Sunday, July 6, 2014
Supply-Side Economics: The Great Political Shell Game
The shell game goes something like this. First you promise to lower everyone's taxes. That's an important first step, because who doesn't want their taxes lowered. Next you claim that the tax breaks will pay for themselves because everyone will have more money to spend, including the "job creators," who, you know, create jobs. With more people working, there will be more money coming into the treasury and, with all that extra capital out there, the economy will grow by leaps and bounds and the deficit and debt will shrink as the great engine of capitalism purrs along in 5th gear.
It sounds great doesn't it? And I'll bet dollars to doughnuts that those of you who played that other shell game swore that the ball was under that third cup. But it wasn't, was it? It always ended up being under the cup you didn't choose. That's why it's called a shell game. The house rigged the contest; the player never stood a chance.
Over the last 34 years, the United States has had two front-row seats to view the ultimate shell game: supply-side economics. The results have been as consistent as they've been predictable. The economy did not grow by leaps and bounds; in fact, growth was no more than average at best. The job creators didn't create those extra jobs; for the most part they lined their corporate pockets. And while the rich got richer, the poor got poorer and the middle class got squeezed. But, worst of all, the debt exploded.
When Ronald Reagan took office in 1981, the debt stood at $930 billion; when he left in 1989, the debt stood at $2.7 trillion. In short, Reagan almost tripled the debt in his eight years as president. George W. Bush's eight years in office proved no better. When he took office, the debt was $5.7 trillion; when he left in 2009, the debt was $10.7 trillion. That's almost double if you're keeping track. Worse for Bush is the fact that he inherited a $300 billion surplus from Bill Clinton, which he quickly squandered by starting two huge land wars, passing two huge tax cuts and expanding Medicare.
You'd think that the American people, after getting burned twice, would've figured out the con and come to the realization that supply-side economics simply doesn't work. You'd think that, but you'd be wrong. And the reason is quite simple. No matter how many times they get burned, Americans love it when you tell them something they want to hear. And everyone loves hearing they're getting something for nothing. Think about it. Who doesn't want a few extra bucks in their pockets to spend?
Of course those few extra bucks come with a huge price tag. For every dollar the typical middle-class taxpayer receives, the ultra rich get hundreds, if not thousands. And that extra money floating around hardly ever ends up back in the treasury. That's because people who were barely getting by in the first place are not likely to spend that extra cash. What they're far more likely to do is hold onto it for a rainy day. Ironically, Bush found that out when he did his own little stimulus in early '08 when the economy began to tank. Bush thought he could prevent a recession by naively believing that American consumers would go on a spending binge. It backfired. Instead of spending the extra money, they horded it.
Corporate America pretty much did the same thing. One of the cruelest hoaxes perpetrated on the public is that the reason the job creators haven't created enough jobs is because they are over regulated and over taxed.
In 2011, as the economy was beginning its long, slow recovery, America's largest corporations were sitting on roughly $2 trillion. That's right. At a time when unemployment was over 9%, our vaunted job creators were sitting on the sidelines propping up their balance sheets and making their investors rich and happy. The idea that giving these blood suckers another trillion dollars more in tax "incentives," is obscene.
Obscene or not, the proponents are persistent in their claims. More tax cuts and less government regulation equal more jobs and greater prosperity for all. The fact that Clinton grew the economy more with higher marginal tax rates and the same regulations, all while balancing the budget, or that Eisenhower presided over the longest stretch of prosperity the nation had seen in a century - with even higher marginal tax rates and more regulations - is irrelevant. Tell a lie often enough and gullible people will swallow it.
Once more the gullible are lining up to play the shell game. The deficit is shrinking and the economy is growing at its highest rate in six years. But that hasn't deterred the supply-siders. They're determined to rewrite history once more. Trust us, they say. This time the ball really will be under the third cup.
Don't believe them, Amercia. The ball isn't going to be under the third cup this time. In fact there IS no ball. There never was one. And no matter how many times you play the game, you'll never win. The house will see to it.