Can they do it? Can Obama & Co. actually manage to undo close to three decades of damage? Can they they, at long last, end the Age of Reagan?
Needless to say, I'm hoping the answer is "yes." I have especially high hopes for tax restructuring, bringing back some of the progressivity lost over the years. If it were my call, the restructuring would be considerably more aggressive, with a top marginal rate somewhere around 45%, but just getting back to Clinton era taxation is a step in the right direction.
Frankly, however, I think the middle class cuts may be a mistake. It's always a lot easier to cut taxes than to raise them, and one of the main reasons we have the deficit problems we do today is because every politician is a Keynesian in rough times, happy to slice taxes and increase spending. The real problem comes in periods of rapid growth, when Keynes would have us increase taxes and cut government spending. There's no real incentive to do it, because tax collections are going up with increased incomes and business activity. Government is flush with cash -- so why would a politician even consider raising taxes or bringing home a bit less pork?
As a matter of fact, in good times politicians are inclined to cut taxes even more than in bad times -- because government seems to be able to afford it -- but that's always a really bad idea. The Keynesian model is to build a surplus in the good times, to offset the deficits incurred when growth is off and stimulus is needed. Putting on the brakes when growth is accelerating also reduces the likelihood of bubbles -- and we've all come to know what those can do.
As for aspects of tax policy other than income tax, where all Obama really has to do is wait for the Bush tax cuts to expire, some real effort will be required. The problem is not the Republicans, who are so closely identified as lackeys of the rich that they have virtually no legitimacy at this time. The problem will be Democrats with obligations to various special interests. If direct payments to agribusiness are substantially reduced, I'll be pleasantly surprised. There's a better chance, I think, of eliminating the subsidies for insurance companies providing Medicare Advantage, but it's certainly not a done deal.
The "experts" are finally coming around to the point of view that most Americans have held all along -- that the economy is in worse shape than government and business leaders have been willing to admit. I find it very hard to believe that the unemployment rate will stay below 10% for the remainder of this year, and I wouldn't be at all surprised if it went higher still. Consider that employment levels are very slow to recover even when the economy starts expanding again, and you have to admit that America's problems are likely to be around longer than the Obama administration might like -- and possibly longer than the Obama administration.
I'm trying to look for the silver lining. The egalitarian economic opportunities of the 1950s and 1960s, a generation of real advances for average workers, were made possible by the vicissitudes or the Great Depression. If it takes hard times to re-establish social and economic justice, than hard times are just what we need.
Human memory is short, of course, and history (as my former students insisted) is "boring," so eventually the locusts will descend again. In the meanwhile, though, we should be spreading as much economic insecticide as possible.