Ned Barnett

About that canal .....

May 12, 2013 

Last Sunday’s New York Times Travel section featured a cover story headlined “Panama City Rising.” It included photos of the vibrant city’s new skyline and described how Panama’s economy is also soaring, expanding by nearly 50 percent since 2008, the same period during which the economies of large, industrial nations have struggled.

Much of that growth is driven by Panama’s effective management of the Panama Canal. The country’s economy is expected to boom further as the canal undergoes a $5.25 billion expansion that will double its capacity.

The Times’ story might inspire some to visit Panama, but it also invites us on a journey back into American political history. It’s a journey to North Carolina and the roots of the gridlock that now keeps the United States from making the kind of infrastructure investment that has lifted Panama.

Thirty-five years ago, the U.S. Senate approved the Panama Canal treaties over the opposition of conservatives. Two years before the approval, in the GOP presidential primaries of 1976, candidate Ronald Reagan seized the issue and vehemently opposed plans to transfer authority over the canal. Reagan said it could fall into the hands of Communists and could be used to stymie or threaten the United States.

“We built it, we paid for it, it’s ours, and we are going to keep it,” Reagan declared.

Noel Maurer, a Harvard Business School associate professor and co-author of the Panama Canal history, “The Big Ditch,” says Reagan’s position was ironic because the champion of capitalism was defending a poorly run, money-losing U.S. government operation that presidents had been trying to unload for decades.

But the issue lent itself to jingoism, and it energized Reagan’s flagging campaign. He won the North Carolina primary largely on the strength of it. Reagan failed to gain the GOP nomination, but his surge in North Carolina helped make him a credible candidate and set the stage for his successful run in 1980.

In a roundabout way, it can be said that the anger and nationalism stirred by Reagan over the canal ignited the Reagan Revolution. With that came the anti-tax, anti-government fervor that animates the tea party today.

And it can also be said that on the issue Reagan rode to power he was absolutely wrong. The United States did the moral thing and upheld its obligations, its interests and its ideals by transferring ownership of the canal to the small nation it bisects. Since the formal transfer in 1999, Panama has prospered along with U.S. businesses that use the canal. It has all turned out quite well.

Money is called the mother’s milk of politics, but what truly sets the course in America is amnesia.Voters are stirred to oppose their own interests by appeals to their fears or their prejudices and too many forget the last time they were misled.

Now the nation is enduring the effects of another wrongheaded but viscerally appealing notion. That is the belief that taxes are always bad and tax cuts are always good. Reagan didn’t invent that dogma, but he popularized it, and his legacy perpetuates it. Cut taxes and prosperity will follow. Raise them and government waste will sap the economy.

The idea has been repeatedly debunked by experience. George W. Bush, for instance, gave away a surplus through tax cuts and the economy collapsed before he left office.

Anti-Obama forces have blocked the president’s efforts to revive the economy. They are unilaterally opposed to tax hikes, and they’ve forced cuts in spending. But the austerity measures backed by House Republicans are hindering the recovery. The government should be spending more in hard times, not cutting.

According to estimates by Moody’s Analytics reported last week by The New York Times, Republican insistence on deficit reduction in the aftermath of the recession will slow economic growth for 2013 by 1.2 percentage points and prevent the nation’s 7.5 percent unemployment rate from falling to 6.1 percent by the end of this year. Behind those dry numbers is a lot of human pain.

North Carolina is getting a double dose of austerity. The federal sequester is cutting military spending in a state with major bases. The Republican-controlled General Assembly is refusing federal payments for extended unemployment benefits and Medicaid expansion while “holding the line” on state spending despite population growth. That federal-state whammy is one of the reasons North Carolina has the fifth-highest unemployment rate in the nation at 9.2 percent.

Not to be deterred by history, Republican state senators last week proposed revisions to the tax code that would follow the same failed formula. They want to cut state income tax rates sharply and reduce state spending by $1 billion over three years. They say it will create jobs.

Reagan couldn’t keep the Panama Canal, but his adamant stance set in motion a movement that has dug us into a different ditch. We built it. We’re paying for it. It’s ours. And, sorry to say to the unemployed, the foreclosed upon and the youth without job prospects, we’re keeping at it.

Editorial page editor Ned Barnett can be reached at 919-829-4512, or nbarnett@newsobserver.com

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