A Raw Deal


1935 Vanity Fair cover

By Judge Steve Russell

I do wish the election were today, but it’s not, and two months is an eternity in a national election. So Ms. Clinton would be foolish to be making decorating decisions about the White House just yet. Anyway, she should let Bill do that.

But let’s suppose, just suppose, that nobody can persuade Mr. Trump to pull out of his death spiral. Suppose an outcome of LBJ-AU H2O or Reagan-Mondale proportions.

The first problem is that Trump is laying the groundwork to claim the result is illegitimate and revolution would be a rational response. Trump is no Al Gore, tamping down ego for the sake of the country.

There are several ways that could play out. None are good for the country but none are good for the GOP either.

Which leaves me wondering….at what point do we have a historic realignment? Do the center-right voters get a new home or do they become Democrats and try to jerk that party to the right?

I’m no fan of the two party system but I can’t see a path to a parliamentary system and I am a fan of having elections.

The country is split, and always has been in my lifetime. If there must be two parties with some relation to reality, then one will occupy the center-right like Eisenhower and the other will occupy the center-left like Obama.

Outliers on both sides would duke it out with the party mainstream in primaries and some issues would be mainstreamed because of those primary fights.

The problem with that scenario is there is such a gulf between the GOP elite, the “donor class,” and the bulk of the voters.

Here’s what I think happened and is happening. We are still fighting over the New Deal.

Before the New Deal, class distinctions in the US were clear and both parties were unabashed about the class interests they primarily represented. On the GOP side, the Taft faction vanquished the Roosevelt faction and the progressives decamped for the Democratic Party.

The dominance of the working class party, the Democrats, was never a given. There was too much Horatio Alger in American drinking water. Too many people conflated social mobility with necessity to care for and feed big business.

The Republicans went on a long and lucrative roll and the stock market blew a bubble of monumental proportions that did not just go “pop” in 1929. It went “boom!”

The middle class and the working class plunged into poverty together and even the wolves of Wall Street ended up skinny. As Will Rogers famously said, “they had to wait in line to rent a window to jump out of.”

Tens of thousands of people just disappeared in the Great Depression, leaving on on rumors of jobs–often by rail–and never returning. Pauper’s cemeteries sprang up around the well known places for hopping on freight trains. Boarding a moving train is dangerous business. Those lucky enough to have jobs with the railroad would find bodies in empty boxcars, frozen to death or starved.

In those days, nobody carried picture ID.

In those days, if your bank went belly up, your money was gone. 4,000 banks failed in 1933 alone, of at least 10,000 over the decade. $140 billion evaporated. Mortgage foreclosures happened every day, putting people out of their homes and farmers off their land.

This is why public opinion seriously differed over whether robbing a bank was a real crime, and many who took on bank robbery as a profession became folk heroes.

The Depression was world wide. In Europe, it stoked the rise of fascism.

In Russia, Lenin kicked off the Comintern in 1919. There really was a Communist conspiracy to seek world domination, but there was nothing secret about it. One of the primary goals of the Third International (Comintern) was to deny leadership to socialists.

After Stalin cut a deal with Hitler, Leon Trotsky founded the Fourth International.

None of these movements–Nazism, Italian Fascism, the Comintern, the Fourth International–meant any goodwill for capitalism of the US variety. The working class in the US was in no mood to play defense for the greedheads who blew the economy up.

Herbert Hoover, a man of good personal qualities but elected on the canard that sustains Donald Trump–that “government should run like a business”—could feel the country’s pain but was clueless what to do about it.

The shantytowns erected by homeless Americans were called, uncharitably, Hoovervilles. My own grandparents squatted in a condemned building with no utilities.

If you look up “change election” in a political science text, it probably should take you to 1932.

The New Deal consisted of many, many laws we take for granted today. The US went into the Great Depression as a capitalist country and came out as a mixed economy. Republicans saw each one of those laws as a razor at the throat of capitalism.

The GOP line on recovery from the Depression is that WWII made it happen. If that were so, it would be a substantial upside to an awful calamity, but most sane economists could parse the aggregate demand curve before war spending hit and see that the New Deal was getting us out of the ditch, save for the brief period when FDR was persuaded to take the pedal off the metal in the interest of balancing the budget.

The one sense in which WWII rescued the economy was that it made the budget balancers STFU because it was an existential emergency.

FDR cleaned Hoover’s plow so completely that we didn’t see another Republican POTUS until the war hero Dwight Eisenhower was persuaded to run as a Republican rather than as a Democrat. It was necessary for Eisenhower, with his “middle way,” to wrest control from the Taft conservatives.

