The recession that provoked no response

...The erosion of real wages and benefits has been uneven...

...Reagan, in contrast, was outspoken in his opposition to general revenue sharing and wanted to end all federal aid...

...Has there ever been a time when conservatism so dominated the national domestic agenda...

...In addition, the 1990 budget agreement, which surpasses Gramm-Rudman in its stupidity, has made it difficult to enact an antirecession spending program...

...Poverty rates generally rise during FALL • 1991 • 449 Comments and Opinions recessions and fall during recoveries, but the recovery of the 1980s had little effect on poverty...

...Typically, after a period of prosperity and growing labor militancy, inflation would start to rise...

...Establishment figures would begin to call for a downturn (we must, they say, wring inflation out of the system...

...That the economy merely lacks "confidence" is surely a comforting theory...

...As a result of cuts in the program, unemployment insurance is replacing workers' lost income only half to two-thirds as well as it did in past recessions...

...From fiscal year 1981 to fiscal year 1991 federal funds for employment and training programs fell by more than half after adjusting for inflation...

...It's noteworthy, however, that the administration expects no more than a weak recovery, with a growth rate of 2 percent to 3 percent in the first year—significantly less than the 6.5 percent growth in the first year of the average post–World War II recovery...

...If consumers—who account for two-thirds of total demand in the economy—aren't spending, maybe, just maybe, it reflects something other than a problem of "confidence...

...q 452 • DISSENT...

...unemployment benefits help sustain the level of income—and hence the demand for goods—in areas hit hard by unemployment...

...Any increases in domestic nonentitlement programs in fiscal years 1992 and 1993 must be "paid for" with reductions in other domestic nonentitlement areas...

...The principal innovation of Nixon's federalism was general revenue sharing...

...Behind weak demand lie the real problems in the economy: two decades of declining wages and growing inequality, the gutting of the welfare state, and Reagan's new federalism, which is causing state and local governments to implement austerity budgets at a time when the government should be stimulating the economy...

...States and municipalities will cut spe iding by tens of billions of dollars in the fiscal year beginning July 1. According to the Congressional Budget Office, this could send unemployment up one percentage point nationwide and much more in New York, California, and New England, where fiscal problems are most severe...

...One wonders what the conservative sages who have written so eloquently about the limits of social policy would say about this...

...Conservatives since Hoover have strongly favored decentralization Nixon and Ford, for example, while supporting many Great Society programs, thought the federal government's role was to extend aid to state and local efforts...

...Conference of Mayors, federal spending for key urban programs fell by 72 percent between 1979 and 1989...

...Similarly, the share going to the poorest fifth of families was as low as or lower than in any year since 1954...

...Where Are The Democrats...

...The Center on Budget and Policy Priorities has illustrated the decline of the UI system by comparing unemployment insurance protection in 1979 and 1989...

...Reagan's innovation was not that he favored decentralization...

...The share of the national family income going to the broad middle class—the three-fifths of all families in the middle of the income spectrum—was lower in 1989 than in any year since the Census Bureau began collecting these data in 1947...

...The three previous recessions were, to some measure, deliberately provoked...

...In 1981 36 percent of public services were paid for by state and local taxes...

...in 1989, the figure was 33 percent...

...Reagan's New Federalism One of Reagan's most significant reforms, the consequences of which are only now becoming clear, was to reduce aid to states and cities while shifting to them responsibility for many programs—particularly housing, education, mass transportation, infrastructure and aid to the poor...

...In 1990 state and local taxes could have been reduced by $63 billion if the federal government paid for the same share of services it did in 1981...

...Adjusting for inflation, wages fell more than 9 percent in the 1980s...

...In fact, government policy actually made the recession worse...

...The recession limits the possibilities for overtime and second jobs...

...The Bush administration's ineptitude is surpassed only by the Democrats' failure to focus public attention on the administration's performance and to propose alternatives...

...This shift in tax burden has made the overall tax system more regressive...

...This poverty rate was significantly higher than it had been a decade earlier, even though the unemployment rate was similar in both years and both years represented comparable points in economic recoveries—years immediately preceding recessions...

...The budget agreement not only puts a straitjacket on fiscal policy but also assures that there can be no peace dividend until fiscal year 1994...

...So even if the recession is over, it won't feel that way...

...In the most optimistic scenario, unemployment is expected to remain close to 7 percent for at least a year...

...For example, from 1979 to 1989 the average income of the poorest fifth of families fell six percent, after adjustment for inflation, while the average income of families in the middle of the income spectrum remained about the same, rising a very modest 2.8 percent...

...What deserves serious criticism is the utter failure of liberals to so much as mount a challenge...

...The stock market is buoyant, oil prices are falling, a competitive dollar favors U.S...

...The Fed would oblige by pushing interest rates higher, cooling off inflation, the economy and labor...

...It has been greater among blue-collar and service workers than white-collar workers, greater among younger than older workers, greater among those with less than a college education than the college educated, and greater among men than women...

...economy into recession...

...A falloff in demand is what led the U.S...

...Even before the recession household debt was at an all-time high...

...In fact in the vast majority of states, both poor and middleincome families are taxed at rates well in excess of the rate at which the very rich are taxed...

...Unable to work longer hours, employ additional family members, or go into further debt, most American households were forced to reduce spending...

...In 1987, the latest year for which figures are available, only 10.5 percent of such families were 450 • DISSENT Comments and Opinions lifted from poverty by cash assistance...

