The views expressed herein are the writers' own
and do not necessarily reflect those of Liberal Slant
www.liberalslant.com2003-2002-2001-2000-1999-1998
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Debunking Dubba-U-nomics
By: Mike Hersh - 01/31/03
"Jobs are created when the economy grows; the economy grows when Americans have more money to spend and invest; and the best, fairest way to make sure Americans have the money is not to tax it away in the first place." - G AWOL Bush
That sound bite sounds right, but it's really right wing...and wrong. Jobs are lost when the economy shrinks; the economy shrinks when most Americans have less money to spend and invest; but the best, fairest way to make sure most Americans have money to spend and invest is through fair and sensible economic policies which promote growth by promoting fairness.
While it's true different economists see the same data in different ways and make drastically different predictions, economics is less confusing than many believe. There are a few basic economic laws which no one can repeal. It's basically about making choices. The right choices make for a better future. Right wing choices lead to the mess we're in now.
We need only consider the Clinton Era for proof of what works, and look at the miserable Bush I and Bush II performance for proof of what doesn't. While the right wingers typically blame this Bush economic mess on Bill Clinton, here's an overview of the Clinton-Gore Administration's economic success:
"Elimination of record-high budget deficits; Largest pay-down of debt in history; Smallest government in over three decades while increasing key investments in our people; Lowest tax burden for typical families since the 1970s; Seven consecutive years of double-digit investment growth for the first time on record; Lowest unemployment in a generation; and Longest economic expansion in U.S. history." Also, record home ownership, record high employment and income for minorities, and college tuition assistance for millions of Americans.
If the Supreme Court hadn't stolen the election from Al Gore and the American people, we could have had more of the same prosperity thanks to "a balanced and fiscally responsible budget plan [including] Paying off the debt by 2013, resulting in lower interest rates and a stronger economy; Strengthening and modernizing Medicare by securing it until at least 2030, reforming it to make it more efficient and competitive, and improving its benefits, including new prescription drug coverage; Extending the life of Social Security to at least 2054; Investing in key priorities like education, health care, environment, public safety, and national security; and Providing targeted tax relief for families to help them save for retirement, pay for child care, and go to college." See PRESIDENT CLINTON: URGING CONGRESS TO PASS A BUDGET THAT INVESTS IN AMERICA'S PRIORITIES, April 13, 2000: http://clinton3.nara.gov/WH/Work/041400.html
Instead of continued prosperity and fair affordable tax cuts for all Americans, we're once more facing recessions and triple digit deficits as far as the eye can see. This because Bush sides with the truly greedy rather than the vast majority of Americans. Bush throws out policies we know work well, choosing to borrow and waste money on Star Wars, unnecessary $billion a day wars, and gifts for the idle rich. The economy can't grow off welfare for the wealthy and corporate crime that Bush coddles and promotes. Then Bush will pass along the bill to future Presidents and the next generation. Just as Reagan and Bush I did.
When Republicans tell you they want to cut your taxes, don't believe them. Not if you're an average American. Read the fine print. Look at their proposals and budgets. They may cut your federal income tax a few hundred or even a few thousand, but they will raise other taxes and cut aid to state making them raise your taxes. This is the bottom line: Unless you earn more than a quarter of a million dollars a year, Bush's proposals make you to pay higher taxes for less in services you and your family need. Not only that, they hurt the economy and may cost you your job. All this so their privileged pals can pay lower taxes. "All they are saying is give greed a chance."
Why do right wing Republicans embrace failed policies and reject basic economic laws? Out of greed and because ideology overwhelms their better judgment. Wealthy special interests hire mercenary and fanatic academics to pontificate from self-serving "think tanks." Keep this in mind the next time you hear right wingers -- calling themselves supply-siders or "libertarians" or whatever -- tell you they know what's good for you and the economy. They never let economics, facts or history stand in the way of a bad, unfair policy.
Bush's policies are taking money from most Americans, and concentrating cash in the hands of the elite few. That means almost all of us will have less money to spend and invest, and the few who have more money will have less incentive to do either. This is a recipe for recession -- if not depression.
Former Nixon advisor Kevin Phillips wrote at least three books explaining this in detail with irrefutable data. JK Galbraith and many others traced the Great Depression to wrong-headed right wing policies such as those Bush is pushing. These policies lose millions of jobs and mortgage the future by rolling up debt and slashing investments in education and infrastructure.
While right wingers embrace some basic economic facts, their ideology clouds the overall picture. Right wing rhetoric -- based on nonsense like "Say's Law," ignoring the need for demand to move products -- flies in the face of common sense. It also contradicts history, recent and long-standing economic laws, even the most basic: "There's no such thing as a free lunch."
