Voodoo Economics, as George H.W. Bush named it in 1980, is what caused most of our national debt. It came from Wall Street and goes by the name “supply-side economics.”
The debt problem comes from Wall Street supply-siders taking over the Republicans. Ike, Nixon and Ford, all good Republicans, brought the debt down 11 out of 16 years. supply-siders brought it down 0 out of 20. That’s batting 688 versus batting 0. And G.H.W. Bush was no supply-sider — he called it voodoo economics. He just got trapped by Reagan’s supply-side policies. He passed a tax increase trying to partially undo Reagan’s damage, but the supply-side Republicans turned on him, and he was not re-elected.
So supply-sides are far from traditional Republican balanced-budget values. Cheney, a supply-sider, said “Reagan proved deficits don’t matter.” Unfortunately the supply-siders have now pretty much captured the Republican party.
What Is Supply-Side “Economics”?
Supply-side economics was started by the the Wall St. Journal opinion editor, Robert Bartley and his right-hand man Jude Wanniski. They worked with two economists, Arthur Laffer and Robert Mundell. But Bartley took the lead, and much of supply-side economics was developed by him and Laffer at a series of dinners at Michael 1, a posh restaurant a few steps from Wall Street.
They viewed it as an attack on Keynesian economics, which described how to get out of a depression by having the government increase demand for goods and services from the private sector. This is how we got out of the Great Depression during World War II (though Keynesian economics does not suggest war as even a possible policy measure). Since Keynes focused on the demand side, Bartley and Laffer focussed on the supply side (remember “supply and demand”) and call their theory “supply-side economics.”
In a nutshell, Keynesian (demand-side) economics, says that when a country is in a recession, it’s because businesses don’t have enough business. That is, people are not buying as much as usual, so they can’t sell enough, so they lay people off, and then the people who are laid off, or are afraid of being laid off, buy even less. To get things going, we need something to increase demand. Conservative economists tend to say — have the Fed reduce interest rates so people and businesses will borrow and spend more. Liberal economists tend to say have the government cut taxes for the poor, because they will spend, or have the government borrow and spend more to help business get started again.
The right answer, is that in a regular recession, monetary policy works and is much easier to use so that is best. But in a terrible recession or a depression, the interest rate goes down to about zero and can’t go any lower, so then monetary policy stops working. Then you need Keynesian economics — like the spending for World War II>
Both conservative (monetarist — like Milton Friedman) and liberal (Keynesian) economists say that the government needs to stimulate demand in a recession. But the two “supply-side” economist say both are wrong, that we need to give tax cuts to the rich and then the rich will be stimulated to work much harder and they are the ones who are most productive and that will make the economy hum again. Laffer drew his famous “Laffer curve” to try to prove this point (but it is just plain silly). It claims that if the government cuts their tax rate, the rich will make so much more money that they will pay more taxes not less. It also claims that if you cut the tax rate for the bottom 98% of the population this won’t happen.
So this was tried under Reagan. Big tax cuts for the rich. And G. W. H. Bush called this “voodoo economics,” because only two economists believed it (or at least they often said they did), and because the idea that cutting taxes for the rich would collect more money not less. Of course it never worked, and that’s one reason the supply-siders ran up the debt (even compared to GDP) for 20 out of 20 years, while other Presidents, both Republicans and Democrats did not have this problem.
We have all been hoodwinked for 4 decades by this bogus scheme. Republican policy is responsible for the national debt. Period. And they still preach it to this day, like it's gospel. Tax cuts, tax cuts, tax cuts.
If we don't educate ourselves and overthrow this silly policy once and for all, we are toast. It's going to get much, much worse. They've already almost completely decimated or entire manufacturing base, our wages, our good paying jobs, our unions, our educational system, our pensions, on and on. The Wall Street sociopaths are in charge, and they don't just want part of the pie. They want it all.
Incidentally, Governor Sam Brownback of Kansas and Governor Bobby Jindal of Louisiana pursued these policies with reckless abandon. The result has been nothing less than an unmitigated catastrophic disaster.
This article explains the fallout in detail. The Republican Party Must Answer for What It Did to Kansas and Louisiana
If we are uneducated, uncaring and uninformed enough to elect another republican to the White House they will enact the same policies Brownback and Jindal did for the entire nation. They make no bones about it. They say that is exactly what they will do, and it makes sense when you understand their philosophy. They hate all the social programs the government provides and they would love to kill them all. When they continue the tax cut, trickle-down lie the debt keeps going up and up, which provides them with the perfect excuse: "We don't have the money for any of this." For a detailed explanation on this strategy read, "Starve The Beast."
What is terrifying is that this is literally all the Republicans have. They don't have another plan. None. They've made Ronald Reagan and trickle-down economics their religion and they will never admit they've been wrong for 40 years, so they're are going to cling to it come hell or high water.
If we as a country don't figure this out very soon, they will sink us all.
Portions of this blog post were used by permission of http://zfacts.com
At the bottom of the "About" section of the page the author states, "The writing and graphs on this website may be used freely, however I would appreciate an acknowledgment and a link to zFacts.com or the appropriate sub-page."
The sub-page we drew from is http://zfacts.com/p/voodoo.html
About TCL Blog
We’re not about Dogma here. We’re just Christians who think the political and Christian right-wing have their priorities wrong.
Charles Toy is the founding member of The Christian Left. We're sure you will enjoy his passion as well as his wit. Guest bloggers featured often.