Today’s Republican Party is turning out to be the worst friend business could imagine, led by politicians who don’t understand the modern economy, and, worse, are ready to blow it up on principle.
This spring, as a GOP beholden to the Tea Party geared up for brinksmanship on the debt ceiling, lobbyists for Wall Street and corporations begged Republican leaders to back off. These pleas were ignored, and now a few trillion dollars in shareholder equity, wealth owned primarily by the top 10 percent of the richest Americans and corporate executives, has gone poof.
The story of Republican economic incompetence long predates the Tea Party. The rise of the new right in the 1970s, based largely in the Western United States, pushed aside an Eastern Republican establishment that knew its way around major financial institutions and believed in fiscal prudence. In his memoir about serving as Ronald Reagan’s budget director, David Stockman wrote of a White House that fundamentally didn’t understand fiscal policy and made gigantic amateur errors in projecting growth rates and tax revenues. That spawned huge deficits and the need for Reagan to reverse nearly half of his 1981 tax cuts. (Yes, Reagan raised taxes: not once, but 11 times.)
The old Republican establishment enjoyed a last hurrah under George H.W. Bush and his Treasury secretary, Nicholas Brady, a graduate of Yale and Harvard who got his start at the august Wall Street firm of Dillon, Read, and Company. Bush was serious enough about fiscal responsibility to back tax hikes to reduce the deficit, but he and Brady proved clueless about how to deal with new competitors like Japan or the recession of 1990–1991.
By the mid-1990s, the GOP had moved squarely to the fringe on economic policy.