The coming election is a tipping point for our democracy, and for our economy. Today, with help from historian Heather Cox Richardson, we focus on the economy.
The election in 1932 of Franklin Delano Roosevelt ushered in an economic era that Cox calls “The Great Compression.” From 1933-1981, through the administrations of Republican as well as Democratic Presidents and with Congresses controlled by both parties, our government focused on getting money into the hands of ordinary Americans due to the economic principle that expanding the “demand side” of the economy would grow the economy for all. As a result, the wealth gap that characterized the country in the 1920s shrank considerably.
After President Ronald Reagan took office in 1981 and shifted the country toward “supply-side” economics, that compression reversed to become the “Great Divergence.” Government under Reagan and his successors, including Democrats, focused on cutting taxes and regulations to move money upward to the “supply side” of the economy in the hope that wealthy investors would expand industries and hire more workers. As a result, in 2020, we had the largest wealth gap in a century.
With the election of Joe Biden and Democratic control of the Senate and House, in March 2021 Democrats passed the American Rescue Plan, a $1.9 trillion economic stimulus bill designed to snap the economy out of the depressive effects of the pandemic. No Republican voted for this bill. The American Rescue Plan ushered in a dramatic economic recovery—the most rapid of any of the G7 wealthy nations—with the U.S. adding ten million jobs since Biden’s inauguration. No other president in our history has seen this level of job growth in his first two years in office.
The September jobs report, released last Friday, revealed that the U.S. economy added 263,000 jobs last month, and the unemployment rate fell to 3.5%. That was more jobs and a lower unemployment rate than economists expected. That job growth has affected all Americans. The Hispanic jobless rate has fallen from 8.6% in Trump’s last month to 3.8% now; the Black jobless rate went from 9.2% to 5.8%. (Notable in the numbers, though, was that K–12 education lost more than 21,000 workers in September, putting the number of teachers and support staff at 309,000 people lower than it was before the pandemic. Teacher salaries and school support is largely in control of legislatures, many of which are controlled by Republican who have squeezed school budgets.)
That extraordinary job growth, along with money saved during the pandemic, helped drive inflation, as people could pay higher prices for goods and services jacked up by supply chain tangles, transportation shortages, price gouging, and the war in Ukraine. But so far, it does not seem that we are locked into an inflationary spiral as we were in the 1970s.
The Democrats have also hammered out legislation to rebuild the nation’s infrastructure. Last November, they passed the $1.2 trillion Infrastructure Investment and Jobs Act to rebuild the nation’s crumbling roads and bridges and to extend broadband to rural areas. More than 60% of Americans wanted infrastructure investment, and for that bill, which is often called the Bipartisan Infrastructure Law, the Democrats picked up “aye” votes from 19 Republican senators and 13 Republican representatives.
But former president Trump attacked those Republicans who voted for the measure, insisting that Republicans’ main goal was to keep Biden from accomplishing anything. “Very sad that the RINOs in the House and Senate gave Biden and Democrats a victory on the ‘Non-Infrastructure’ Bill,” Trump said.
Trump loyalists threatened to strip committee assignments from Republicans who supported the bill. They complained about what Minnesota representative Tom Emmer called “President Biden’s multi-trillion dollar socialist wish list.” Arizona representative Paul Gosar said: “this bill only serves to advance the America Last’s socialist agenda, while completely lacking fiscal responsibility.” Kentucky representative Andy Barr said the measure was a “big government socialist agenda.” Iowa representative Ashley Hinson said the law was a “socialist spending spree.” Representative Markwayne Mullin of Oklahoma said: “I will not support funding for policies that drive our country into socialism.”
In the CNN piece that collected all those quotations, CNN also demonstrated that despite their insistence that government investment in infrastructure is socialism, all these representatives and more have been quietly applying to take that money to their districts, often in the same language Democrats used to justify the bill in the first place. Improving highways would “serve as a social justice measure,” Emmer wrote. “The completion of this project means improved economic opportunities for ethnically underserved communities.” Adding bicycle lanes to a rural area, Mullin wrote, “would greatly improve sustainability by reducing emissions and redeveloping an existing infrastructure plan.”
President Biden has directed his administration not to let politics or votes for the bill influence how project grants are awarded. But for all their talk of socialism and wasteful spending, Republicans clearly understand that the American people want investment in the country and that such investment improves their quality of life. They just don’t want to vote for it after years of rallying voters with a narrative that any Democratic investments in the country are far-left radicalism.
Last week, Biden named the Republicans who voted against the infrastructure law and then asked for money, ironically saying: “I was surprised to see so many socialists in the Republican caucus.”
“I was surprised to see so many socialists in the Republican caucus.”
But their lust for what they call socialism will disappear if they regain the House or Senate in November, and they will respond to their corporate masters by voting down further investment and refusing to tax corporations and the wealthy to pay for that investment. In that case, the nation will lose the start we’ve made toward narrowing the wealth gap by building the economy from the demand side. We’ll head back into The Great Divergence. History tells us that democracies do not survive with extreme wealth gaps.
Notes:
Based on Letters from an American, October 7, 2022, by Heather Cox Richardson.
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