US economy: The Tea Party is a real threat to America

Although ultra-conservatives are not in control of the White House and the Senate, they feel they have the political wind at their back




Editorial
The Observer, Sunday 31 July 2011
Article history


Presidential candidate and ultra-conservative congresswoman Michele Bachmann prays every day for guidance. "The American people are looking for someone who will say, 'No'," she said last week. "I will be that person… I won't raise taxes. I will reduce spending. I won't vote to raise the debt ceiling. And I have the titanium spine to see it through."

Developing her theme, she added that the little people of America, factory workers and housewives, tell her: "'Michele, stand strong. Michele, don't cave.' The American people are scared to death they have lived through the pinnacle of American greatness, that we may be in decline."

The struggle to secure a deal between the Republicans and Democrats to lift the $14.3 trillion cap on the country's national debt is seen by disinterested onlookers as a foolish squabble between self-serving politicians, whose silliness risks potential default on the US's national debt and a first-order financial crisis within the next 48 hours.

If only it were just an ordinary political squabble. The reason the US is so close to economic calamity is that its politicians have existentially different views of the world. As the US faces stagnation and retreat from "the pinnacle of American greatness", these differences have become crucially important. This goes to the heart of how the US can recover its greatness.

Bachmann, with her "titanium spine" and communion with God, is no normal Washington politician. Nor is she alone. There is the chair of the house budget committee, Paul Ryan. There is first-time congressman Jim Jordan, head of the Republican study committee that represents two-thirds of the Republicans in the house. For all of them, representatives of the Tea Party movement, the cause of the US's problems is the federal government, federal spending and federal debt.

Taxation is not merely coercive, it takes money from efficient taxpayers and transfers it to inefficient government. To raise taxes in any circumstances is immoral and undermines the US economy.

These are not politicians given to compromise. Their predecessors in the Republican party did so, securing tax cuts but only at the price of rising national debt because spending has not been cut. The new generation is going to pursue this matter to the end – and the only deal they are prepared to sanction is a short-term fix that will bring the whole issue back to congress in the new year – presidential election year.

While the Democrats now control the Senate and the presidency, they were routed last year in the elections for the house by the Tea Party movement.

The Democrats know that being the defenders of debt, deficits and taxes does not play well with the US electorate, and that to allow another wrangle over the national debt limit in six or nine months is tantamount to signing a political suicide note. Better secure a deal with the Republicans now than allow this fight to go into 2012.

This goes to the heart of the stand-off. Although the ultra-conservatives are not in control of the White House and the Senate, they feel they have the political wind at their back. Why compromise when they can get all they want – no increase to the debt limit and the entire pain being taken by swingeing cuts to federal spending? Which is why President Obama and Democrat Senate leader, Harry Reid, have given so much ground. The Democrats' latest plan for deficit reduction contains virtually no tax increases, despite Obama's insistence it is a balanced package with the rich and corporate America taking some of the burden. But it does require that the issue be taken off the table until after next year's elections.

Within Republican ranks, there is virtually no incentive to bargain; until the US is confronted with the need to maintain debt within the $14.3 trillion cap, no one knows what the consequences will be.

Some Republicans may be concerned about slashing much-loved social programmes, while others worry that they will get the blame if there is a calamity. But there are many who refuse to see why Bachmann and co should get credit for their intransigence, while others bargain responsibly and risk the wrath of voters.

Economically, the Tea Party argument is feeble. Countries' debts are not like individual households; they can be serviced over generations. In the aftermath of a credit crunch, a country that tries simultaneously to cut public and private debt will suffer prolonged economic stagnation or depression. The cost in lost opportunity, broken lives and bust businesses is too high to slash public debt; indeed, the right action may be to increase it.

Nor is tax in essence different from any other fee: it is the cost of services rendered, and some services such as defence, security, healthcare and investment in innovative technology are best rendered by society as a whole. Hence taxation.

All the US's great advances – in the internet, computers, aerospace, space, the internal combustion engine, drugs, optics – have had the federal government as their sponsor. A well-designed social security system offers people security while not removing their incentive to work; well-judged federal spending on innovation boosts the economy; a banking system needs federal deposit insurance and a central bank as a lender of last resort when banks are distressed.

But in the land inhabited by Michele Bachmann, these propositions are false; they undermine US self-reliance and individualism and obstruct America's road back to greatness.

In vain do conservative supporters in Wall Street and business urge the Tea Party Republicans to moderate their opposition – they are dismissed as Democrat stooges.

Nor do the Democrats help their case. In democracies, you argue, argue and argue, but even Obama's eloquence has been silenced in the search for a deal. The Democrats seem to have stopped believing.

Maybe there will be a bargain at one minute to midnight, but until the Tea Party Republicans are exposed as dangerous charlatans and their support recedes, the threat to the US is ever-present.