Thursday, August 2, 2012
President Obama: "They Have Tried To Sell Us This Trickle-Down, Tax-Cut Fairy Dust": The Problems with Supply Side/Borrow and Spend Economics
I'm not sure what's the exact date of when the concept of Supply Side Economics was created. But I know it was first introduced by two Republican Members of Congress in 1978. Representative Jack Kemp of New York, hopefully that name is familiar for several reasons and Senator Bill Roth of Delaware. Congressional Republicans were still buried in the minority in both the House and Senate at this point, with Senate Democrats having sixty seats in the Senate a Filibuster proof majority. And roughly 290 seats in the House but by 1978 the economy was tanking, because of energy and several other factors, one of the reasons why President Carter pushed Energy Independence so much. And Republicans, Ronald Reagan, as well as Congressional Republicans saw an opening in how to get back to power. By focusing exclusively on the bad economy and making Tax Cuts and deregulation their path to Economic and Job Growth. President Reagan is not the Father of Supply Side Economics that he put into law in 1981 with what I believe was called the Economic Recovery Act of 1981. He's the guy who put into law, the theory being that Americans were overtaxed and regulated, as well as employers. That if you cut their taxes across the board, they'll have incentive to be productive and grow the economy as a result.
What is Supply Side Economics and why do I call it Borrow and Spend Economics, which is not my line, I only wish it was. Its actually Howard Dean's line that he came up with as Chairman of the Democratic National Committee from 2005-07. You cut taxes deeply across the board, without paying for them, meaning you don't raises taxes or revenue somewhere else in some other way. Or you don't cut the budget to pay for them, while at the same time you increase government spending. In President Reagan's case the Defense Budget to deal with the Cold War and expanding the War on Drugs, President Reagan was not a Fiscal Conservative in the sense he believed things that. The Federal Government spends money on has to be paid for, he was an Economic Conservative, meaning a big believer in Economic Freedom and Private Enterprise. By the time President Reagan left office in 1989, he passed on to President Bush his Vice President. A record credit card bill and deficit over eight years.
The other theory with Supply Side/Borrow and Spend Economics, is the reason you don't have to pay for Tax Cuts. Is that the revenue thats generated from Economic Growth through the Tax Cuts, will more then be enough to pay for the Tax Cuts themselves. We know from the adventures of the Bush Administration down the road. With 2T$ in Tax Cuts in 2001 and in 2003, with two wars that have never been paid for or the Medicare Advantage plan of 2003, that was never paid for, that this simply doesn't work. Believers in Supply Side Economics are literally insane, because they keeping trying and believing in this same idea, expecting different results.