Jobs and the Economy
Former Nixon advisor Kevin Philips explained we may be headed for another horrendous recession, as bad as the Great Reagan Recession of 1981-82. This because Bush pushed another round of Supply Side "Deja Voodoo" economic polices. We should reverse these Deja Voodoo polices because they are Bushwhacking the economy.
The Bushwhack Bush Tax is credit card economics run amok. We all know what happens when someone goes on a huge spending spree and puts it all on plastic. Soon, the bills start rolling in demanding repayment of the money spent plus hefty interest charges.
Bush's answer is to pay our bills with bigger borrowing, and give our money to his wealthy friends - the "truly greedy" - while slashing needed investment in the future. There is no more foolish and short-sighted approach.
We will have to pay these bills. Bush's tax avoidance policies now mean huge tax hikes in the future. Anyone trying to make ends meet knows this. Bush and those advising him don't know, because unlike most of us, they never had to struggle to make ends meet.
We've seen all of this before. It may be hard to remember how bad things were under the last Bush, but this Bush is quickly reminding us. It was as President Clinton described in his speech to the Los Angeles Democratic Convention in 2000.
"Eight years ago, when our party met in New York, it was a far different time for America. Our economy was in trouble, our society was divided, our political system was paralyzed. Ten million of our fellow citizens were out of work. Interest rates were high. The deficit was $290 billion and rising. After 12 years of Republican rule, the federal debt had quadrupled, imposing a crushing burden on our economy and our children."
After these Bush failures, America took a chance on the Clinton / Gore team. What happened then? As Clinton explained:
"You gave me that chance to turn those ideas and values into action, after I made one of the best decisions of my life: asking Al Gore to be my partner. First, we proposed a new economic strategy: Get rid of the deficit to reduce interest rates. Invest more in our people. And sell more American products abroad."
"We sent our plan to Congress. It passed by a single vote in both houses. In a deadlocked Senate, Al Gore cast the deciding vote. Not a single Republican supported it. Their leaders said it would increase the deficit, kill jobs, and give us a one-way ticket to recession. Time has not been kind to those predictions. The Republicans said then they would not be held responsible for the results of our economic policies. I hope the American people will take them at their word."
"Today, we are in the midst of the longest economic expansion in our history. More than 22 million new jobs, the lowest unemployment in 30 years, the lowest female unemployment in 40 years, the lowest Hispanic and African American unemployment on record, the highest home ownership rate in our history."
Happy days were here again. More Clinton / Gore successes:
"For the first time in decades, wages are rising at all income levels. We have the lowest child poverty rate in 20 years, the lowest poverty rate for single mothers on record. The average family's income has gone up more than $5,000 and, for African American families, even more. The number of families who own stock has grown by 40 percent. Harry Truman's old saying has never been more true: If you want to live like a Republican, you should vote for the Democrats."
Ah those Republicans! They're getting us right back into the mess Clinton and Gore found in 1993 the same way they did it last time. Like Reagan, Bush's reckless tax cutting for the wealthiest and big corporations will force tax hikes.
The Bush Tax is nothing but the same old Trickle-Down Supply-Side Voodoo economics that bankrupted the economy and cost 100,000 American jobs during the 1980s and early 1990s. Supply Side policies gut our investments in the future, short-changing education, R&D and infrastructure - the roads, bridges, and other big scale projects - which we need to help America thrive.
Keep in mind the basis of Supply-Side: the claim that tax cuts more than pay for themselves. The paradox - that high taxes can cause low revenues - makes sense only when taxes are actually discouraging investment and economic activity. Supply-siders always think taxes are too high - on the wealthy.
Nobel Prize winning economist Paul Samuelson debunked the supply side "Laffer-curve prediction that revenues would rise following the tax cuts has proven false; indeed, revenues shrank...."
The cuts from 1981-1983 blew a massive hole in the budget, and forced huge Reagan tax hikes in 1983, 1984, and 1986. Even these tax hikes - the largest in US history - failed to reverse the damage. To add injury to insult, Reagan's tax hikes fell most heavily on those who benefited the least from his tax cuts, those least able to bear the burden.
According to the non-partisan Congressional Budget Office, Reaganomics increased taxes on the half of American families with the lowest incomes, while the wealthiest enjoyed huge tax cuts.
