I find it interesting your refutation is that the basics behind National Income Accounting are wrong and that all economists are dead wrong.
Roger, look around you. Does the economy look that good to you right now?
When was the last time it looked so bad? I know that the word 1929 has been mentioned many times in the media lately.
I know that proponents of supply side economics, like you, claim that today's crisis has nothing to do with supply side economics, but instead it is a creation of Democrats, who kept interfering in the economy when they shouldn't.
Well, I'm fifty-three years old. I know enough, and I remember enough, to say say that the supply side economics was created by Ronald Reagan. All right, perhaps you could say that it was created as a theory by people like Milton Friedman, and then it was Ronald Reagan who turned it into reality, much like it was Marx who created marxism as a theory and Lenin was the one who turned it into reality. The thing is, supply side economics, with its aggressive tax cuts, didn't exist before Reagan. And it is supply side economics that has been the guiding principle of the economy that is taking a severe tumble now.
Ronald Reagan, implementor of supply side economics, was triumphant for a lot of reasons - because of his uniquely charming and charismatic personality, and because he was elected President in the most powerful country in the world by far and dared take advantage of his country's many strengths. He overwhelmed America's traditional enemy, the Soviet Union. And he did so without going too far, without starting a war.
But as Francis Fukuyama said in that article which I gave you a link to, and which you haven't commented on, it was Ronald Reagan who implemented the idea that America can lower taxes especially for rich people, and yet its government can spend beyond its means by borrowing from abroad. According to Fukuyama, it was Reagan who created the American budget deficit. Clinton, incidentally, wiped that deficit out, partly by rasisng taxes, and created a mighty budget surplus instead. But George W. Bush immediately cut taxes aggressively after he succeeded Clinton, and the budget deficit was back with a vengeance.
According to Fukuyama and many other voices that have been heard during the present crisis, supply side economics has created the current conundrum by teaching wishful thinking economics instead of teaching realism. The one enemy of supply side economics has been taxes. Balancing federal income and federal spending has never been much of a problem for the supply side, since they have argued that you can always create additional revenue by cutting still more taxes and borrowing from abroad if revenue for whatever reason isn't rising as it should.
So, yes, Roger. I argue that the current mess is evidence that your economic theory, as it is articulated by Econ 101, teaches things that are not true. I does so because it teaches that government should matter as little in the economy as possible, and the only things we need to understand about the economy is what works best for private interests. It is this kind of thinking that has ruled much of the world since the days of Reagan, thanks to the mighty influence of the United States. Unfortunately this theory is so much wishful thinking. It doesn't work. It is designed to pamper the supply side, not to worry about reality.
You say that it is the Democratic Party that has created the crisis with its unwanted interference in the affairs of the supply side. But it is supply side economics that is the new thing, historically speaking, not Democratic interference. When was an economic theory allowed to rule supreme without the slightest interference from its critics?
Supply side economics wasn't there before Reagan. Reaganomics has been so successful that the Democrats have embraced it too, more or less, although they have tried to be a little more cautious about it.
To me, however, the idea of blaming Democrats for a situation that has happened after a Republican has been President for eight years, and after this Republican President inherited an extremely strong economy with a super-strong dollar and a mighty budget surplus, is not the sort of position I can take seriously. Particularly if you remember that this mess has happened not only after a Republican has been President for eight years, but also after Republicans have ruled the country for twenty of the last twenty-eight years.
But ultimately is not that interesting to blame Republicans or Democrats. Why talk so much about individual people? People come and go. There will never be person exactly like George W. Bush again. For that matter, there will never be a person like Bill Clinton again, and never another one exactly like Ronald Reagan.
No, I think we should talk less about individual people and more about the ideas they lived by and the ideas they bequeathed to posterity. That is why Reaganomics is so much more interesting to me than Reagan himself. Reagan was successful and triumphant, yes. But Reaganomics lived on after Reagan's term was over, and it lived on after he died. It shaped so many of the rules that has governed Western economies for a few decades now. It has created stupendous wealth, at least for those who were wealthy from the beginning, and also for a few smart entrepreneurs like Bill Gates and for a few dedicated go-getters from humble beginnings. It has created a feeling that in the world of economics the sky is the limit, and anything that prevents hungry capitalists from reaching for the sky is harming the economy as a whole. It has papered over the fact that in the Western world where Reaganomics has ruled supreme, and perhaps particularly in the United States, most people have not made any economic gains at all. I recently saw a figure which claimed, I think, that the richest 1% of the American population has increased its income by 228% since 1979, whereas the median American male has hardly had a raise at all since then. The fact that most American families earn more money today than they did in 1970 is almost exlusively due to the fact that today most women are also breadwinners.
Reaganomics created a mighty and magnificent bubble that almost exclusively benefitted the rich. Admittedly it also created a festive feeling in much of society.
Now we are waking up. The bubble has burst. It proved impossible to live so much beyond ones means. Remember, too, that we have been living beyond our means not only in an economic sense, but also when it comes to exploiting nature. We are facing an ecological crisis. The climate change may or may not be created by humanity, but other ecological problems are certainly mostly man-made. A recent report that every fourth mammal is threatened by extinction says something about how humanity has been using up natural resources, leaving less and less for the other species. And, ultimately, we are going to be emptying the coffers of nature for ourselves, too.
We can't go on the way we have. Indeed, I think we are seeing the end of Reaganomics.
Ann
