All presidential elections are not created equal. Some are important; some, considerably less so. Once in a lifetime the fate of the nation rides on an election outcome. Abraham Lincoln's election in 1860 saved the Union. Franklin Delano Roosevelt's election in 1932 kept the nation afloat during the economic ravages of the 1930s.
The worst economic crisis since the Great Depression has produced another once-in-a-lifetime election in 2008. George W. Bush's administration, Congress, and the Federal Reserve are struggling to prevent further economic collapse that becomes an extended recession or worse.
The defeat of the $700 billion bail out plan by the House of Representatives increases the economic danger. Yet enacting a bail out package would only be a beginning. America must confront economic and political factors that are frighteningly similar to those in 1932.
Just as in 1932, voters must make the absolutely crucial choice of the president and the political party that will seek a governing strategy that can keep the United States from plunging into an even worse economic morass. Central to the 2008 election is an epic clash of two opposing governing philosophies as stark as the nation has faced since 1932.
The last eight years have brought the worst economic performance, put the federal government closer to fiscal insolvency, and left the nation's broad middle class in direr straits than at any time during the six plus decades of the post-World War II era. Which presidential nominee will be more likely to develop the better governing strategy in coping with the nation's most serious economic threat since the1930s? That is the overriding question.
Bush's philosophy of governance embraced Ronald Reagan's fundamental precepts of deep tax cuts for the highest income families and massive deregulation. Even though that strategy produced today's economic dangers, Reagan's "proven principles" remain the twin pillars of the Republican economic strategy.
This leaves the Republican Party and its presidential nominee the dilemma of trying to flee from the highly unpopular Bush, but still praise Reagan's fundamental precepts that shaped Bush's governing strategy.
Bush's Economic Mess
Bush's wrongheaded tax cuts have brought large yearly budget deficits that fed and continue to feed a burgeoning national debt. The incoming president will inherit a Fiscal Year 2009 deficit estimated at a record $500 billion. With a bail out package that simply must be enacted, the U.S. Treasury may need to borrow a trillion dollars or more to cover the tax revenue shortfall. This amount could be a challenge for the world financial system to absorb. It most certainly will be a staggering addition to the national debt that is pushing the federal government toward fiscal insolvency.
No postwar presidency has done such harm to the nation's broad middle class as it now faces the deadly combination of stagnant income, deeper debt, rapidly increasing prices, declining housing values, and a severe credit crunch. Its standard of living has not been in such jeopardy since the 1930s.
We could be witnessing nothing less than the destruction of the American way of life. After a little over six decades, the postwar phenomenon of a broad middle class that lived the American Dream may be running its course.
The Political Battle Then and Now
Democrats and Republicans are contesting the current election on the same ideological battleground they did in 1932. The Republican president Herbert Hoover stood for the existing order of limited government and unregulated capitalism. Franklin Roosevelt believed that a strong government must tackle the massive problems that bedeviled the country in 1932.
New Deal activism became the prevailing governing philosophy. In the first quarter century after World War II, the United States attained the highest level of extended growth in national income and the most equal distribution of the economic pie in American history. The broad middle class emerged in these years of the nation's greatest prosperity and equality.
Severe economic problems in the 1970s provided Ronald Reagan the chance to change his governing strategy to the unregulated free market principles of the 1920s. In 1981, he adopted supply-side economics with its basic concept that deep tax cuts targeting the highest income citizens would induce new capital investment, thereby bringing economic growth sufficient to take the middle class to a higher living standard.
Reagan's huge 1981 tax cut that was by far the largest in American history to that time did not induce a big jump in capital investment, just record deficits. Tax benefits went disproportionately to those in the top tax brackets. Deficit financing -- not induced capital investment -- created new consumer demand to stimulate economic growth. That is exactly what Lord Keynes predicted in the 1930s.
Bill Clinton went against the Republican dogma in 1993 to actually raise income tax rates at the top. The sky did not fall. Instead, the economy during 1995-2000 had its best performance since the 1960s.
Bush immediately reaffirmed Reagan's economic principles in 2001 and brought the catastrophic outcomes as discussed. The belief held by Reagan and Bush that tax cuts are always good and tax increases bad has repeatedly been shown by hard evidence to be dead wrong.
Supply-side economics does not work and will not work. The governing philosophy of limited government and unfettered free market capitalism has failed and must be abandoned just as it was by Franklin Roosevelt in 1933.
The Presidential Nominees
Despite behaving as if George W. Bush never existed, Senator John McCain voted with Bush roughly 90 percent of the time and continues to follow to the letter the Reagan-Bush position on the efficacy of deep tax cuts for the rich. Bush and McCain remain joined at the hip on income tax policy and an overall governing philosophy favoring the highest income families and corporate America over ordinary citizens.
McCain has suddenly become an advocate for tough regulation. Whether he has changed stripes remains to be seen, especially in light of McCain's campaign behavior. In the "Atlantic Journal Constitution," Jay Bookman wrote: "The volume and audacity of lies pouring forth from McCain is startling and even historic...The McCain camp has cut any remaining tethers to reality and integrity."
McCain continues to repeat his claims even when clear evidence refutes them. He has asserted repeatedly that he would cut taxes for everyone while Barak Obama would raise most everyone's taxes. The Urban Institute- Brookings Tax Policy Center, which is the accepted source of estimates on the McCain and Obama tax plans, indicated the falseness of McCain's claim on August 25, 2008.
The Tax Policy Center reported that both the Obama and McCain plans propose tax reductions for low- and moderate-income families, but treat high-bracket taxpayers differently. By 2012, middle-income taxpayers would see their after-tax income go up nearly $2,200 annually under the Obama plan, but only $1,400 annually with the McCain plan. The top 1 percent would actually experience a $19,000 reduction in after-tax income under Obama while McCain increases the after-tax income of the top 1 percent more than $125,000 by 2012.
McCain just as Bush shortchanges ordinary families. Yet he wrote in a fund-raising letter: "The Obama Democrats won't back away from the massive tax hikes they have proposed even though we are facing serious economic difficulties" (underscoring in the original). It is a blatant lie told again and again.
The Republican economic ideology has been proved woefully wrong in its strongest test ever -- the failed Bush tax cut and deregulation policies. In light of the events of the last eight years, Barak Obama's economic ideas make considerable sense.
Choose McCain and likely opt for a third term of the governing philosophy that has pushed the United States back toward the economy of the Great Depression. Select McCain and keep the governing approach of unregulated free market capitalism that favors corporate America and the highest income families at the expense of now struggling middle class.
It is already very late. Americans in the future will live poorer lives because of the Republican economic philosophy that has dominated our national discourse since Reagan. But it can get far worse. The choice voters make in this once-in-a-lifetime election will shape the nation's economic and political future.
Walter Williams is Distinguished Fellow, Center for American Politics and Public Policy and Professor Emeritus, University of Washington at Seattle. Bryan D. Jones is the JJ Pickle Chair of Congressional Studies, Department of Government, University of Texas at Austin. They are coauthors of The Politics of Bad Ideas (Pearson Longman, 2008).