Get Above This Bad Idea

I found this blog discussing the difference between Supply Side Economics (SSE) versus Demand Side (or Modified Keynesian) Economics. It's a little over-simplified, but factually fairly accurate IMO.

Let me esplain. Wait, no time. Let me sum up.

SSE dictates that lowering the tax burden on the richest Americans is the solution to every economic condition. Recession? Lower taxes on the rich. Debt? Lower taxes on the rich. War? Lower taxes on the rich. Get it? SSE has only one tool in the box.


(Modified) Keynesian economics dictates the opposite, based on the theory that "economic activity is driven by demand for goods and services. Moreover, money in the hands of the middle and lower classes has greater inherent VELOCITY—meaning that a given dollar will be spent and then re-spent more often, if the middle class is passing it around with sequential purchases, than if it is stockpiled in a rich person’s portfolio."

The reason I am a left-leaning person politically, aside from social issues, is that I am more a Keynesian that a Supply-Sider. Here's why: the premise that rich people create jobs by investing when their taxes are lowered is simply false.

What do rich people, banks and corporations do in a recession? LAY PEOPLE OFF AND STOCKPILE MONEY. They don't hire people because demand is down and fewer goods and services are being bought.

How do we increase demand? Not by giving money to rich people - BECAUSE THEY ALREADY HAVE MONEY. But if you put money in the hands of the poor and middle class in a recession, do you know what they do? They spend it on things like cars, rent, food, clothes, child care, etc. Putting money in the hands of people who don't have money creates demand. And creating demand grows the economy.

How do you make money? Probably by working. But how do rich people make money? BY INVESTING. This is true whether taxed at 30% or 35% or 40% etc. See my point? Rich people create jobs by investing regardless of their tax bracket (up to a point of diminishing return, obviously). And the economy grows because of demand, not supply.

As an MK lefty, let me add that lowering taxes on the wealthiest people has a purpose in economic stability: to slow inflation. That's right. If we need to slow growth, reduce demand, we lower taxes on the rich.

So why do we keep electing people who advocate this SSE nonsense when we have seen it decimate our economy off and on for the past 30 years? It's not a rhetorical question? Does anyone know?

Haven't we learned yet that this "theory" is nothing of the sort? It is simply a nice way of packaging the idea of concentrating the nation's wealth in the top 10% of our population. And it absolutely strangles our economy.

So, as an American, I am asking you not to take my word for this. Don't even take the word of the blogger. Go read academic sites on economics and see what they say. SSE is a bill of goods that President George H.W. Bush called "VooDoo Economics." Let's come out of our trances, start voting in a way to actually make our country's economy work, and stop being doormats for neo-con corporate sycophants.