Specifically, Reagan hiked the effective tax rates on the poorest fifth 15% from 1980 by 1989. The richest fifth saw their taxes slashed 7%, while tax rates for the wealthiest one percent - like Reagan, Bush and Bush - shrunk 16%! The promised economic bonanza never happened.
Reagan's bad policies forced us to accept his own huge tax hikes, Bush I's "read my lips" tax hikes in 1990 and Clinton's budget-balancing fiscal policies from 1993 on - just to get us part way out of the ditch. Just like Reagan's special favors to special interests, Bush is increasing our debt to help his friends.
Reagan's favors were so costly, not even his tax hikes could stop the bleeding as deficits shot from less than $80 billion to well over $200 billion and debt tripled. Bush promised to run our government like a private firm, and he is. Too bad he chose Enron as his model. He's using the same failed approaches his close personal friend Ken Lay used which bankrupted Enron.
Bush II has right back in the wrong direction, toward the middle of the ditch. That's why we must repeal the Bushwhack Bush Tax.
The failed "Supply Side" approach always supplies misery and unemployment every time it's tried. It's doing so again. It's unfair. The ultra rich pay less than their fair share in taxes, and less than they get in services, when we include the huge profits they make off Uncle Sam. Sure, they pay more in taxes per person, but only because they get much more income.
Much of that income comes from the government, funded mainly by middle class taxpayers. The middle class subsidizes the richest already, and will do so even more thanks to right wing policies. Unfair taxation undermines confidence in America.
Most of the $24 Million income Dick Cheney enjoyed in 2000 came from government contracts and insider loan guarantees to his Halliburton company. The rest came from bonuses Cheney cashed in for firing 1000s of workers and slashing medical benefits for the rest. This is the blue print for America Cheney wants.
Robbing the middle class this way is not only unfair, it's also horrible for the economy. Every time we try these policies, the economy ends up worse off afterward. All the best evidence proves this, but the right wingers don't care.
Bush and his beneficiaries defend greed despite the unfairness, and despite the diseconomies it creates. Bush blew our surplus long before 9/11. Clinton and Gore were paying down the debt, and cutting our interest costs. These policies were creating jobs and helping our economy. The facts Clinton quoted prove that.
Bush reversed good policies, and we can see the results. Lost jobs, outlaw corporations lying to investors, ripping off employees, and crumbling into bankruptcy. All this is sapping our economic vitality, and transferring middle class tax and pension money to the most ruthless and dishonest corporate raiders.
Even conservative Republicans know Bush has us on the wrong track. Alan Greenspan is a confirmed right winger on economics, but even he sees the danger in the bloated Bush tax plan. Anyone familiar with the voodoo economics disaster of the 80s, anyone who can read the business section or understand the Wall Street reports knows this Bush tax is train-wrecking our economy.
Look at the facts. We tried Bush's plan before and it nearly bankrupted us. Reagan slashed taxes-mainly for the richest few-and claimed the benefits would "trickle down" to the rest of us. Wrong. Didn't happen. Instead we had the worst recession since the Great Depression. We never recovered until Reagan and the Senate Republicans reversed the course.
The US economy always chokes on this scheme. During the first two Reagan years, growth and employment went negative, as the deficits broke all records. Growth was stronger before Reaganomics than after. Unemployment hit double digits and stayed there until we reversed Reaganomics. Then, the economy recovered, and we saw some real growth due to tried and true Keynesian economics.
It took years for the economy to get back on its feet after Reagan wrecked it. We still haven't paid off the interest, much less the principle on this huge disaster. That's not even counting the S&L mess Reagan caused, or all the money he wasted on $1,200 coffee pots, $45 hammers, and $980 toilet seats.
We can look this up in the official facts and figures published by Reagan's own Office of Management and Budget. Sadly Bush is recreating Reagan's worst errors.
A few years into Bush's Enronomics, and we're back in the hole. Bush's policies already failed. How could they not? They're the same snake oil policies in a different bottle. It couldn't work any better this time than last time.
Want proof? Look at the smart money on Wall Street. These conservative businesspeople make their living knowing which way the economy will go. Most of them were willing to vote for Bush, but they don't trust him to run the economy. Not with their money on the line.
The idle rich know Bush's huge tax cut was great for them, but horrible for the economy. They have no, none, zero faith in Bush's economic policies. The smart money is out of the market, and the small investors are out of look. Look at the financial pages.
