One of the few joys of living through the presidency of George W. Bush is celebrating the moment when he's inevitably proven wrong. As a prognosticator, Bush is somewhat less accurate than a Magic 8-Ball. Not only did Bush get everything about Iraq wrong, but he even declared the war over years prematurely. This is the man who though he could read Vladimir Putin's mind. "I looked the man in the eye. I found him to be very straight forward and trustworthy and we had a very good dialogue," Bush said. "I was able to get a sense of his soul."
Apparently, Bush's soul-sensing superpowers weren't strong enough to foresee that parking a missile defense system on Putin's borders wouldn't fly. "If the American nuclear potential grows in European territory, we have to give ourselves new targets in Europe," Bush's soulmate said at the time. "It is up to our military to define these targets, in addition to defining the choice between ballistic and cruise missiles."
So, it comes as no surprise that Bush was wrong about the effects of his top heavy tax cuts. See, Bush bought into this whole "supply-side" economic scheme, where you give more money to people who have plenty of money and it all "trickles down" to everyone else. Not surprisingly, this doesn't work.
In theory, the idea is that if you're an employer and can afford to expand or give everyone raises, then that's what you'll do. If you can afford to lower prices, you will. Except this isn't exactly logical. Say you run a company that's making money -- are you going to hire people you just because you can afford to? Are you going to give everyone a raise because you can? Only if you hate money. If there's nothing wrong with your business, why on earth would you "fix" it? Everything's going great, why screw with success?
Take a look at Exxon. Last year, Exxon made more money than any other company in history. And it's not the first time They broke that record. Supply-side economics would dictate that their fabulous success would find its way into your pocket somehow, but you're paying more at the pump. Why? Because that's what corporations do; they make money. As much money as they possibly can. They aren't going to cut gas prices or give the people mopping the office floors a raise merely because they can afford to. They're in the money-making game, not the money-giving-away game. If they make more money, they keep more money. The average consumer be damned. They're in the money collection business, not the money spending business.
And so, Bush and his supporters made a lot of promises about his tax cuts that they couldn't possibly deliver on. This idea that "across the board" tax cuts improve revenues is BS. It didn't work for Reagan. According to Paul Krugman, Reagan "followed his huge 1981 tax cut with two large tax increases. In fact, no peacetime president has raised taxes so much on so many people."
Looking at the failure of Reagan's economic policy, Bush got all Bullwinkle and said, "This time for sure!" It didn't work the last time, but what the hell, give it another try. This time, we'd stick with it regardless the consequences. Deficits be damned. Ronald Reagan's mistake was in being too distracted by the petty concerns of reality. If we go back in time to 2001, we find this fun article by Tom DeLay for the right wing magazine Human Events, where he "debunks" criticism of Bush's tax cuts. In that piece, DeLay claimed that "far from causing deficits, tax relief in conjunction with fiscal discipline can grow our economy out of deficits."
"Growing our way out of deficits" has been the Bush theme on his tax cut scheme. In 2006, Bush told us:
And as a result of a growing economy, we collected more money for the Treasury. I told the American people we would keep spending down and keep pro-growth policies in place to help cut the deficit in half by 2009. As a result of the Mid-Session Review, the numbers that came out of the Mid-Session Review, I'm able to tell the American people we'll cut the deficit in half by 2008. The projected budget deficit over -- of over $420 billion is now assumed to be $296 billion. See, what happens is when you grow the economy by cutting taxes, more tax revenues come into the Treasury, and that's what we're seeing here.
When Bush said he was "able to tell the American people we'll cut the deficit in half by 2008," he wasn't so much right. In fact, like pretty much every damned prediction he's made since he first sat behind the desk in the Oval Office, it was completely, 100% opposite of the eventual facts. Here we are, it's 2008, and Bush's plan for deficit-fighting is pretty much nonexistent.
n the nation's first-ever $3 trillion budget, President Bush seeks to seal his legacy of promoting a strong defense to fight terrorism and tax cuts to spur the economy. Democrats, who control Congress, are pledging fierce opposition to Bush's final spending plan—perhaps even until the next president takes office.
The 2009 spending plan sent to Congress on Monday will project huge budget deficits, around $400 billion for this year and next and more than double the 2007 deficit of $163 billion. But even those estimates could prove too low given the rapidly weakening economy and the total costs of the wars in Iraq and Afghanistan, which Bush does not include in his request for the budget year beginning Oct. 1.
So much for that, then.
The problem with Bush's economic ideas is that they're basically anti-capitalist. They don't use the markets so much as they go around them. Bush ignores the process and jumps straight to the result. He sees that, when the economy does well, the wealthy have pockets full of money. So, mistaking effect for cause, Bush and supply-siders assume that putting cash into the pockets of the wealthy will help the economy. This isn't economic theory, this is what anthropologist James Frazer called "sympathetic magic." It's the idea that if you lay out the plates, the food will come lay on them.
Imagine the market as an actual market -- in fact, a supermarket. If you want to increase sales, you can hand out coupons and give everyone a good deal. This is retail or "demand-side" economics. And this doesn't just help the store, this helps the consumers by allowing them to spend more. It doesn't stop there.
It helps the grocery's suppliers by moving more product. It helps the employees by offering them more hours. It even helps the local utility -- every time someone opens one of those freezers and compares prices on frozen fishsticks, a happy bell at the generating plant goes "Ka-ching!"
Bush, on the other hand, takes wads of money and stuffs them into the cash drawers. It helps the grocer, but no one else. Capitalism isn't supported this way, it's sidelined. It leaves the market starved. You don't get the system to work unless you actually use it. Money doesn't effect the market if it never enters it.
And the stimulus package, while welcome, isn't going to do a damned thing. As long as we're stuffing the pockets of people at the top of the economic ladder, there's no reason for those people to use the market. It won't change a failing non-system a bit.
So, once again, Bush was wrong. We didn't grow our way out of deficits, we shrank our way into recession. That was the predictable effect -- well, predictable for everyone other than George "Always Wrong" Bush and his band of supply-siders.
Technorati tags: politics; recession; supply-side; Reagan; tax cuts; capitalism; Bush's policies have been a disaster for the economy