Okay, before we start, hold this thought firmly in your mind. I have no degree in economics. I tend to rely on the likes of Paul Krugman and Robert Reich, both well-respected as experts.
As I understand things, most economists believe in a Keynesian approach to managing a national economy. There are lots of variations of course, but essentially Keynesian economics recognize that at some points unchecked business practices lead to stagnation and that government must intervene at some points and with some actions that stabilize and move growth forward. Of course where and with what are always the question.
This is the approach generally favored I believe by both Krugman and Reich, and certainly by the President, and most Democrats.
Republicans, on the other hand, favor a “supply side” economics, which generally can be referred to as “trickle down” or “laissiz-faire” or “free market”. Of course details vary, but in the main it means that government needs to stay out of the way, taxes on the wealthy and corporations should be low, and regulations eliminated for the most part.
The idea is that the wealthy, given more money, will invest it in infrastructure and expanding business, employing more, thus lowering prices, allowing the lower echelons to buy more, as they receive greater income.
This practice, according to John Kenneth Galbraith has been tried before, namely in the 1890’s. It failed and led to the panic of 1896 and this famous statement from none other that William Jennings Bryant:
“There are those who believe that, if you will only legislate to make the well-to-do prosperous, their prosperity will leak through on those below. The Democratic idea, however, has been that if you legislate to make the masses prosperous, their prosperity will find its way up through every class which rests up on them.”
So nothing new here.
Why then do Republican politicians continue to push this failed agenda? Frankly, I can come up with no other answer than that is what their overlords demand of them. Business interests have always filled the coffers of Republican politicians. (Democrats of course get their money elsewhere, and there is plenty of room for condemnation there as well. But that is another story.)
The question then becomes why do corporations push these failing policies? The average small business is mostly doing horribly in this economic downturn. So are most medium-sized. It is only the mega conglomerates, with their deep diversity in markets throughout the world that can be said to be doing well. And frankly it seems that most of the ones who do well are doing so because they provide essential products.
But clearly, a stable, growing economy seems best for them too. So why do they argue for policies that ultimately tank the average national economy and lead to severe recessions if not down-right depression?
I think in part it is fairly simple.
We tend to think of corporations as entities, as “persons” because we have been taught to. Courts have declared over the passing decades that corporations can be guilty of torts and even criminal acts. They can sue and be sued. The can be harmed and can harm. They are people in the sense that they have a right a political voice. They have a right to pursue through advertising and lobbying their particularized interests.
So we tend to think of them as “people.’
Yet, in the end, they are not. They are run by INDIVIDUALS. And when you remember that, it all makes a good deal more sense. The individual who is CEO or CFO of Acme Inc., is not looking down the road to what the world will look like twenty years from now given a particular economic ideology. They are looking to the next quarter.
Most if not all CEO’s and others in high management, know that their “bottom line” is dependent on the corporation’s bottom line. You are paid to make money and keep stockholders happy and buying stock. You are not paid to make choices that hurt in the short term but will mean a healthier and stable business in ten years.
One would expect that most CEOs of major businesses have taken basic economics. Yet they ignore what works and argue for what doesn’t work long-term. If you tell business that “they are the job creators” and wait for them to tell you what they “need” they will. Don’t be surprised if it’s lower taxes and less or no regulation. Nothing drives up the short-term bottom line than those two things.
This is the only explanation that makes any sense to me. Trickle down economics was restarted with the Bush tax cuts in 2001. All the Bush years brought us was the loss of millions of jobs, a spiraling debt, a recession, and a growing divide between the rich and the rest of us. Yet today, Congressional Republicans and those running for the nomination cannot get off this tired and failed merry-go-round.
That’s what I’ve come up with. I’d be happy to hear what you think.