Supply Siders claim that cutting taxes increases revenues, so tax cuts pay for themselves. They often claim Reagan and JFK accomplished this, but that's wishful thinking -- if not outright lying. Tax revenues did not increase because Reagan cut taxes. Revenues fell dramatically. The record -- produced by Reagan's own Office of Management and Budget proves that revenues increased only after Reagan hiked taxes.
By fixating supply, right wingers ignore the need for consumers to have money and want to spend money ("demand") before they can spend money. The Keynesian view holds that without demand, supply remains stagnant -- not "demanded" and therefore not purchased. When almost no one has anything, and only a few have almost everything, the economy chokes to a halt and starts contracting.
Imagine playing the game Monopoly. After a while, one person has all the money and you can't play further. It simply won't work that way. History proves the same laws apply to the national economy. When too few have too much, and too many have too little, the economy sputters and fails.
Before the New Deal, "boom and bust" cycles wracked the US economy. Wealth and power flowed into the hands of the elite, and impoverished the rest. The bust cycles became deeper and longer, until we reached the culmination of Supply Side economics: the Great Depression.
After a century or more of unmitigated failure, you'd think no one would propose "Supply Side" -- at least not with a straight face. If it weren't for the unbridled enthusiasm of "free market" fanatics and the bottomless greed of special interests, Supply Side would join other discredited oddball ideas like the "flat earth" theory or the idea frogs come from mud. Periodically, however, this right wing ideology arises against common sense, history, and established economic thought.
The latest incarnation of this carnival game developed during the late 1970s. Based on oversimplifications and even stark internal contradictions, a few non-economists launched a junk-science approach known as "Supply Side" Economics. In this they borrowed from a long discredited theorem known as "Say's Law."
"Say's Law" holds that no matter how little money consumers have, or how little they want an item, they will buy it provided producers supply enough of that item. This because as the supply increases in the face of stable demand, the price per item will fall until people buy all the items. Don't believe people really think this "proves" Supply-Side? Take a look at this quote from a typical ideologue:
"...Hoover, Roosevelt, and Keynes had it all backwards. The proper economic principle is called 'Say's Law,' for Jean Baptiste Say (1767-1832), that 'supply creates demand.' This means that 'overproduction' in a free economy is actually impossible. This happens to have been the topic of the doctoral dissertation of the great economist Thomas Sowell, now available as Say's Law, An Historical Analysis [Princeton University Press, 1972]."
The breathless endorsement of Say concludes with this gem: "Why Say's Law is correct is evident from one simple consideration: if inventory doesn't sell, then prices will be cut until it does." See Say's Law and Supply Side Economics: http://www.friesian.com/sayslaw.htm
Crack your local Yellow Pages or search online and count all the buggy whip vendors for confirmation of "Say's Law." No matter how low the price of an unwanted item falls, not enough consumers will buy it. Moreover, unless enough consumers have enough money, they cannot buy the things they want -- much less the things they don't want.
As absurd as this notion is, it provides the main economic underpinning for "Supply Side." The right wing view tries to repudiate an idea any kid running a lemonade stand knows: Without customers, there are no sales.
No matter how cheap the car or home is, if you're broke you can't buy it. To make bad matters worse, these right wing policies increase actual costs of purchasing items -- higher interest rates, higher sales / property taxes -- thereby decreasing the demand needed to break the vicious cycle! I'll get to that later.
Bush's approach failed before and will fail again, leading to fewer jobs, higher real costs for consumers and businesses, and higher total taxes for most Americans. Supply-Side policies caused, deepened and lengthened the Great Depression, and did the same during the Reagan Recessions of the 1980s.
Right wingers try to blame every bad economic event on "big government." This is facile and dishonest. Public and private institutions manipulate the economy in various ways for various reasons.
Government action promotes economic growth on a triumphant scale. Public spending actually built our nation. Public money and resources financed our great national transportation and communications systems from the Erie Canal to the national railroads to the interstate highways to the Internet.
Government spending empowered and vitalized America. Massive public projects like the Hoover Dam and Tennessee Valley Authority brought water and power to huge regions of the United States.
Our tax dollars help make us more productive workers. Our unfairly maligned public education -- K through 12 and our unmatched universities -- foster invaluable personal development and learning, and promote commerce and research.
No private firm or consortium fills these needs. None act in the public interest defending workers, consumers or the environment. None ever will. It's simply not profit motivated.
Right wingers like to invoke their Supply Side patron saint Adam Smith. They pretend Smith advocated economy of anarchy, social Darwinism, and free-for-all helter-skelter commercial predation. However, Adam Smith never envisioned -- much less endorsed -- an economic system devoid of governmental controls.
Smith predicated his theory on an understanding that government would provide for public needs, and protect public interests "the market" undervalues because private firms would not and do not do so. Therefore, Smith's system required the "invisible hand" of the market working with the visible hand of government.
