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Republican Stranglehold Allows Test Of Supply-Side Theory
The Resurrection of Voodoo Economics
M.W. Guzy is a retired police detective who teaches criminology at the University of Missouri, St. Louis. ---------------------------------------------------------------------------------------------------------------------- The recent Republican triumph at the polls has left the GOP in control of both Congress and the White House. Though alarming to liberals, this development could actually boomerang in their favor: It finally allows for an empirical test of so-called "supply-side" economics. The supply-side theory is essentially a reformulation of the venerable fiction that wealth at the top of the economic pyramid "trickles down" to those below. By this reasoning, Brazil -- where an elite few own virtually all of the wealth -- should be the most prosperous nation on earth. The concept's modern incarnation first entered the political arena during the 1980 primaries when Ronald Reagan advanced the counterintuitive notion that cutting tax rates would increase tax revenue. At the time, critics howled. Chief among these was his rival for the Republican nomination, George H. Bush, who labeled the proposal "voodoo economics." Talk of witchcraft soon vanished, however, when George [Bush] I -- ever the team player -- joined the Reagan ticket as its vice-presidential nominee. The theorem that reduced taxes would stimulate economic growth and thus enhance revenues subsequently became a right-wing staple. When Reagan actually implemented his plan, of course, nothing of the sort transpired. In conjunction with a massive defense build-up, his tax cuts plunged the budget into record deficits that would persist until two tax increases, a "peace dividend" and the unparalleled economic expansion of the '90s finally combined to stem the flow of red ink. Undeterred by disastrous outcomes, supply-siders blamed the profligate Democrats who controlled Congress for the mess. It seems that their appetite for domestic pork had undermined the experiment. The debate thus remained a theoretical stalemate until the '02 elections gave W. Bush the mandate he'd sought. The ideological scion of Reagan rather than of his patrician and relatively moderate father, the younger Bush would never renege on a "read my lips" pledge simply to accommodate fiscal reality. Relieved of the strictures imposed by a hostile legislature, he's now free to test the theory that our economic doldrums are the result of rich people not having enough money. Of course, should welfare for the wealthy fail to stimulate middle class consumer demand, supply-side enthusiasts will fabricate another explanation for their creed's failure. Like all true believers, they're amazingly resilient in the face of contradictory empirical data. After all, they've argued for decades that any increase in the minimum wage will result in job cuts even though this phenomenon has never, in fact, occurred. In theory, wage hikes should cost jobs because they inflate the cost of labor. In reality, this doesn't happen because employers hire workers to satisfy demand for their products, not because labor's cheap. Layoffs take place when demand ebbs. Understanding that simple fact suggests that the surest way to stimulate economic growth is to give consumers more money to spend -- demand-side economics, if you will. Unfortunately, that humble notion fails to justify huge windfalls for the country club set and will thus attract few proponents in the current political climate. Boxing is sometimes called the "sweet science" because it subjects all conjecture to the test of the ring. Supply-siders are about to step back between the ropes -- this time without a fall guy to blame for their shortcomings. Let the match begin. This is M.W. Guzy for TomPaine.com. get the latest on what's new at TomPaine.com before everyone else! You can unsubscribe at any time and we will never distribute your information to any other entity. Published: Nov 18 2002 |
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