While it’s not politically correct, here is something for political pundits to ponder: Are the Republicans trying to finish what bin Laden started?
In a 2004 video message, Osama bin Laden boasted about leading America to a path of self-destruction, in an interview with Ted Koppel, the former managing editor of ABC’s “Nightline.”
In the video, bin Laden said “All we have to do is send two mujahidin…to raise a small piece of cloth on which is written ‘al Qaeda’ in order to make the generals race there, to cause America to suffer human, economic and political losses.”
And while bin Laden was indisputably a diabolical Islamic fundamentalist fanatic, his main goal was never to defeat the U.S. militarily. His goal was to destroy the U.S. economy.
Yet as history has shown, bin Laden never did that.
Instead, we derailed the U.S. economy ourselves.
We did this through the Iraq War, the invasion of Afghanistan; creation of the Homeland Security Agency; the 2008 recession; subsequent unemployment that rose from 5% in December 2007 to 9% in 2009 and peaked at 10% in October 2009; bailouts of errant financial institutions; and an unprecedented Federal Reserve quantitative easing monetary stimulus policy. But there was even more.
It is true that bin Laden had nothing directly to do with the systemic mortgage fraud that caused the 2008 recession and the related domestic political wars intent on derailing the Obama presidency. But bin Laden’s acts ignited what historians could call an American over-reaction that caused war mobilization aggravated by recession.
Here are some key historical events to consider that helped derail the U.S. economy:
The Iraq Invasion
While the Bush-Cheney administration presided over the Iraq and Afghanistan invasions after the Sept. 11, 2011, (even though the Taliban had offered to turn over bin Laden if the U.S. could link him to the attacks), the political machine was already engaged for a huge war expenditure. Eventually, the war costs would tally more than $2 trillion, plus an additional $490 billion in benefits owed to war veterans. Combined, these expenses could grow to more than $6 trillion over the next four decades counting interest. The wars in Afghanistan and Iraq would eventually cost 6,840 American lives and 134,000, Iraq lives.
Another estimate of the war costs according to a 2011 report prepared by the Costs of War Project at the Watson Institute for International Studies, Brown University, found the wars in Afghanistan and Iraq cost at least $3.7 trillion, based on actual expenditures from the U.S. Treasury and future commitments, such as the medical and disability claims of U.S. war veterans. That estimate climbed to nearly $4 trillion in the update, a Reuters report stated.
So what was gained in the wars?
“The report concluded the United States gained little from the war while Iraq was traumatized by it. The war reinvigorated radical Islamist militants in the region, set back women’s rights, and weakened an already precarious healthcare system, the report said. Meanwhile, the $212 billion reconstruction effort was largely a failure with most of that money spent on security or lost to waste and fraud, it said.”
The 2008 Recession
The TARP bailout and the accompany plan by the Fed to start its quantitative easing plans made a huge impact on attempting to resurrect a damaged economy.
Eventually, the 2008 recession would destroy about $16.4 trillion of net household wealth from its peak in spring 2007, about six months before the start of the recession, to the nadir reached in the first quarter of 2009, according to figures from the Federal Reserve. The financial devastation was so severe that despite a stock market recovery, a higher savings rate and consumer’s attempts to reduce debt, only a little more than half of that lost wealth –$8.7 trillion–was back on household balance sheets by the spring of 2011. The net effect of the recession, which still lingers today, is that American household wealth was $7.7 trillion less in 2011 than from before the recession.
So while there have been gains since then, personal finance pundits who bemoan the low savings rates of workers in 401(k) plans, they should remember the devastating effects of the recession.
The Deficit Increases
The wars and recession set the stage for an increase in the deficit.
“The price tag for the massive taxpayer bailout of Wall Street and the nation following the 2008 financial meltdown has been whittled down to approximately $40 billion, according to a report from the Special Inspector General for the Troubled Asset Relief Program (TARP) cited by CNNMoney.” Source: NewsMax, May 2014.
“The Treasury Department spent $7.8 billion of the TARP monies helping taxpayers with underwater mortgages get cheaper loans. But $1.2 billion has been lost on loan modifications for borrowers who later defaulted anyway.” Source: Newsmax, May 2014
Deficit Records of Presidents (ratios of deficit to GDP)
George H. W. Bush (Bush I)
George W. Bush (Bush II)
*fiscal 2012 ends Sept. 30, 2012, so this figure is estimated
Source: Economic Report of the President, February 2012, as cited in Forbes , July 11, 2012.
As James Glassman, the author of this Forbes article notes, Bush’s deficit results were affected by the 10% deficit/GDP ratio in fiscal 2009. “A large chunk of spending in that year went to the Troubled Asset Relief Program, or TARP. In fiscal 2009, TARP contributed $151 billion to the budget deficit, but in 2010 and 2011, $147 billion of that amount was recouped and thus reduced the size of the deficit during President Obama’s watch,” Glassman wrote. (These calculations are complicated and are available at the Office of Management and Budget.)