Middle class families are getting killed on Wall Street, not even counting the pensions and jobs we lose when Bush's CEO friends wreck their companies. The high rollers are now counting on high interest rates, and a long, deep recession. They are investing accordingly.
The Bush tax is already bushwhacking the economy. It's chock full of unfair and economically disastrous give-aways for the idle rich, at the expense of productive people. Bush's central planning distorts the system of risks and rewards that makes the market efficient.
All this adds up to economic catastrophe, just as we saw during the Reagan / Bush recessions of the 80s. Don't just take my word for it. Look at the smart money!
Anyone still not convinced can examine the historical facts and figures covering the past quarter century. Some of this gets a little technical, but bear with me. The cold hard numbers prove once and for all that "Supply Side" is not just trickle down - it's all wet.
Sometimes taxes go up, and so does growth. Other times taxes go down, and growth rates fall. That proves everything Supply Siders tell you about economics is wrong.
What do Supply Siders claim? That tax cuts - like those the Bush Occupation pushed into law in 2001 - always spur economic growth and pay for themselves. Supply-siders also claim tax increases always hurt the economy. They are wrong. What does that say about the Bushwhack Bush Tax?
Supply Side "theory" is really just wishful thinking and rationalization for rich people who want to avoid paying their fair share of taxes.
Supply Siders claim tax hikes always hurt the economy, and lead to deficits. This because, so they story goes, any increase in taxes "punishes" productive people, and makes them flee from profitable enterprise.
Supply Siders also contend cutting taxes creates all kinds of incentives for capitalists to produce, create jobs, and - here's their favorite part - actually end up paying more taxes than they used to. So tax cuts magically pay for themselves, and deficits disappear as we "grow our way out of debt." All of this "theory" is demonstrably false.
The basic problem with "Supply Side economics" is that it isn't based on economics. It's public relations double talk. Supply Side itself is so plastic, and some Supply Siders are so giddy, they even claim credit for the great Clintonomics expansion.
Informed observers recall that this expansion began with a bang-what Republicans called the largest tax hike in US history-as Supply Siders all whimpered. They whined that the Clinton tax increase would kill the weak, anemic Bush expansion. Never mind that they also claimed Bush I already killed the Reagan expansion when he broke the "Read My Lips-No New Taxes" pledge penned for him by Peggy Noonan.
Some Supply Siders claim that a series of allegedly deadly tax hikes, Reaganomics RIP suddenly burst back into life, just in time for the longest recovery in US history. Is there any reason to believe in Supply Side at all? Look at the record over the past few decades.
Many people seem to think Ronald Reagan invented tax cuts. Not so. The Revenue Act of 1978 (enacted November 1978) cut capital gains, which the supply side Republicans claim should have increased growth. Didn't happen. Look what did happen.
Growth was about 5.0% in 1977 and 1978. After the change in tax policies took effect, growth fell to less than 3.0% in 1979 and went into the red in 1980.
Actually, the growth rate fell by more than 2% after Democratic President Carter, and Democratic majorities in Congress cut the Capital Gains tax rates from 39% to 28%
Then growth fell again, this time by more than 3% as the tax cuts failed to prevent a recession. Even after the economy pulled out of recession, growth was still lower than before the tax cuts. Tax cuts failed to stimulate growth, or prevent recession.
Growth was already at 2.5% when Reagan's Economic Recovery Tax Act of 1981 (ERTA) passed. This bill contained all of Reagan's supply-side tax cuts. If the Supply Siders' claims had any merits, the biggest tax cut in history should have sent the economy soaring. It didn't. The opposite happened as growth tanked by nearly 5%, bottoming out at a negative 2.1%.
To repeat, the Supply Side tax cuts took effect, and the growth rate fell, actually collapsed by 4.6%! This began the longest, deepest, worst recession since the Great Depression.
This economic catastrophe alone repudiates the supply side theory. There really isn't any need to go on, but let's continue, because it's so much fun to debunk right wing blather. Supply Side is pure bunk.
Deficits shot past $100 Billion and $200 Billion for the first time in US history. In a panic, Republicans in Congress such as Bob Dole and Pete Dominici demand Reagan reverse course.
The GOP Senate voted no confidence in Reaganomics, and the White House reneged on promises, agreeing to massive tax hikes and throwing out Supply Side.
According to Supply Side, the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) - a huge tax hike - should have made the recession worse. Instead, growth rebounded to 4% in 1983.
