It’s Still the Economy — but More So

Good Fences

By J.J. Goldberg

Published September 29, 2010, issue of October 08, 2010.
  • Print
  • Share Share

It’s pretty obvious by now what this election is about. It’s the economy. Folks are hurting, and those who aren’t hurting are scared. Too many people don’t have jobs; too many families are losing their homes. Too many kids can’t move out and start their lives. Too many parents saw their savings evaporate and don’t know how they’ll retire. Voters are sad and angry, and nobody — nobody — knows what to do.

The basic facts are familiar, but bear repeating. In mid-2007, banks started teetering. They had made too many bad loans, mostly to people who bought homes they couldn’t afford in hopes of joining our “ownership society.” Strapped for money, the banks stopped lending, which meant businesses couldn’t borrow to expand and create jobs. As family spending dropped, business declined and firms laid off workers, further reducing spending.

By late 2008, the economy was in free fall. Former President George W. Bush and Congress created a $700 billion emergency bailout fund to save the financial system from catastrophe and get banks lending again. The money saved the banks, but the banks mostly kept it instead of lending it. In the spring of 2009, President Obama pumped in another $787 billion, partly to goose the banks, partly to keep teachers and police on the job, partly to encourage new industries. The bit about teachers and cops worked. The rest, not so much.

Today, unemployment is nearly 10%, twice the 2007 rate. Four million people have fallen into poverty anew. Eight million jobs have disappeared, and many experts say these will never come back. Topping it all, the national debt has reached a staggering $13 trillion, thanks to bailouts and lost income taxes. The country feels like it’s going bankrupt.

The politicians’ solutions are, frankly speaking, the same old stuff. Democrats would give people money to boost demand and to feed the hungry, hoping things turn around somehow. Republicans would cut taxes and stop all the health care and environmental meddling that’s spooking business, hoping things turn around somehow.

The Jewish community is even more predictable. On the left, a posse of organizations including the federations, Reform movement and Conservative rabbinate is working with a big interfaith anti-poverty coalition. The major push right now: Improve school lunches. On the right, a crop of Orthodox pundits, including Shmuley Boteach and Jonathan Rosenblum, complains that Obama is treating America as badly as he treats Israel.

To be fair, Obama didn’t start this crisis — he inherited it. Many of his antidotes stalled in the Senate. Senators stunted his stimulus plans, so as not to increase the debt. They gutted his banking reforms, meant to prevent another collapse, arguing that regulations burden business and hinder growth. They won’t even let him raise the top tax rate on the richest 2% of Americans by a lousy 4.6%, bringing it back to the pre-Bush rate of 39.6%, which would cut $1 trillion in debt, because taxes supposedly punish investors and hinder growth. As for the debt, most of it, $10 trillion worth, was inherited from Bush, who had managed to double it in his eight years in office.

But blaming Bush isn’t fair, either. This crisis didn’t start in 2007, nor in 2000. To unravel it, you have to go way back to 1980, when Ronald Reagan was elected.

Reagan’s biggest goal, you’ll recall, was to get government off people’s backs and liberate the free market. For eight years he deregulated everything from airlines to banks to communications. He slashed the top income tax rate, which was 70% (for income over $200,000), to 38% and then 28% (with a lower income ceiling). Companies were encouraged to look abroad for new markets and cheaper labor. Democrats bickered about details but hardly challenged the president’s assumptions.

How’s that working out? Let the numbers speak: In the 27 years from the end of World War II until the Arab oil crisis of 1973, the top tax rate averaged 80% and the economy grew an average 3.8% per year. In the 26 years from 1981 to 2007, the top tax rate averaged about 35%. Economic growth: 3.8% per year. Net gain: zero.

Well, not quite zero. The economy didn’t boom, but the debt did. Reagan inherited a cumulative national debt of $905 billion. Eight years later, the debt was $2.6 trillion, nearly double even accounting for inflation. By 2007, the debt had reached $9 trillion.

In other words, lowering taxes didn’t stimulate the economy, but hollowed it out. We borrowed a fortune just to stay even.

But that’s not the real scandal. Watch where the money went. In 1980, the luckiest 1% of the population took home 8.5% of the nation’s total income. The bottom half of the population got 17.7%. That is, 46 million households at the bottom made about twice as much, all told, as the 932,000 households at the top.

