Saturday, June 13, 2015

Failure of Conservative Economics Should Discredit Their Bankrupt Ideas Forever

As noted in the prior post, the Republicans have no economic policy other than the same failed voodoo economics that have gutted the middle class and shifted obscene amounts of wealth to the super rich.  More of the same failed policies will only intensify the problem and, yes, it worries me that my children's prospects are worse than mine were at a similar age, and mine were worse than those of my parents.  As noted in other posts, upward social mobility is now higher in "Old Europe" than in America.  A piece in Salon argues why the GOP's economic policies are bankrupt and need to be discredited for all time.  Here are highlights:
On April 30, 2012, Edward Conard, a former partner for the financial management company Bain Capital and a multimillionaire who retired at age 51, sat across from Jon Stewart, host of “The Daily Show,” to promote his new book. Conard smiled and stared intently through his black-rimmed glasses as Jon Stewart, the liberal host of the comedy show, held up his book and described its contents. Conard’s book argued that America’s economy would be stronger if people like Conard were even richer and the country had even higher levels of economic inequality.

Stewart was puzzled by Conard’s argument and joked that it didn’t seem right because inequality in the United States was approaching the level in countries with “kidnapping-based economies,” generating laughter in the audience. 

Tax cuts for the rich and less regulation of business supposedly provide incentives for the wealthy to invest and work more. Enabling “job creators” to get richer helps us all, the theory goes.

Conard’s former boss at Bain, Mitt Romney, the 2012 Republican Party nominee for president, ran on a platform of supply-side policies, as have virtually all Republicans since Ronald Reagan was elected president.

Fortunately, these flawed ideas are beginning to be challenged. Academics have begun to rethink their views about the decline of the middle class and progressive politicians are finally starting to openly contest the logic underlying supply side after years of failing to do so. It is about time because our economy is suffering deeply from a financial crash caused in large part by high levels of inequality. And though we may not have a kidnapping-based economy, as Stewart joked, the American middle class is so weakened that we are experiencing the kinds of problems that plague less-developed countries, including high levels of societal distrust that make it hard to do business, governmental favors for privileged elites that distort the economy, and fewer opportunities for children of the middle class and the poor to get ahead, wasting vast quantities of human potential.

A strong middle class is not merely the result of a strong economy—as was previously thought—but rather a source of America’s economic growth. Rebuilding the middle class would provide the stable base of consumer demand necessary to increase business investment and job creation. It would also enable the country to fully develop the human capital of its people, increase the social trust that makes transactions possible, and balance political power to produce a government that works for the whole country, not just those at the top.

The United States was founded as a middle-class country. On the eve of the American Revolution, America’s carpenters, shopkeepers, and farmers enjoyed a higher standard of living than workers in other parts of the world. Further, economic inequality was lower in the United States than any place else. In an era of kings and peasants, America’s middle class stood apart.

The strength of America’s middle class ebbed and flowed over time, especially as industrialization took hold. But after World War II, America returned to its roots and built a mass middle class that was the envy of the world, with rapidly rising incomes and decreasing inequality.

Yet, over the past three to four decades, middle-class America has come undone. The American middle class was already hurting when the Great Recession struck and is now in deep trouble. While there’s no official definition of the middle class, it’s not hard to see that it is in decline. By most every measure, most Americans are struggling.

First, there is the basic level of income earned by the typical American. Median household income—meaning half make more and half make less—was lower in 2013 than it was in 1989. This means that middle-class households now earn less than they did two decades ago.

The miniscule gains that households have made have largely come because women have increasingly entered the workforce—meaning families are working longer hours, as they run faster and faster to stay in place. Indeed, the hourly wage earned by a typical man is less than it was in 1973.

Median incomes for male workers now in their thirties are about 12 percent lower than the income was for their fathers’ generation at the same age.

While incomes have been stagnant for most Americans, the cost of middle-class basics like healthcare and gas have risen much faster than inflation, and some basics like housing and college have risen at double the rate of inflation over the past four decades. It costs a lot more to maintain a middle-class lifestyle, but no matter their efforts most families have not been able to earn much more income. Not surprisingly, debt levels have jumped sharply—the average debt of middle-class families has nearly doubled since 1983.

In contrast to the middle class and the poor, incomes of the rich, especially the very rich, have grown by astronomical amounts over the past three decades: in 2007, the year the Great Recession started, the top 0.01 percent, the richest one in ten thousand, earned in today’s dollars the equivalent of about $38.8 million, compared to $6.4 million per year in 1979.

The rich now make so much more than the middle class because they captured the vast majority of the economy’s gains over recent decades. The share of the nation’s income going to the top 1 percent has approximately doubled over the past three decades, while the share of income going to the middle 60 percent of income earners has fallen precipitously and is now stagnating near the lowest level ever recorded since the government began keeping track of the statistic.  

After 30 years of political dominance, it is obvious that supply-side economics has failed in a number of ways and is thus vulnerable to a challenge from middle out. Supply side helped fuel the Great Recession of 2007–2009 by destabilizing consumer demand and encouraging the deregulation of Wall Street—costing the United States 8.7 million jobs and trillions of dollars in reduced economic growth.

[G]rowth was weaker after President George W. Bush cut taxes for higher earners than it was after President Bill Clinton raised taxes on the rich.

Moreover, trickle-down’s supposed growth mechanisms haven’t occurred the way the theory predicted. Savings, investment, employment, and productivity didn’t increase after trickle-down policies were enacted, as a host of studies have shown. And budget deficits skyrocketed when tax cuts didn’t pay for themselves, contrary to the claims of trickle-down proponents.

There's considerably more to the article that deserves a full read.  The take away?  That voodoo economics theories need to have a wooden stack driven through their heart.  And through the heart of the GOP.

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