The Republican Pledge to Derail the Obama Presidency
On the night of Obama’s inauguration, a group of Republicans held a four-hour dinner at The Caucus restaurant (where a New York strip steak costs $51) in Washington D.C. to develop plans that would stop the Obama administration, paralyze the Congressional and budget process and confront Obama and any of his officials as they sought to perform their duties.
Among the 15 or so people in attendance were Republican Representatives. Eric Cantor (Va.), Kevin McCarthy (Calif.), Paul Ryan (Wis.), Pete Sessions (Texas), Jeb Hensarling (Texas), Pete Hoekstra (Mich.) and Dan Lungren (Calif.), along with Republican Senators Jim DeMint (S.C.), Jon Kyl (Ariz.), Tom Coburn (Okla.), John Ensign (Nev.) and Bob Corker (Tenn.). The non-lawmakers present included Newt Gingrich, several years removed from his presidential campaign, and Frank Luntz, a long-time Republican fanatic who organized the dinner where everyone sat at a large square table. However, Senate Minority Leader Mitch McConnell (R-Ky.) and House Minority Leader John Boehner (R-Ohio) missed the dinner because Draper wrote they had “an acrimonious relationship with Luntz.”
For several hours, the book says they plotted ways to not just win back political power, but to also stall Obama’s legislative platform. In the book, “Do Not Ask What Good We Do: Inside the U.S. House of Representative,” by Robert Draper, the meeting set the tone for Obama’s two-term presidency that resulted in blocked any legislation ranging from economic stimulus bills to challenging his Cabinet-level nominees.
“If you act like you’re the minority, you’re going to stay in the minority,” Draper quotes Kevin McCarthy (R-Cal.) as saying. “We’ve gotta challenge them on every single bill and challenge them on every single campaign.” (Sadly, the obstructionist McCarthy is now jockeying to take over the position of Speaker of the House.)
But Boehner and McConnell also endorsed the government shut-down plan.
In October 2010, Boehner, the incoming Speaker of the House, offered his plans for Obama’s agenda: “We’re going to do everything — and I mean everything we can do — to kill it, stop it, slow it down, whatever we can.”
At about the same time, Senate Minority Leader Mitch McConnell summed up his plan to National Journal: “The single most important thing we want to achieve is for President Obama to be a one-term president.”
Shutting Down the Government
While this plot was hatched at a partisan dinner, it was more akin to a political coup since it was much more than a meeting of the “loyal opposition.” Taken in its historical context as the TARP bailout was meddling along and the nation was clearly entering a recession, the “loyal opposition” was essentially plotting to shut down the legislative process for what they thought was Obama’s single four-year presidential term. When Obama was re-elected in November 2012, the Republicans became more radical and more intent on shutting down the government. This is something bin Laden could never have dreamed for.
While that happened in October 2013 and was threatened twice in the past two years, (the latest in September 2015), the larger long-term negative impact for the entire nation from the economic perspective was that it de-coupled the ability of the U.S. to enact monetary and fiscal policy. This meant that the monetary policy of the Federal Reserve did not reflect the fiscal policies (tax- and budget-related) that were the responsibility of Congress.
De-Coupling Fiscal and Monetary Policy
With Congress was paralyzed by the Republicans intent on discussing Benghazi, Planned Parenthood, the merits of de-regulation, dangers posed by the Environmental Protection Agency, voiding the Export-Import Bank, the “fallacy” of global warming, repealing the Affordable Care Act (since it would make Obama look like a statesman) by taking 55 separate House votes to overturn or defund it, that the bill is legal, as well as rear-guard actions by Republican attorneys generals that challenged the bill. Some of these anti-Affordable Care Act votes were taken after the U.S. Supreme Court decided the bill was legal. So while the Republicans votes almost as a block to confront Obama, enacting any national fiscal policy stopped. All this happened as the nation was mired in the worst recession since the Great Depression of the 1930s.
It also put the Federal Reserve in an impossible position of trying to resurrect the economy by itself. This was something it was never intended to do. The nation moves ahead historically through coordinated fiscal and economic policy. Now, half of that equation was gone. This is one reason why the financial media has been talking ad nauseam about interest rates since June 2006, the last time they were increased. Yet by a variety of measures, the country is still emerging from the 2008 recession.
You Get the Government You Deserve
While Americans may not know all the details about how their government runs, they know something is wrong.
Some may think it’s a problem that only a corporate executive can fix, as if any government in the world is a business. Think of what happened in Italy when it was run by billionaire ($7 billion net worth), former Prime Minister Silvio Berlusconi, who was elected as an “outsider who was going to bring a new efficiency to the public.” He eventually was forced to resign after financial scandals raised over his conflicts-of-interest, preferential treatment of friends, manipulative politics and sex scandals.
Others are looking to correct what they see as social excesses or for a populist to correct economic inequalities aggravated by the 2008 recession, years of stagnant wage growth and the feeling that Americans are just in a rat race.
But the main theme that most Americans can agree upon is that the country has not advanced since October 2001. Not enough major problems that nations face related to society, the economy, politics, race, or justice have been solved, especially since this is such a powerful nation with so many resources. Some Americans may prefer this stagnation, but it’s certain that bin Laden would be enjoying the spectacle.