WASHINGTON — The image that the Republicans developed during the 1980s as the party of the rich and rapacious--re-emphasized by Washington's surrealistic budget debate--is no longer just a sarcastic liberal epithet. It's a White House bias that could menace both the economy and the future of the GOP.
New poll data reveals that, under George Bush, the percentage of Americans describing the GOP as the party of wealth and avarice has surged. Bush's upper-crust background may be a factor. So, too, his millionaire friends in the Cabinet. Bush's incessant 1988-90 economic emphasis on reducing the capital-gains tax rate peeved even GOP congressional leaders. And his son Neil's involvement in Colorado's $1-billion Silverado savings-and-loan scandal hasn't helped. Politically, this imagery plays on one of the GOP's historic great weaknesses.
The economic downside, as America moves into the 1990s, is also significant. For starters, the White House has been putting upper-bracket interests--principally a reduction in the capital-gains tax rate--ahead of compromising to reduce a federal budget deficit that's nearly out of control. This has made deficit reduction a Perils-of-Pauline process. Second, the greed cycle and debt bubble of the '80s may be on the verge of bursting--just as it has twice before in the last hundred years. The ever-worsening S&L bailout crisis is just one sign. Real-estate values and commercial-bank solvencies are in jeopardy, and a rising tide of personal and corporate bankruptcies has begun lapping at states, cities and counties.
It's no coincidence. Policies of the 1980s have paralleled previous boom-bust patterns, and this time the public sees what's happening. According to a new Gallup poll commissioned by the Times Mirror Corp. and released earlier this month, unprompted voter responses to a question about what Republicans stood for found 51% linking the GOP to "rich, powerful, moneyed interests"--up from only 18% in 1987. Cynicism was deepening, the poll said, "as the public in unprecedented numbers associated Republicans with wealth and greed, Democrats with fecklessness and incompetence."
This is the third time a Republican White House era has mutated, during its second or third decade, into a "capitalist overdrive" of tax cuts and reduced government interference with business. At first, Main Street cheered along with Wall Street--but that changed by the late 1980s. When Horatio Alger-type entrepreneurs were replaced in headlines by Charles H. Keating Jr., Michael Milken and Leona Helmsley, the percentage of Americans citing Republicans as greed-focused allies of the rich tripled.
Democrats, for their part, were feckless. Caught up in 1980s go-go economics and fat political contributions, they forgot their old low- and middle-income constituency. And those constituencies, in turn, lost their commitment to Democrats. Pollsters could have recorded the same disdain in the early 1890s, or 1920s.
Alas, prior eras of greed and fecklessness produced unsound structures of debt and speculation that imploded in the stock-market crashes of 1893 and 1929. The follow-up question for the 1990s is whether another such implosion is gathering. It's possible. The risky credit-card economics and speculation of the 1980s has left Washington facing a political agenda of debt-related issues unmatched since early 1930s Depression days.
The federal budget deficit is ballooning toward $300 billion to $400 billion. The S&L bailout may be the biggest economic scandal in U.S. history, and other government loan and insurance programs are teetering. The Federal Deposit Insurance Corp. is running low on money to insure bank deposits, just as more big banks are flirting with insolvency.
Nor does it end there. Weakness in institutional and household finances has boosted bankruptcies to levels not seen since the 1930s, and government tax collections are sliding. Butte County, Calif., narrowly avoided bankruptcy in mid-September; 17 other California counties have been identified as in trouble. And that's just one state.
Corporate America, for its part, faces record debt levels, with the gimmicks of the 1980s--leveraged buyouts and junk bonds--coming unglued. Washington must also confront the possible write-off of perhaps $100 billion in U.S. bank loans to Latin America and the Reagan era emergence of the United States as the world's leading debtor.
Like dominoes, these greed-and-debt legacies are leaning against an overextended business cycle that could become a once-a-generation major downturn. The partisan consequences of any debt implosion would be enormous. The slumps of 1893 and 1929 reshaped U.S. politics, and a 1990s downturn could do the same.