...The share of national income going to the wealthiest fifth, however—as well as the share going to the richest five percent of families—was the highest ever recorded...

...Nixon's federalism, while rejecting the centralized welfare state of Kennedy and Johnson, advocated a decentralized welfare state, but only marginally diminished and still federally sustained...

...Finally, how has this affected poor families...

...Despite the recovery, there were signs of trouble...

...By contrast, the average income of the wealthiest fifth of families rose 16.7 percent—or more than $13,000 —over the ten-year period...

...The lack of progress in reducing poverty during the 1980s was accompanied by a second disturbing trend: widening income disparities...

...Complacency is called for because, in contrast to past recessions, this one has not been accompanied by excessive inventory buildup in the manufacturing sector or serious inflationary pressures...

...Unlike the federal government, state and local governments are required to balance their budgets...

...Those families who do qualify for benefits will receive much less aid than in the past...

...Most of the cuts in his fiscal 1982 budget were borne by programs administered by state and local governments...

...The poverty rate was also substantially higher in 1989 than it had been in 1974, just before the recession of the mid-1970s...

...One of the staunchest defenders of this nonsense is the Democratic chairman of the House Ways and Means Committee, Dan Rostenkowski...

...A recent report by Citizens for Tax Justice, A Far Cry From Fair, documents that after taking into account federal offsets, not one state has a progressive tax system—that is, one in which the share of income paid in taxes rises as income rises...

...Compounding this problem has been the stagnation of wages...

...Can anyone believe it was an unintended consequence of Reaganite policy...

...The average income of the wealthiest five percent of families jumped 23.4 percent...

...The UI system is also intended to aid local economies...

...The Flawed Recovery of the 1980s After 1982, spurred by a militaristic Keynesianism, the United States experienced an eight-year economic recovery...

...In 1979, 19 percent of poor families with children were lifted out of poverty by government cash assistance...

...According to the U.S...

...Another consequence of Reagan's federalism is that state and local taxes are paying for an increasing share of public services...

...There one will find an elaborate rationale for why nothing should be done...

...Other forms of less restrictive federal aid were also favored, and by the end of the 1970s about a quarter of all federal aid was conveyed by broad-based grants...

...Not since Gerald Ford's daring anti-inflation program—the distribution of Whip Inflation Now (WIN) buttons—have we seen such imaginative economic theorizing...

...As the economy declines they are forced to raise taxes or cut spending and employment...

...in 1990 they paid for 42 percent...

...The Shredding of the Safety Net Another factor prolonging this recession is that unemployment insurance—which is supposed to cushion the effects of unemployment on workers— has been devastated...

...What is most remarkable about this recession is that for the first time since World War II the federal government is not attempting to stimulate the economy out of a recession...

...The 1990-91 downturn did not fit the typical pattern...

...In the typical state, maximum AFDC benefits for a three-person family fell 39 percent from 1970 to 1990, after adjustment for inflation...

...In the nearly two decades that Republicans have controlled the presidency they have served their constituents well...

...In 1980, such a family could qualify for benefits in forty-two states...

...Not only do government programs provide less cash assistance than in the past to cushion the blow of unemployment, they also provide less help for jobless workers seeking training or placement into new jobs...

...With wages stagnant, families have been forced to cut their standard of living or have maintained living standards by working longer hours, putting more family members into the workforce, or going into debt...

...If the percentage of the unemployed receiving benefits had been the same in 1989 as in 1979, about 600,000 more unemployed workers would have received benefits in an average month in 1989...

...Both of these were years immediately preceding a recession...

...Hourly benefits, such as pension and health insurance, fell by 13.8 percent...

...Although the unemployment insurance system is the most important form of assistance for workers who lose their jobs in a recession, other parts of the safety net have also been cut sharply in the last decade (these figures also come from the Center on Budget and Policy Priorities): • In 1990 a single-parent family of three with wages equal to 75 percent of the poverty line could qualify for AFDC benefits in only nine states...

...From 1980 to 1990, these benefits fell 18 percent in real value...

...exports, and the Federal Reserve abandoned tight money (for a few months) in an effort to fight the recession...

...Where are the liberals calling for a revitalized public sector, a jobs program, a blueprint to SYLVIA by Nicole Hollander FALL • 1991 • 451 Comments and Opinions revitalize American industries, a plan to bring America's trade policies in line with international realities, a repair of the safety net, national health insurance, and a return to progressive taxation so we can equitably pay for what needs to be done...

...Federal Reserve Chairman Alan Greenspan has been at a loss to explain the causes of this recession...

...In 1979 some 42 percent of the unemployed received UI benefits in an average month...

...In 1989 12.8 percent of Americans-31.5 million people—fell below the poverty line...

...Testifying before Congress, Greenspan said: "More than any other time that I can recall, this economy is driven by confidence rather than physical forces...

...If the natural constituency of liberalism is the bottom two-thirds of society, when will liberals adopt a program—one far more radical on economic issues then anything they have embraced so far—that will attract their own constituency...

...The agreement establishes separate spending caps for domestic nonentitlement programs, defense and foreign affairs and specifies that from 1991 to 1993 funds cannot be moved from defense to domestic programs...

...One expects conservatives to represent the interests of the well off...

...Those in search of the administration's domestic economic strategy need only consult the Council of Economic Advisors' Economic Report to the President...