For months now I have been trying to figure out what the Republicans were offering as an alternative to the Democrats to re-start our sagging economy. Even though the economy has created more private sector jobs under President Obama than were created during the entire Bush administration, we are nowhere near the number needed to replace those that were lost since 2008. Being a card carrying "lefty," I was in favor of a stimulus package about twice as big as the one enacted in 2009. Since I am a student of history, as well as a liberal, I was aware that FDR's timid foray into Keynesian economics in the 30s, rather than demanding an aggressive plunge, resulted in a slide back into depression in 1937. Every high school student in America knows (or at least was taught) that the Great Depression ended when World War II began. But the war did not, in and of itself, end the thirteen year economic slump in America. It was the massive deficit spending to churn out weapons of war that did the trick. The national government poured billions of borrowed dollars into the private sector to manufacture everything from guns and bullets to beds and boots, and millions of new jobs were created almost over night!
Without a doubt, the Obama stimulus was the correct medicine for our sagging economy, but the dosage was not strong enough to get the job done. Once again, timidity was the enemy of a Democratic president, and as in the midterm elections of 1938, the Republicans will reap the benefits of this luke-warm response. But then, one might ask, what is the Republican strategy for success? So far it has been little more than crying "No" to everything the Democrats have proposed. But in comes House Speaker Wanna Be John Boehner and we now have our answer.
According to Minority Leader Boehner, what we need to do to fix our economy is, drum roll please. . . extend the Bush tax cuts to everyone making over $250,000 per year! That, says Boehner, will then allow for the creation of all kinds of jobs in the private sector and we will all live happily ever after. I guess it must be part of Republican marching orders for their leaders to abstain from reading the history of the United States. We tried this "trickle down" nonsense before and it did not work. . .TWICE! First in the 80s it was called Reaganomics and it led to the Reagan Recession and our country's worst ever deficits that the country did not emerge from until 1992. Then, just to make sure that is wasn't a fluke, George W Bush and the Gingrich crowd in Congress did it again in the Bush tax cuts and the results were the worst recession since the Great Depression! But at least Bush extended the tax cuts where they could do some good today, to the middle class.
Rich people do not create jobs when they get tax cuts, they just get richer. But the middle class takes their tax savings and spends them on household goods and services which indeed put their fellow citizens back to work. So why aren't Boehner and his fellow travelers in Congress supporting President Obama's call to extend the tax cuts to everyone except those who make more than $250,000 per year? Because they are Republicans and they have never deviated from their code of making sure that the rich get richer! Why any middle class American would vote for these people is beyond my comprehension.
Hey Mr. Meegan. Just a hypothetical question... is there any data or statistics showing "the rich" did not spend more/less during the Bush tax cut years than previous years? Just seems too easy to say the rich get richer when in actuality, it seems that the rich would spend more discretionary money on luxury items and other objects.
ReplyDeleteI am taking a Public Policy class this semester and I just learned about the Tolstoy Syndrome, and I thought of you. I wish my professor was as great a teacher as you are.
-Nick Leathers
Great question Nick. The answer, as discovered during the Reagan tax cuts called "trickle down" was that rich people do not consume enough products to turn the economy. For example, how many more cars will someone buy? But a tax cut for the huge middle class always leads to a huge stimulus in consumer spending. The wealthy use most discretionary money, unless they just got wealthy, to increase their wealth, which does very little to stimulate consumer spending. IF you are already wealthy and have an abundance of luxury items, a summer home, a boat, etc, are you likely to go out and buy more goods? On the other hand, the middle class, as demonstrated when the Bush tax cuts were first implemented, did not set the money aside, but used to to purchase consumer goods. That stimulated production, which meant that businesses had to hire new employees, who in turn spent money too. . .
ReplyDeleteBut in all honesty, the Obama/Democratic plan is more about appealing to an electoral constituency, than a measure that will stimulate the economy. Whether the rich get more tax cuts or not, it is critical to stimulate middle class spending, but without a plan to create more jobs, no one is going to spend all that much. People are afraid that they too might lose their jobs and consequently are saving rather than spending. Saving is a great idea in boom times, but a bad idea during a recession. Unfortunately, the psychology of money produces just the opposite. We spend when we feel good and save when we are frightened.
Good luck in your policy class and thanks for the kind words!