That's right. The growth rate increased by more than 6% after Reagan hiked taxes. Once more, this result was completely against everything they predicted, and should have ended the bogus supply side charade forever.
The economy struggled creating huge, gaping deficits because od the complete failure of supply side Reaganomics and Reagan's reckless, wasteful overspending on the real, but grossly exaggerated Soviet threat.
Republicans in Congress pressured Reagan to do something. He supported the Social Security Amendment Act of 1983, which accelerated FICA tax hikes. Another huge Reagan tax hike should have crushed the recovery, if the Supply Siders' had any clue. Did it? Nope!
Growth in 1984 approached 7%. The growth rate increased by 2.8% after Reagan hiked FICA taxes. Once again, supply side was proven totally, 100% wrong.
In 1984, Reagan signed the Deficit Reduction Act of 1984 (DEFRA) into law. This featured even more Reagan tax hikes-including a $2 per gallon increase in the alcohol tax and an extension of the telephone excise tax. Other technical changes hiked taxes to lower the deficit.
If Supply Side theory worked, this should have backfired. It should cost the Treasury as taxes increased, but growth collapsed. Didn't happen. Growth stayed healthy in 1985 (3.7%) and 1986 (3.0%) as Reagan hiked taxes again.
Then Reagan signed the Tax Reform Act of 1986. This created the "Marriage Penalty" by repealing the two-earner deduction. It also hiked other taxes. If Supply Side had any validity, this would have slowed growth and decreased revenues. It didn't.
Supply Siders may claim that was because TEFRA 1986 also cut the maximum corporate income tax rate from 46 percent to 34 percent, and closed loopholes to remain "revenue neutral."
However, it eliminated many Supply Side "incentives" (a nice name for loop hole or tax dodge) such as the investment tax credit, and it limited ways that businesses could write off expenses.
According to the Supply Siders, this should have hurt growth. It didn't. Growth went from nearly 3% in 1987 to nearly 4% in 1988, and stayed strong into 1989.
Reagan and Democratic majorities in Congress hiked taxes on individuals, cut some taxes on corporations, and hiked other corporate taxes. Once more, reality proves Supply Siders are wrong, as growth slowed but continued, and then increased.
I am not saying tax hikes increase growth, but it clearly proves Supply Side claims-that tax cuts increase growth-are just so much trickle. Supply Side is utter, total nonsense. No honest, sane, sensible person can even pretend otherwise.
To recap, nothing works the way the Supply Siders claim. Tax cuts have not encouraged savings, investment, R&D, employment, growth or revenues. Reagan, Bush and the people who claim unfair pro-rich anti-middle class tax cuts and tax hikes help the economy are totally wrong, absurdly wrong, time and time again.
It is hard to imagine a more repudiated, more completely disproved, more obviously wrong theory since people said the world was flat. What makes Supply-Siders repeat their disreputable refuted nonsense? They get to pay little or no taxes while passing the burden onto the rest of us and our children.
Supply Side theory predicts the opposite of what actually happens in the real world. If the Reaganite Supply Siders were correct, we'd have seen massive growth during the 1981-83 period of tax cutting, before tax hiking. Instead, the economy shrunk 2.1%, with the most massive unemployment since the Great Depression!
If the Reaganite Supply Siders were correct, the Reagan, Bush and Clinton tax hikes - which reversed Reaganomics - would have crushed the expansion. Instead, we saw strong, sustained growth.
We should recall the dire warnings of the Supply Siders who predicted inflation, recession and ruin as the Democrats passed the Clinton / Gore fiscal policies without a single Republican vote in Congress, and reject their failed policies rather than let them throw out the successful Clintonomics policies.
It doesn't have to be this way. We can throw out the unfair, unwise Bush policies instead. We can get out house back in order, and enact a fair, equal tax cut to all who need and deserve one. We can restore the surplus, shore up Social Security, and pay down the debt. That's the Clinton / Gore tried and true approach.
We still haven't paid off the credit-card bill from the last foray into failed Voodoo economics. We are already looking at huge tax hikes to come, just to pay down existing national debt.
Bush's policies will make these inevitable tax hikes even higher, and place an even great burden on productive American working families. This repudiates Reagan, Bush and Bush, confirms Keynes, and proves Congress must repeal the Bushwhack Bush Tax.
