Where's My Trickle?

Years ago, in the heady Pro-USA days of Ronald Reagan's first term, we were introduced to a new kind of political term: Supply-Side Economics. According to this theory: lowering marginal taxes would improve private sector incentives, spur productivity, and jack up the economy. In the immortal words of Big Ron Reagan, cutting taxes on the highest earners would spur the economy to such a degree that the rest of us would, eventually, benefit through being "trickled down on." Take the bonds off of the top two percent and they would, in turn, reinvest their new-found wealth in Amerika. Years and years later, the Common Man would reap the benefits because . . . well, the economy would be robust. Or something.

Big Ron has nearly been canonized in Amerika these days, but it's interesting to note:
 
The supply-side idea is a simple one, and makes a popular political message. However, it is interesting to note that mainstream economists -- even conservative ones -- almost universally reject supply-side theory. In the early 80s, the influential and multi-partisan American Economics Association had 18,000 members. Only 12 called themselves supply-side economists.¹ In American universities, there is no major department that could be called "supply-side," and there is no supply-side economist at any major department.² This is significant, because academia in the 70s was dominated by conservative economic theory, and conservative economists normally welcome any ideas that make the case against government intervention. The fact that they scrutinized supply-side theory and rejected it wholesale gives eloquent testimony to the theory's bankruptcy. When candidate George Bush called it "voodoo economics" in the 1980 presidential campaign, he was doing so with the full backing of America's economic community. 
 
Where does this leave our Tea Party? Because it seems to me that what they desperately want to do is return us to the Ronnie Reagan Years of blind Supply Side economics: cut taxes on the wealthiest, reduce funding to enough government agencies that they wither away, yet continue to outspend the rest of the world combined on military gadgetry and hardware. In other words: take in fewer tax dollars, but continue to spend like crazy to fund the military.

I'm constantly amused by these emails that I receive from concerned conservative friends, the ones that feature a phony dollar with Obama's face on it and multiple, multiple zeros indicating the growth of the deficit - this from the same people who laud Ronald Reagan - the man who jacked our deficit higher than any previous president due to his Supply Side economics, Voodoo economics. The problem with Obama, as I see it, is that the Supply Side Tea Partiers stepped in just in time to short circuit a key part of the President's economic plan: raise taxes on the top two percent of earners in the US, while keeping Bush era tax cuts for the Middle Class. This massive amount of money would have gone a long way towards paying for . . . well, a whole helluva lot of things.

Because we want our services in this country, dammit: education, police, street lights, etc. We just don't want to have to pay for them. In that - as in so many things - we're a population that is collectively and permanently pre-pubescent. We want! We want! We just don't want to pay. And so currently we pay less in taxes than any other industrialized nation on earth and yet we worry that our education system is in the shitter. We're constantly decrying the need for taxes at all! Let's do away with taxes, the hard-liners tell us, or let's introduce something like the Fair Tax or the Flat Tax - systems that have proven their worth in . . . well, really only in Russia, the world's largest mafia state. And the success they've had there is merely in regaining taxes that were owed.

Are my taxes too high? I'm a lower middle class teacher. I own a home and two cars. It's a complicated question. I pay less in taxes than anyone in Sweden or England or Canada. At the same time, I watch the education system to which I have hitched my wagon, crumble helplessly: less funding, larger classrooms, poor pay. Not that I want to pay more in taxes, mind you - but, seeing as how my tax rate is much, much lower than any where else in the civilized world, I'm constantly aware of how poorly my tax dollars are being utilized. And this is the crux of the matter.

Currently, out of every dollar I pay in taxes sixty-seven cents goes towards the military. It is the vast, blood sucking Big Government Nightmare that the Libertarians and Tea Partiers rail on about. All that money! And why? Are we Israel, surrounded by hostile nations who want to destroy us? Do we fear an invasion by the Canadians who want to over-run us and enforce their Canadian Way of Life upon us? Are we at war in two hemispheres like we were during WWII? Are we On The Brink? No.

This vast arsenal of ours did not keep us safe on 9/11. This massive war machine, geared towards mechanized warfare on an outdated European battlefield, has been ineffective in stopping insurgents everywhere we run into them. All the money we invest in Nato and our Asian alliances has not endeared us to them in any way whatsoever, nor has it been money well spent in terms of addressing a pressing need. We subsidize their defense so they can invest in their economy and schools and whatever they want to. Investment in Nato is ridiculous. The Soviet Union is no more. Europe is a Big Boy now, somewhat unified and capable of spending plenty of Euros on protecting themselves. The people there have not appreciated our sacrifices on their behalf. All those doubloons spent on nothing.

Supply Side Economics did not work under Reagan's mantle. The deficit ballooned enormously. Yes, many people will point out that the economy recovered in the eighties, but was that due to Reagan's economic policies? Most economists say no, it was not. This from Princeton professor Paul Krugman:

the rapid growth after 1982 proves nothing: a severe recession is usually followed by a period of fast growth, as unemployed workers and factories are brought back on line. The test of tax cuts as a spur to economic growth is whether they produced more than an ordinary business cycle recovery. Once the economy was back to full employment, was it bigger than you would otherwise have expected? And there Reagan fails the test: between 1979, when the big slump began, and 1989, when the economy finally achieved more or less full employment again, the growth rate was 3 percent, the same as the growth rate between the two previous business cycle peaks in 1973 and 1979. Or to put it another way, by the late 1980's the U.S. economy was about where you would have expected it to be, given the trend in the 1970's. Nothing in the data suggests a supply-side revolution.
At what point in contemporary American history was our economy at its most robust? During the Clinton years when Big Bill raised taxes on the rich. Period. It didn't hurt me, it didn't hurt you - though the conservatives waited confidently for the Other Shoe to Drop. You'll see, they said. Raise taxes on the Rich? The economy will collapse!

They waited and it never happened.In fact, the economy grew at a reasonable pace through Clinton's first term, while the deficit and the unemployment rate went steadily down. And then the news got even better: unemployment fell to its lowest level in decades without causing inflation, while productivity growth accelerated to rates not seen since the 1960's. And the budget deficit turned into an impressive surplus.

 So what are we going to do? Obama's plan, following the Clinton pattern, was to pay for investment in America through raising taxes on the top two percent of earners. This would still put them at a lower tax rate than anywhere else, other than Russian - and I don't think anyone wants to emulate Russia's economy. This would go a long ways towards shrinking the deficit. And the rest? Well, the Tea Party wants to shrink the Big Government, but the they won't touch the biggest part of our government: like many Arab nations we have a ridiculous sentimentality attached to our military. We'll starve every other aspect of our infrastructure but we love the Big Dick of having stealth fighters and main battle tanks and air craft carriers. Reminds me of the rednecks that live all around me here in Chicken City. They live in shithole houses but drive fantastic trucks. The best investment for their money would be to buy a home and at least make money on simple appreciation. Instead they rent a shit-hole and push their dollars towards a zero sum investment - in fact, no investment whatsoever. That big 4X4 is depreciating the minute you drive it away.

That's where we are. The Redneck nation. Don't invest in infrastructure, invest in Big Dick items. That truck with its chrome and big tires and jacked up suspension is ridiculous. Your trailer home is a shambles.