates the problem’s size.” He then points out that “every dollar’s worth of foreign claims on America is matched by 89 cents’ worth of U.S. claims on foreigners. And because foreigners tend to put their U.S. investments into safe, low-yield assets, America actually earns more from its assets abroad than it pays to foreign investors.”
If Krugman is too liberal for a “conservative” to accept, perhaps the concern can be allayed by Forbes columnist Pascal-Emmanuel Gobry, who declares that the debt is no bugbear “[b]ecause the US has an even bigger advantage than just being sovereign in its own currency (hi Greece), it also holds the reserve currency. The US dollar is the main currency that is used in most international transactions, it is held by all of the world’s central banks, and so forth.”
It is not that Krugman and Gobry have declared that the debt does not matter, only that it is still manageable—and a combination of sound fiscal policy and economic recovery will turn the problem around. But another renown economist, James Kenneth Gallbraith, posits that budget surpluses create a drag on the economy, because they take currency out of circulation. Hence, the Republican insistence on a balanced budget amendment to address the issue of the debt is also ill conceived.
Oh, but what about the increases to the welfare rolls, and increases in government spending on unemployment some Republicans will argue—and what about the downgrade in America’s credit rating that will lead to higher interest rates on the debt! The answer is that how ever so much the Republicans want to shift the responsibility for the consequences of their ill conceived fiscal policy onto the incumbent, the added costs associated with them would not have come to pass had they acted responsibly.
The economic collapse that resulted from Republican policies thrust millions into the ranks of the unemployed and impoverished. Nor was the downgrade of US creditworthiness due to the level of the debt, as the right would have voters believe. It was due solely to the threat by GOP lawmakers to default on the debt, while refusing to consider tax increases to offset the debt.
In the final analysis, irresponsibility of the Republican agenda is borderline immoral, because it threatens not just the poor, but the entire economy. While the morality of how we address the societal issues related to poverty—and even our assessment of the true nature of the problem of poverty—needs review, our economy is teetering on a cliff already exacerbated by austerity measures at the federal level and within the states to cope with budget shortfalls.
Now, despite the known efficacy of demand side economics, and demonstrated failure of supply side economics and austerity, the Republicans have mobilized in a virtual war on our nation’s recovery by attacking the poor—many of whom are among the growing number of our most vulnerable, senior citizens.
Instead of dedicating their efforts to job creation, congressional Republicans have dedicated their efforts to pushing for further tax reductions for the wealthy, assuring subsidies for enormously profitable industries that often pay no taxes into the treasury, and repeatedly attempting through under funding to gut existing regulatory agencies.
Additionally, House Republicans have dedicated 33 efforts to repeal the Affordable Care Act, which has the potential to foster job creation to assure services to an estimated 30 million uninsured people. In their zeal to discredit President Obama solely for the sake of political gain, the Republicans have set themselves in opposition not just to wasteful legislation, but legislation to the benefit of the nation as a whole. To paraphrase the opening quote from The Wealth of Nations, the fundamental outline of modern economic theory, as the ranks of those who live in poverty increase, so too will the economic strength of our nation decline.