By 2007, the shares were reversed. The top 1% now pocketed 23% of the nation’s total income, while the bottom half took home 12.3%, just over half of what the top 1% collected. In fact, the bottom half — we’re now talking about 66 million households — received almost exactly the same as the 133,000 households that made up the top one-tenth of 1%.

This problem isn’t simply about feeding more mouths. For three decades we’ve had a system that steadily makes the rich much richer and the poor more numerous, while the middle disappears.

Why? That’s very complicated. There’s a masterful series by Timothy Noah at called “The Great Divergence” that sheds some light. What’s certain is that things won’t get better if we keep doing what we’ve been doing. And it’ll take a lot more than improving school lunches.

For source materials and further resources behind these numbers, see J.J. Goldberg’s blog at

The Jewish Daily Forward welcomes reader comments in order to promote thoughtful discussion on issues of importance to the Jewish community. In the interest of maintaining a civil forum, The Jewish Daily Forwardrequires that all commenters be appropriately respectful toward our writers, other commenters and the subjects of the articles. Vigorous debate and reasoned critique are welcome; name-calling and personal invective are not. While we generally do not seek to edit or actively moderate comments, our spam filter prevents most links and certain key words from being posted and The Jewish Daily Forward reserves the right to remove comments for any reason.

Find us on Facebook!
  •'s Allison Benedikt wrote that Taglit-Birthright Israel is partly to blame for the death of American IDF volunteer Max Steinberg. This is why she's wrong:
  • Israeli soldiers want you to buy them socks. And snacks. And backpacks. And underwear. And pizza. So claim dozens of fundraising campaigns launched by American Jewish and Israeli charities since the start of the current wave of crisis and conflict in Israel and Gaza.
  • The sign reads: “Dogs are allowed in this establishment but Zionists are not under any circumstances.”
  • Is Twitter Israel's new worst enemy?
  • More than 50 former Israeli soldiers have refused to serve in the current ground operation in #Gaza.
  • "My wife and I are both half-Jewish. Both of us very much felt and feel American first and Jewish second. We are currently debating whether we should send our daughter to a Jewish pre-K and kindergarten program or to a public one. Pros? Give her a Jewish community and identity that she could build on throughout her life. Cons? Costs a lot of money; She will enter school with the idea that being Jewish makes her different somehow instead of something that you do after or in addition to regular school. Maybe a Shabbat sing-along would be enough?"
  • Undeterred by the conflict, 24 Jews participated in the first ever Jewish National Fund— JDate singles trip to Israel. Translation: Jews age 30 to 45 travelled to Israel to get it on in the sun, with a side of hummus.
  • "It pains and shocks me to say this, but here goes: My father was right all along. He always told me, as I spouted liberal talking points at the Shabbos table and challenged his hawkish views on Israel and the Palestinians to his unending chagrin, that I would one day change my tune." Have you had a similar experience?
  • "'What’s this, mommy?' she asked, while pulling at the purple sleeve to unwrap this mysterious little gift mom keeps hidden in the inside pocket of her bag. Oh boy, how do I answer?"
  • "I fear that we are witnessing the end of politics in the Israeli-Palestinian conflict. I see no possibility for resolution right now. I look into the future and see only a void." What do you think?
  • Not a gazillionaire? Take the "poor door."
  • "We will do what we must to protect our people. We have that right. We are not less deserving of life and quiet than anyone else. No more apologies."
  • "Woody Allen should have quit while he was ahead." Ezra Glinter's review of "Magic in the Moonlight":
  • Jon Stewart responds to his critics: “Look, obviously there are many strong opinions on this. But just merely mentioning Israel or questioning in any way the effectiveness or humanity of Israel’s policies is not the same thing as being pro-Hamas.”
  • "My bat mitzvah party took place in our living room. There were only a few Jewish kids there, and only one from my Sunday school class. She sat in the corner, wearing the right clothes, asking her mom when they could go." The latest in our Promised Lands series — what state should we visit next?
  • from-cache

Would you like to receive updates about new stories?

We will not share your e-mail address or other personal information.

Already subscribed? Manage your subscription.