Maybe John Maynard Keynes didn’t have all the answers for what ails an economy, but after thirty years, this much is certain: supply-side economics has been a brutal disaster. One wonders why it is still taken seriously at all. It was George H. W. Bush who first coined it – and appropriately so – as voodoo economics. By all the evidence, papa Bush knew what he was talking about.
Consider that over the last three decades income inequality has spiraled, the gap between the wealthy and the poor has widened, the top 2 percent of the population has seen their wealth balloon, while the middle class and working poor have lost ground.
Not only is supply-side economics a morally bankrupt system, financially it doesn’t make any sense either. Okay maybe you don’t give a damn about income inequality – screw the poor, right? – so long as, at the end of the day, the math adds up.
Except it doesn’t. Not even close. To summarize, supply-siders have long maintained that by reducing taxes – specifically on the wealthy – receipts into the treasury would swell to record numbers. Proponents of this false religion refer to it as a growth economy.
Here’s the problem. While tax receipts do indeed increase, they never make up for the lost revenue from the reduced taxes. In fact, interestingly enough, for every dollar that goes out, only about 80 cents comes back in. Funny, for a movement that claims to know a thing or two about how businesses are run, these fools apparently haven’t figured out that losing 20 cents on the dollar is a pretty shitty investment.
All this has led to some amazingly abysmal results, both on a micro level and macro level. Paul Krugman recently observed that “if you look at United States history since World War II, you find that of the 10 presidents who preceded Barack Obama, seven left office with a debt ratio lower than when they came in. Who were the three exceptions? Ronald Reagan and the two George Bushes. So debt increases that didn’t arise either from war or from extraordinary financial crisis are entirely associated with hard-line conservative governments.”
You’d think that would be enough to put the whole matter to bed. And you’d be wrong. Like a bad habit, supply-side economics simply refuses to go away. It keeps hanging around waiting for yet another chance to spring to life and wreak havoc on an unsuspecting economy. If anything, its proponents are as defiant as ever. Not even the travesty of European austerity is enough to break the denial.
I’m starting to think that Barack Obama’s greatest accomplishment – and perhaps his lasting legacy – was that he didn’t allow the supply-side / austerity police to destroy the American economy the way they did Europe’s.