Ike refused to dismantle the New Deal. He did nibble around the edges with reforms that tacked to the right like Taft-Hartley. Ike’s conservative brother Edgar wrote him a letter accusing the POTUS of selling out to the New Deal. Ike famously replied:

“Should any political party attempt to abolish social security, unemployment in­surance, and eliminate labor laws and farm programs, you would not hear of that par­ty again in our political history. There is a tiny splinter group, of course, that believes you can do these things. . . . [But] their number is negligible and they are stupid.”

These sorts of remarks led to the John Birch Society–right wing crazies funded by the father of our contemporary Koch Brothers–insisting that Eisenhower was a Communist.

William F. Buckley, who founded National Review as the organ of American conservatism, read the Birchers out of the GOP because of their attempts to Red-bait Eisenhower.

The New Deal remained safe until the Reagan Revolution. The New Deal had engineered the greatest redistribution of wealth from the haves to the have nots in the history of the nation.

EVERY ACT OF GOVERNMENT REDISTRIBUTES WEALTH. It matters not how limited you think government ought to be, it can’t pave a road or hire a firefighter or deliver the mail without taxing and spending. Taxing and spending is everything governments do and every time they do it, wealth is moved from A to B.

By convincing the working class that they live in a classless society of limitless opportunity and government should never redistribute wealth or pick winners and losers, Reagan engineered the second largest redistribution of wealth in US history–from the bottom to the top.

The Reagan Revolution was such a political force of nature that it begat Bill Clinton’s political vehicle, the Democratic Leadership Council. Clinton signed the bill that tore down the Glass-Steagall Act, the firewall between investment banking and commercial banking that had worked so well since the New Deal.

The New Deal gave us the Federal Deposit Insurance Corporation, funded not by taxpayer money but by assessments on commercial banks. Thanks to the FDIC, when banks started failing during the Great Recession, the government auditors typically moved in at quitting time on a Friday and the failed bank was reopened under a new name by Monday and no depositors lost a dime.

Investment banks did not have to pay the FDIC assessments but they were free to gamble with other people’s money…but the gamblers were uninsured, and investment operations were separated from commercial operations and both were separated from insurance.

Gambling? Yes, with collateralized debt obligations (CDOs) and a de facto insurance called Credit Default Swaps. They were trading in CDOs backed by subprime mortgages leveraged 30-1 and hedged with Credit Default Swaps. Unfortunately, they were also gambling with depositor money from the commercial operations, dragging the whole banking system down.

Some of the smartest graduates of the best business schools devoted themselves to designing and then buying and selling leveraged debt instruments so complex auditors had trouble understanding them.

Because the investment banks had been allowed to get their hooks into commercial banking, we the taxpayers had to bail them out. Remember TARP? Troubled Assets Relief Program. The assets were troubled because their true value was concealed and they were leveraged and hedged with Credit Default Swaps written by banks that also were connected to the real economy.

The perpetrators of this nonsense called themselves “masters of the universe.” I am not making that up.

TARP wound up compensating the suckers…er, buyers..of the Credit Default Swaps at 100 cents on the dollar.

And the people who signed those predatory mortgages?

They got foreclosed. If they were not kicked out of their homes, it would cause “moral hazard,” doncha know?

The US is still politically divided over the New Deal.

The Democrats favor New Deal programs.

The Republicans oppose the New Deal. They oppose it with numbers they gained by taking in three waves of homeless Democrats.

1. The Dixiecrats turned to the GOP in last ditch defense of Jim Crow laws.

2. Evangelical Christians alarmed by birth control, abortion, and gay rights became Republicans.

3. Finally, neoconservatives seduced by the idea of extending our time as the only superpower with the principal tactic of making war on countries easily beaten for the purpose of demonstrating our willingness to protect our hegemony by force.

So…if it’s time for a realignment on the level of Whigs to Republicans, how does it happen? Who goes where and why?

Or do the Republicans satisfy themselves with all the state governments they control?

I realize I’ve run my mouth for so long people may have forgotten the question, but it was what will a realignment look like? Are we going to continue fighting over what’s left of the New Deal? Or can there be a modern vision of conservatism that means more than lower taxes and smaller government and privatize everything: pensions, prisons, drinking water. Take government out of the business of governing. Then it will be off your back.

If that’s all conservatism has to offer, I’m not sure what conservatives can do but continue to stand for small government as long as it’s big enough to make sure every woman is forced to carry every pregnancy to term and watch Social Security be destroyed by refusing to adjust to the gig economy.

Then we’ll be free like we were when Hoover was POTUS.

The top 1/10th of 1 percent will finally have enough money to make America great again.


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