Writing in the 18th Century from a background of crown-controlled mercantilist restraint of trade, Smith knew unconstrained capitalism would devolve into over-concentration of economic power, monopoly and oligopoly restraint of trade, market abuses and other failures.
Right wingers who demand we operate with one hand tied behind our back advocate private restraint of trade every bit as onerous and anti-capitalistic as the system Smith decried, along with gargantuan public and private debt distorting any semblance of "the market."
Contrary to Smith's theory -- as well as all evidence and reason -- right wing ideologues rely on something that doesn't exist: the mythical "free market." One might as well depend on increased production from unicorns and centaurs for economic growth! Trusting the dubious wisdom of an imaginary entity over flesh and blood people makes for bad policy.
For example, wanton and wasteful "tax cuts" -- which redistribute money from hard working people to the idle rich -- poison the economy. These tried and false policies caused the Great Depression. They failed to prevent and in fact deepened the Reagan Recession of the Early 1980s. They're distorting and derailing economic recovery now.
Right wing economics pose this false choice: you decide how to spend your money or else "big government" will decide for you. The implication is these policies "return your money to you." In fact, unless your annual income is well above $250,000.00 the right wing policies will take more from you than you will receive. Look at the balance sheet:
The federal government will borrow more money, increasing your interest costs.
Federal government borrowing taps the pool of money available for lending.
Federal debt crowds out other investments, offering high guaranteed returns.
This drives up interest rates and makes business investment more difficult.
Higher interest rates will make it more costly for people and businesses to buy.
Faced with declining demand for goods and services, businesses will fire people.
People out of work cannot afford to buy as many goods and services.
This further depresses demand for goods and services.
As more people leave the economy, they no longer able to produce things, can no longer able to buy things, and the economy actually shrinks. Welcome to the vicious cycle which inexorably leads to deep recessions and depressions.
The federal government will eventually have to increase taxes to pay down this debt.
The federal government will eventually have to pay back this money, with interest.
The federal government will cut services you need and slash payments to states.
Your state and local will then have to raise your taxes and / or cut your services.
This means total net taxes increase, even as roads and bridges, schools, libraries, and other economic infrastructure crumble.
Tax cuts aimed at the top few percent wealthiest will rob Americans of jobs and income needed to keep the economy growing. This while undercutting the economic building blocks we need for sustained prosperity -- our transportation, education, and communications systems. Thanks to these "tax cuts," almost all Americans will end up paying more in taxes!
Right wingers cannot repeal the basic maxim: pay me now or pay me later -- with interest. By the time we're done paying down this latest round of Republican debt, we and the next generation will pay the wealthiest few -- with interest -- money they are obligated to pay in taxes by law, custom and moral duty to their country.
Contradicting dollars and sense, right wingers claim it matters to people, businesses and the economy whether they pay money as higher taxes to government or as higher interest rates to bankers. It does not and cannot. In either case, human judgment plays a role overruling the "free market forces" -- imaginary constructs, fictions which ideologues invoke to promote their prejudices.
Compare a higher tax bill of $1000 to higher interest payments totaling the same denomination. In both cases, the payer has $1000 less money and the bank or the government has $1000 more. Where is the difference to the payer? There is none, except.... Bankers act for themselves. The government acts on behalf of us all.
Both are "interventions" in the "free market." Which "intervention" is better for society? The answer is obvious. Yet, the ideologues contradict this logic and insist on the opposite of reason. They claim it's better to let the idle rich and corporate criminals spend your money on themselves, rather than you voting for people to spend your money on better schools, medical care, transportation and national defense for you.
Understand right wingers' vested interests and market mania when they demand you give your money to them and their wealthy patrons rather than keep it invested in your quality of life and the future.
Keep this in mind the next time right wingers, calling themselves supply-siders or "libertarians" or whatever -- champion a superstition espousing naive faith in a "free market" which never was (and could never be).
Bush's borrowing and spending will require higher taxes, just as his daddy's did and Reagan's did. Red Ink Reagan and Borrowing Bush I both raised taxes on most Americans, and so will little AWOL.
All they are saying is give greed a chance. All we are saying is we tried it your way, and it failed. We tried it our way, and we built the wealthiest economy ever. When presented with a clear cut choice between tried and true moderate policies and extreme economic ideology which favors the few and impoverishes the rest, voters will reject Bush's Dubba-U-nomics.
Mike Hersh is a contributing writer for Liberal Slant
www.bushoccupation.com
- www.mikehersh.com
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The views expressed herein are the writers' own
and do not necessarily reflect those of Liberal Slant
www.liberalslant.com2003-2002-2001-2000-1999-1998
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All rights reserved.
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