Supply-Side Politics - Why Grover Norquist is Wrong!

Over the weekend I had the opportunity to meet with Grover Norquist, Cheerleader-in-Chief of Reagan's failed supply-side economic theories. However, it seems he failed to get the memo that those theories don't work. These defunct economic theories do nothing more than passing popular tax cuts that actually hurt the nations financial strength. Let's consider the following-

Starting in 1980, the Republican Party embraced and implemented "supply-side" economics. The central theory of supply-side economics was politically an easy sell: if the government cuts tax rates – especially on the wealthy – the wealthy will feel more inclined to earn more money. This will encourage the wealthy to make even more money. This will lead to higher tax revenue, which will more than offset the loss of revenue from the initial tax cuts. The central problem is no matter how you look at the results, they didn’t work as advertised.

Reagan started the implementation in 1981, cutting upper-income taxes from roughly 70% to 50%. But a funny thing happened. Tax revenues were stagnant for 4 years from 1981 to 1984. For the years 1981-1984, revenues from individual taxpayers were (in billions) $285, $297, $288 and $298,(click on historical budget data) respectively. While the double-dip recession is partially responsible for the first two years, the economy came out of the recession November 1982. Yet for two more years, the rich didn’t feel unencumbered enough to increase their work efforts. At the same time, discretionary spending increased from $307 billion to $379 billion – an increase of 29%. This discrepancy between revenues and receipts then continued for the rest of Reagan’s presidency. Here is a chart from the St. Loius Federal Reserve that shows the discrepancy. Expenditures are blue and receipts are red.

There are a couple problems with Reagan’s overall economic policy. The first is the massive amount of debt he incurred for economic growth (which we’ll get to in a minute). The other problem was the US did not achieve a super-human rate of national product growth. The median quarterly change in GDP during Reagan’s tenure was 3.85%. This is a good rate of growth. But the cost was substantial because to achieve this growth Reagan used debt which the US has not paid off.

Bush 43 has attempted the same policy with the exact same result. Bush 43 cut taxes twice. Yet revenue from individual taxpayers did not increase sufficiently to make-up for the loss in revenue. Revenue from individual taxpayers was $994 billion in 2001 and $1.08 trillion in the third quarter of 2006. However, Bush 43 has increased discretionary spending from $649 billion in 2001 to $967 billion in 2005. As a result, the gap between federal revenue and spending is similar to Reagan’s graph.

On the chart above, notice the scale for revenue on the right is $100 billion less per line than the expenditure line on the left.

Despite the failings of these policies, Norquist and his tax-cut acolytes refuse to acknowledge that our deficit problem is out of control and primarily their own doing. Even completely gutting domestic discretionary spending would cut the deficit by roughly $500 billion. Supply-side tax cuts created these deficits, the only solution is to raise taxes. No amount of spending cuts in our government will save $2 trillion.

Now We Want to Tell You Why Taxes Are Bad

Now I don't like paying taxes anymore than the next person. Or at least I thought so. But some of my tender friends on the right are sick and tired of being punished by the government. Because everyone knows that is exactly what taxes are, a form of punishment. I have often wondered about this, especially when I hear the all too typical, "why should I be punished for being successful, other people should learn to pull themselves up like I have."

To begin with, how condescending can you possibly be? When you consider how hard you have worked to get where you are, let's consider a couple of things - what type of school did you go to, did you have two parents in your life, were you parents employed, could you afford college, did you have health insurance? The government isn't punishing you for succeeding, taxes are the price of society. That school you went to, that road you drive on, that tax deduction for your college loans, that tax credit for your parent's mortgage, that food subsidy, that employer insurance subsidy, these things cost money. So don't think you are being punished, you are providing a small portion of everything you have been given.

Now That's What We Call Regress

I want to start out with a couple of statistics before I launch my typical diatribe.

In 1971, the average worker's CPI was $738; in 2008 it was $598.

Since 1980, the richest 1% have seen their after-tax income triple, the bottom 90% have seen their after-tax income drop 90%.

Now I know that it is apparently un-American to call for any type of wealth redistribution. But these numbers make me think that the wealth redistribution affecting our country isn't from top to bottom. It seems that the bottom gets left behind, while the top keeps finding life better and better.

Thanks to supply-side economics, the loss of necessary safety nets, and lack of real reform, the average American is finding it harder and harder to reach that fabled middle class and realizing that the working poor lifestyle is going to become a fact of life.

The loss of the middle-class seems to become more apparent as the American dream falls out of reach for more and more families. Home-ownership is on the decline, college tuition rises many times faster than the average rate of tuition, and health-care premiums are rising 40% a year. In order to have stability, we have been taught we need a home, an education, and security in our health; but when we have to go into debt to afford these things, what are we to do?

Why are policies aimed at helping the poor always the first to go? One can argue that they aren't paying the taxes so out of fairness they should be the first to suffer? But how can this work when the jobs they do have don't even allow them to make enough to enjoy the fabled middle-class life. Isn't one requirement of a government to help those that can't help themselves. How come 50 million Americans have entered poverty? Why will 1/4 American's under 18 be forced to use food stamps? They will grow up listening to their neighbors say that it was the choices they made that got them to the situation they are in. These people didn't fail themselves, they're continually failed by government policies that allow the rich to take on more wealth while leaving everyone else behind.