Related articles
- Robert Reich: Ransom Paid (huffingtonpost.com)
- Robert Reich: It’s not a budget crisis, but a jobs crisis (americablog.com)
- Brawl with Paul – Krugman is ‘wrong,’ Sperling says (politico.com)
- Newt Gingrich Accuses Obama Of Being A Follower Of Paul Krugman, Which Would Be News To Paul Krugman (huffingtonpost.com)
- Krugman: “The President Surrenders” (americablog.com)
Existential Ennui 
I think your cartoon pretty much says it all when it comes to trickle down economics. The stock market just voted too with a 500 point one day drop (you were wise by the way to have sold earlier last week). In fact I choose to believe the “Market” over any pundit, cause when it comes to their money, market participants but all ideological BS aside, and do what’s in there own self interest to preserve capital. Economics aside, it’s my humble opinion that “The market” sees things slowing down with some recent weak numbers, and with more government stimulus being the only way to spur growth, feels that ain’t gonna happen based on last weeks debt ceiling debate, and is dumping stocks en mass and hunkering down for a real slowdown. The tea partiers are meanwhile blaming Obama for a lack of leadership, and will no doubt take up the jobs mantra soon when their “base” starts getting lay-off notices.
The chutzpah is amazing. Obama always wanted an up or down vote on the debt ceiling. It was the Teanutz who insisted on using it as a bludgeon against the Democrats to extract cuts in social safety programs. They can spin on a dime with never a crack of a smile.
I even read one idiot (not a pundit but merely a wingnut pastor-blogger) who seemed convinced that the 500-point drop was a sign that Wall Street was dissatisfied that the tea party did not stop the rise in the debt ceiling. Moron. But seriously he probably represents a ‘buzz’ that’s going on somewhere in the media or at least on one corner of mainstreet.
Great writing, Sherry. Thanks for those wise words by Jennings Bryant.
Americans need to realize soon that more of the tax burden simply must be shifted off the backs of folks making under $75K / yr. Only if taxes are adjusted to absorb a tiny additional percent of the fat-cat’s discretionary income can the paycheck-to-paycheck worker actually have some discretionary income at year’s end. As it stands the bottom workers are left, after state, local, and federal taxes and SS, with almost no discretionary funds and therefore no future. It’s all about discretionary income, and I think that the guy who works 40 hours per week and plays by the rules should have something to show for it every year.
I find it ironic in a sense that the more I learn about economics the more obvious it is to me (possibly a product of my limited understanding) that the Reaganomics is not a workable model and never has been. Why are these people so obtuse? This is the only reasoning that I could come up with. It is of course the product of reasoning based on one’s own self-interest alone without regard to the rest of humanity. And isn’t this really just conservative versus liberal thinking? Liberals care about the whole, conservatives believe in utter self-reliance. Nice if you can do it, but what of all those who (for myriads of reasons) can’t? They would rely on charity for that, but then of course, religious tenets then come into play as to who is “worthy” and who is not. I often conclude that things must be more complicated than I can see. These people seem so cold and unfeeling to me, and so utterly deluded about reality.
Gees, I have hit my head so often on my own debt ceiling that the first thing I do in the morning is grab my hard hat….
Lol. don’t we all Jimmy. Don’t we all.
I dunno what it would take for them to learn their lesson; I’m hoping that the S&P downgrade, which seems like a serious slap on the wrist to me, has them all — on both sides of the aisle — sh*tting bricks, however much they downplay it. A market in free-fall, with no possibility of a bailout this time, may be the only thing to get the attention of the filthy rich and uber-powerful. China adding their two cents ain’t good: However the GOP’s spokesmodels might poo-poo China’s commentary on our whole debt ceiling debacle, it’s worth remember that China and India are touted as the next economic powerhouses this century — and China is our largest debt-holder, while India now has much of our braintrust and technology.
Anyway, at this point I can’t say I blame one side more than the other. They’re all idiots.
Yeah pretty much I agree Blisterina, but the GOP made this an issue. The debt ceiling has been raised dozens of times and really has no business being held for ransom by the crazy free marketers who have yet to prove their system works. It doesn’t and we have proof of that!