Wednesday, September 05, 2012

This Is Not a Love Song

This is not class warfare.

This is economics.

And we should be able, as a nation of reasonable people, to discuss it calmly and maturely.

I've been waiting for the GOP to offer up an explanation for why trickle-down, or supply-side, or (as one of their own called it) "voodoo" economics hasn't truly been disproved. That exact theory would seem to describe what Romney and Ryan are, again, offering as the solution to what ails the country : decreased taxes on the wealthiest among us, decreased regulation and cuts to government programs, as a means to spark the economy, create new jobs, usher in a new era of growth, and supposedly therefore benefit everyone. 

But this has been tried, and tried, under various names since Reagan. Over those thirty years, it hasn't actually worked. The money doesn't actually trickle down. It defies gravity and keeps rising up.

As Nobel Prize-winning economist Joseph Stiglitz points out in his new book "The Price of Inequality,"
[O]ver the last three decades, those with low wages (in the bottom 90 percent) have seen a growth of only 15 percent in their wages, while those in the top 1 percent have seen an increase of almost 150 percent and the top 0.1 percent of more than 300 percent.
Again, this is not class warfare. This is economics. Trickle-down simply does not work.

And yet, Romney and Ryan are offering it up again. "[Romney's] plan seeks to reduce taxes, spending, regulation, and government programs." [Alarmingly, though, he doesn't get much more specific than that.] ...even though that cut-taxes--scrap-regulations--cut-the-safety-net approach has proved to disproportionately benefit the top 1 percent and to really, really benefit the top 0.1 percent.

In fact, the only time since Reagan took office that the nation's incomes seemed to rise in sync, with poor and middle class people seeing significant increases, even as the very wealthy saw even larger increases, was in the 1990s...when Clinton was President. Otherwise, rising inequality has been the result.

Stiglitz outlines how this inequality, as opposed to sparking growth, as Romney and Ryan would have you believe, actually undermines growth and impairs efficiency:
Part of the reasons for this is that much of America's inequality is the result of market distortions, with incentives directed not at creating new wealth but at taking it from others. It is thus not surprising that our growth has been stronger in periods in which inequality has been lower and in which we have been growing together. This was true not only in the decades after World War II, but, even in more recent times, in the 1990s. [emphasis mine]
Inequality corresponds with weaker growth, not stronger growth. Inequality is actually bad for the economy.

And so, I'm back to wondering how Romney and Ryan and their supporters, when looking at the previous attempts to implement trickle-down economic theory, can explain their desire to try it once again. The only feasible argument I can imagine they could offer to explain it, despite how history seems to contradict their claims, would be that "true" trickle-down economic theory hasn't yet been implemented...that previous efforts have been hampered by lingering regulations and the drain of entitlement programs.

And you know what, I would agree with that. Trickle-down theory in its purist form has not yet been tried in the US. The New Deal safety net would need to be essentially dismantled, regulatory bodies would need to be disbanded, and we'd all need to take a deep, deep breath and wait for the suddenly more wealthy to invest ( what? exactly? not sure...) and for that to eventually create good jobs...the kind that pay salaries that would encourage the level of consumer confidence to spark real growth. It would be a gamble, for sure, to attempt it that way. But unless you attempt it that way, you'll never really know if that's what it takes for trickle-down theory to actually work.

As I thought about this approach (and I'm not saying that's what Romney is proposing...he seems to be proposing a more intermediary approach...essentially more of what we saw under Reagan and Bush...that is, more of what led to the sort of inequality that derailed growth), it began to remind me of another economic (and social) theory. The advocates of that theory insisted that the people should trust them...that it was worth the gamble...but that the theory would only truly work in its purist form. Those advocates justified all manner of truly horrific and inhuman measures to try to realize that pure form of their theory. They never got there, though. All they managed to do was destroy millions and millions of lives and plunge the world into near annihilation. I'm speaking of course of Communism under the Soviet Union.

Now before you conclude I've violated my own call for mature and reasonable discourse, please note I'm not suggesting Romney is Stalin or any such nonsense. I offer this not as comparison, but as cautionary tale to consider. In fact, I truly hope Romney has a different argument for why his proposed economic plans would work this time, even though they failed under Reagan and Bush. I'm hoping he's not going to argue that it wasn't implemented purely enough.

But the fact remains that we have tried this plan before, and it has failed. If this time is different, I'd like to know why. 


Anonymous MacCruiskeen said...

"But this has been tried, and tried, under various names since Reagan. Over those thirty years, it hasn't actually worked. The money doesn't actually trickle down. It defies gravity and keeps rising up."

You misunderstand. The program has worked, in the sense that it has achieved the desired results. The rich have gotten richer. The rest of us get a trickle.

It is class warfare.

9/05/2012 04:17:00 PM  
Blogger Richard G. Crockett said...

One would do well to remember that trickle down economics was hardly new to Reagan. This was the policy of Harding, Coolidge, and Hoover.

It did not work then, either.

9/06/2012 02:54:00 AM  
Blogger Charles Kessler said...

Capitalism cannot exist without government regulation -- if only to prevent fraud and enforce contracts. Inequality by itself isn't the problem, it's because "... America’s inequality is the result of market distortions, with incentives directed not at creating new wealth but at taking it from others." We need regulations to control these "distortions" and "incentives."

Naive Republican economic theories about the efficacy of laissez faire capitalism are wrong. Even Adam Smith believed regulation is vital.

9/06/2012 12:29:00 PM  
Anonymous Anonymous said...

I overheard someone saying: "I'm tired of being trickled on."

9/06/2012 04:59:00 PM  

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