Tuesday, January 27, 2009

GOP sings same old supply side song

The New York Times Bob Herbert asks:

What’s up with the Republicans? Have they no sense that their policies have sent the country hurtling down the road to ruin? Are they so divorced from reality that in their delusionary state they honestly believe we need more of their tax cuts for the rich and their other forms of plutocratic irresponsibility, the very things that got us to this deplorable state?

Read his answer and entire column.


Fred Schnook said...

Right on!

The republican's are dead wrong in their assertion that tax breaks will stimulate the economy. President Bush pushed through a huge stimulus package last year in the form of a $600.00 check to each individual. People either used the money to pay-off bills or put it into savings. In fact, the economy performed WORSE after this tax cut. Also, the monetary policy of the Fed has been anemic. The only cure is to ramp-up fiscal policy and get real dollars into the hands of working people who will spend it. Everything else has been tried and proven not to work.

The fact that republicans are sticking to the tired old mantra of tax breaks and trickle-down economics, in light of the recent failures of these policies, shows their unwillingness to recognize their past failed polices. Sticking to these tired, old failed polices is dangerous to the American economy.

Michael Rosen said...


You are, of course, right.

Economists recognize that between 70% and 80% of last year's tax cuts were saved not spent. As a result, we didn’t get much economic stimulus bang for the buck.

Tax cuts for businesses won't stimulate investment any more than baling out banks stimulated lending. Businesses like banks won’t start investing or hiring when the economy is in a freefall.

Monetary policy, manipulating the money supply, is no longer an option since the Federal Funds rate is effectively zero.

Since there is no source of private demand (consumption and private investment) in the current economy, we need to utilize public (government) demand to jump start the economy.

The Obama administration is focusing its stimulus plan in making necessary public investments like education, infrastructure and green technologies that will lead to long- term growth and to supporting state and local governments so they don't slash their budgets which would only intensify the already deep recession.

The Bush administration pursued tax cuts for 8 years and the economy produced only 2 million jobs. In the eight years prior, which included increases in high marginal tax rates for high income earners, the economy created over 22 million. During the 1950s, ‘60s, and 70s when the high marginal tax rate ranged from 91% to 68.8%, the nation experienced much faster rates of economic and middle class growth than it has since we adopted the supply side dogma that low marginal rates create growth.

Opponents of the stimulus should care more about their fellow Americans who are losing their jobs and their homes than their ideology.