I know, I know . . . We've Had It With Healthcare

Can you believe it?!? After how many months of endless media attention wasted on the health-care debate and now it looks like is on the rocks.  And who else to ruin it, a GMC driving; in-love-with-his-body Massachusetts Republican. I know, that's what I thought, "Massachusetts HAS Republicans." Who knew, right.  Well, what's done is done.  Even though Democrats were lucky to have a 60 vote majority, they still couldn't rush it through.  Blame who you want, I will eagerly call this a blessing in disguise.  

Don't get me wrong, American's want and need reform.  But I sincerely believe that if this bill was passed without bi-partisan support, the Democrats would have been massacred this November. Even if it is great for the country, which it is, health-care can't be rammed down our throats.  

Should Democrats start over, I don't know.  I don't know if anyone is so masochistic to want another year of this death-panel business, especially now that Sarah "Say it ain't so, Joe" Palin works for Fox. Honestly, I think that Obama should have focused on bank reform first, when populism against the banks was at its strongest point.  But what's done is done.

As for reform,  the Democrat's plans weren't perfect.  They were probably too optimistic and expensive.  But Republican's didn't do enough to bring new ideas to the table.  Hopefully something happens, because the status-quo cannot be abided much longer.  Just to put the situation in perspective, for a Utah audience-- over 360,000 Utahns are unemployed.  110 lose their insurance daily.  Productivity losses because of lack of insurance will cost Utah $2 billion dollars.  Health care costs are expected to raise $10,000 per family within the next decade.  

Those numbers can't suit anybody's definition of good policy.  What we need are solutions!

A quick note about health-care

Dear Readers,

I apologize for the obvious lack of postings on this illustrious blog.  Life has its snags.  With finals, holidays, moving, and prime movie season I have been taking a self-imposed sabbatical from my writing obligations.  However, I am getting my life back on track!!!

Let me take a minute to add some comments about recent events.  Health-care!!!  Despite efforts by Ben Nelson and Joe Lieberman to hold the 47 million Americans without healthcare hostage to their political whims, Harry Reid was able to get healthcare through the Senate.  Now the fun part starts.  The Senate care is flawed, from taxing union-workers with expensive insurance plans, to enabling insurance companies to keep over-charing their clients by avoiding a public-option.  It will be difficult for the more liberal portions of the House bill to win the day, but at this point I think we're going to have to take whatever we can get.

Kudos to the Republican media machine for making health-care look like a government monster, when it is more of a lifesaver for millions of Americans.  This was a bipartisan issue until Republicans were able to make it appear as the last thing the voters wanted.  America, health-care reform is needed, it is needed now.  Although I do not believe this reform will solve everything, if nothing is done, prices will continue to sky-rocket and millions more will suffer.

As new job reports come in, focus will turn to job creation.  Hopefully this will provide a cover for a quick compromise between the two chambers and let America move forward.

Joe the Plumber

This morning I had the wonderful opportunity to listen to Joe the Plumber and Cherilyn Eager on their state-wide book/campaign tour. The blessed privilege allowed me to not only listen to Cherilyn's wisdom as she advocated herself to be the next senator from Utah. Do not get me wrong, I have plenty of reasons to oppose Bennett; however, she did not highlight a single one of them.

Her biggest complaint is that he was an incumbent. She really didn't say much about why he needed to be replaced. She did harp on him over and over again for voting for the bailout. Lest she forget that it was President Bush who called for such an extreme measure. She also explained that the bailout is the reason for the massive budget deficit. Sure it added to the pain, but America's misadventure in Iraq did too.

However the highlight of the event was when she spoke about her hero and role-model-- Phyllis Schlafly. This is where I lost all interest. Any candidate endorsed by the fringe Eagle Forum loses all credibility. This group is anti-public education, anti-women, anti-equality, and, anti-choice. Cherilyn also lauded Sarah Palin and said she hopes she will become President. If you think Obama lacked experience, try out this beauty-queen.

However, I did find Joe the Plumber slightly refreshing. He wasn't running for office, just using his so called 'noteriety' to bring a little cash home. No shame in that. However, he did have the quote of the day. And this is a direct quote: "The ones I really hate are the liberals, I really just want to shoot them." This said only two minutes after his big speech on why the values of Christianity matter so much to him!!!

Election Night

It's late, well not that late, but after three consecutive hours of pushing the reload button, I need to call it a night. I don't know how to weigh this election day. Last year was mostly cheers as Barack Obama was elected president. However, this year the Republicans get the victory in the two gubernatorial elections. This isn't unexpected, Corzine sucked as a governor and Creigh Deeds never learned how to campaign. However, the Republicans are the clear losers in the NY-23. The Dick Armeys and Sarah Palins of the world should have stayed home and let Dede Scozzafava run as the only Republican. Maybe this will signal to the myopic leaders of the tea-party movement that Republicans need to be inclusive and cannot set a litmus test on every moderate within the party. This district was a Republican stronghold, but now it is represented by a Democrat. And for this I am happy.

Maine decided that marijuana isn't going to kill us all and extended medicinal use of the drug. However, voters removed the right for homosexuals to be granted same-sex marriage. Another state opposed to equality I guessed. But on a brighter note for the gay rights movement, Washington extended benefits under domestic partnerships and Kalamazoo voters rejected a proposal that would have ended the non-discrimination policy for homosexuals within housing and employment.

In the end it was a win-lose night. Republicans take the governorships, Democrats take the two House seats. One state advanced progressive ideals, another rejects them. However, given time, I am hopeful that a liberal agenda will gain a majority status among American voters.