Conservatives & Their Economic Fairy Tales

It can’t get much plainer than this just how detached from reality conservatives are in their economic thinking: supply side economics is, through John McCain’s campaign, coming back despite its total failure.

[A]dvocates see broader economic benefits from lowering tax rates, which is one of the reasons the concept has reappeared as a point of contention in this year’s election campaign, in an amended form.

“What really happens is that the economy grows more vigorously when you lower tax rates,” said Kevin Hassett, an adviser to the presumptive Republican nominee, John McCain, and the director for economic policy studies at the conservative American Enterprise Institute. “It is beyond the reach of economic science to explain precisely why that happens, but it does.”

Except, of course, that it does no such thing and never has.

In the 1980s, though, during the initial era of supply-side tax cuts, per capita revenue from personal income taxes, adjusted for inflation, rose an average of just 0.7 percent annually throughout the Reagan presidency, according to the White House Office of Management and Budget.

That was far below what turned out to be an average annual increase of 6.5 percent in the eight years of the Clinton administration, when tax rates at the high end of the income ladder were raised.

Since 2001, the annual per capita revenue from income taxes fell 1 percent under President Bush even though tax collections picked up sharply starting in 2005. The budget surplus Mr. Bush inherited turned into a deficit.

The Stockman-born conviction of the Reagan years that tax revenues would magically grow after you cut taxes has never been seriously questioned by any conservative economist despite the acres of evidence over the past 3 decades proving that it’s all poppycock. We have been led into an economic dystopia by people who, like supporters of the Iraq war, have never been right about anything.

Why did we ever listen to these people? More importantly, why are we still listening to them when they’ve been so far off-base? We knew – people made jokes about it at the time – that Reagan’s contradictory formulation made no sense, that raising taxes by cutting taxes was a bonehead idea. Yet we voted for this peabrain twice, voted once for Peabrain II, got burned, and then came back to vote twice more for Peabrain the Third even though the guy wno came between P2 & P3 had pretty much proved that supply-side was applesauce.

“If you are cutting taxes without offsetting the cuts through reductions in spending, then all you are doing is increasing the debt and postponing the taxes,” said Jason Furman, director of the Hamilton Project at the Brookings Institution, and also a policy adviser to the Democratic presidential candidates.

Well, duh.

What in gawd’s name is wrong with us? Why don’t we – can’t we – learn?

It’s a puzzlement.

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4 Responses

  1. Ahh, nice and quiet over here. I can make an ass of myself without anyone noticing….

    I’m sorry, Mick; did you say something? I was just sitting here in my cardigan with my thermostat set at 68, thinking about how long it will take me to get from here to there at 55 mph. The year is 1980 and I’m full of hopes and dreams. I’m a basic needs kind of socialist with a leaning toward greater good/demand -side capitalism where people can get rich and no one ever goes hungry. We have the best country in the world with potential everywhere to make it a better place. We drive cars that run on flower-scented methane and I’m studying holistic health and medical social work so I can help people reconnect with their inner greatness.
    What?!! Jimmy Carter didn’t win?!!! Crap. My dreams just died with the reading of the election results on tv.

    I was sure when the 70’s were coming to a close, we had already been through some pretty big stuff an wouldn’t be going through any of it again anytime soon. Because we all learned how battles were hard fought and supposedly won. Why would we dare torture ourslves.

  2. I wasn’t sure I wanted to actually post the above, but it got out there anyway. How embarrassing; well, no turning back now. I guess I did claim I might make an ass of myself…. How’d I do? Anyway, we fool ourselves in the way you describe above, in my opinion, because we don’t attach oursleves to the basic collective good anymore and I simply don’t know why. Ipods?

  3. I have a friend who thinks so. He’s convinced that it’s technology that’s caused all the damage. Course, he’s native American and they’re notorious Luddites.

    Your first idea – “because we don’t attach oursleves to the basic collective good anymore” – is a big part of it, I think. That at least explains our intial blindness. But what explains this continued blindness in the teeth of overwhelming evidence? Normally denial falls before a parade of incontrovertible facts but in this case, no. If our intent was to promote a rich economy, why would we insist on pursuing policies that clearly bankrupt us every time we follow them?

    That’s where the possibility of national insanity comes in….

  4. National insanity or ignorance/stupidity. Who knows the difference? There are millions and millions, who don’t believe that the trouble we’re in is designed to stay on course until we’re all beggars. Listening to the extremist neo-con message, we learn this whole mess is caused by “government over-regulation, public schools, the environmentalists and well, let’s not forget the Mexicans”. I have neighbors who believe our state is operating in the red simply because we have a dem governor and don’t even consider all those crazy, irresponsible, unfunded federal mandates. “One Flew Over the Cuckoo’s Nest” is coming to mind as I type. I guess that might make you Jack Nicholson. Boy, my thoughts are dated…

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