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Historical facts and technical details.
Before Reaganomics:
Growth %
1977 4.9
1978 5.0
Changes in Tax Policies: 1978 - Revenue Act of 1978 cut the capital gains top rate to 28 percent (enacted November, 1978).
Growth %
1979 2.9
1980 -0.3
The growth rate fell by 2.1% after Democratic President Carter, and the Democratic majority Congress cut Capital Gains taxes from 39% to 28%. Then growth falls another 3.2% as the tax cuts failed to prevent recession.
Growth %
1981 2.5
Operating under the last Carter budget, before the Reagan policies took effect, the economy pulled out of recession, but growth is still lower than before the tax cuts. Tax cuts failed to stimulate growth.
Under Reaganomics:
Change in Tax Policies: 1981 - The Economic Recovery Tax Act of 1981 (ERTA) - otherwise known as Reagan's supply-side tax cuts - passed. They included: An "across-the-board" reduction in individual income tax rates of approximately 23 percent, phased in over 33 months, a reduced maximum top rate (from 70 percent to 50 percent, beginning in 1982). Accelerated cost recovery system (ACRS), which allowed faster business write-offs. Reduction of the maximum tax rate on capital gains to 20 percent.
Growth fell 4.6% after Republican President Reagan, the Republican Senate and Republican / Dixiecrat majorities in the House cut taxes.
Growth %
1982 -2.1
Change in Tax Policies: 1982 - Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) passed increasing airport, cigarette, gas, telephone and "excise taxes." Reduced tax-free contributions to pension plans and reduced limits on benefits from defined-benefit plans. These tax hikes began to undo the failed Reaganomics experiment.
Growth %
1983 4.0
After Reagan, the Republican Senate and Republican / Dixiecrat majorities in the House hiked several taxes, the growth rate increased by 6.1%.
Change in Tax Policies: 1983 - Social Security Amendment Act of 1983 passed. This drastically accelerated Social Security tax hikes originally passed in 1977. Reagan and the Republicans shortened the tax hike schedule by forty years from 2030 to 1990. Since they used this tax hike as general revenues, this was a flat-rate jobs tax which fell on every working American, unfairly capped at well below the upper middle class tax bracket.
Growth %
1984 6.8
Despite the massive tax hikes, the growth rate increased by 2.8% after Reagan, the Republican Senate and Republican / Dixiecrat majorities in the House began to finance their policies with increased FICA / Social Security taxes.
Change in Tax Policies: 1984 - The Deficit Reduction Act of 1984 (DEFRA) passed. This complex legislation repealed some interest income exclusions. It increased the excise tax on alcohol by $2 per gallon, and extended the telephone excise tax.
It also effectively increased taxes on families selling their homes, but helped corporate raiders by cutting the waiting period for special treatment of speculation in stocks and bonds from one year to six months.
Growth %
1985 3.7
1986 3.0
Republican President Reagan, Republican Senate and Republican / Dixiecrat majorities in the House hiked several taxes on working people; gave special favors to junk bond speculators and other fat cats. Growth slowed but continued as these changes took effect.
Change in Tax Policies: 1986 - The Tax Reform Act of 1986 passed. Repeal of the two-earner deduction, income averaging, and the state and local sales tax deduction. Repealed of the 60 percent capital gains exclusion for individuals. Reduction in the maximum corporate income tax rate from 46 percent to 34 percent.
"Broadened" the corporate tax base through repeal of the investment tax credit, limiting depreciation deductions, restricting the use of net operating losses, etc. Cut top capital gains rate to 28 percent. Cut corporate tax from 46 to 34 percent. These changes hiked taxes on working people, and slashed taxes for corporations.
Growth %
1987 2.9
Republican President Reagan and Democratic majorities in Congress hiked some taxes on individuals, cut some taxes on corporations, and hiked other corporate taxes. Growth slowed but continued
After Reaganomics
In 1986, Democrats retook the Senate, and they began to set the agenda in 1987. Their policies forced Republican President Reagan to reverse course on his failed polices, bringing down the crushing deficits, letting real interest rates fall, and unleashing the American economy:
Growth %
1988 3.8
1989 3.4
For additional historical analysis debunking Supply-Side Reaganomics, see: THE REAGAN YEARS: A Statistical Overview of the 1980s
Technical details-taken with attribution from the Steve Kangas website. See: Growth and Tax Timeline
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