Wednesday, January 16, 2008

The Ridiculousness That Is Republican Economics

The success of Republican economics is a very convenient lie misrepresentation. Like 9/11, it's been used to sell policies to the American people that are neither good for them nor for the greater economy.

Let me say this first: when taxes are too high, they can choke off economic prosperity. Less money in my pocket means less money I am going to spend (or "reinvest" into the economy). Taxes aren't an economic black hole, though. For example, government spending also puts money back into the economy. A good deal of all of the "pork" everyone gets so fired up about finds its way back to local economies, and localized spending does a great deal of good for the general prosperity of the country.

Also let me say this: long term deficits are bad. Think of it the way you would in the context of your household. There's "good" debt, such as debt used to buy a house. Short term debt that you leverage in a low-risk way to finance assets. Then there's bad debt... out of control credit card spending on fast food and designer shoes. A new Toyota Landcruiser. Trips to Vegas and the Cayman Islands.

Republicans have created the myth that they're the party of fiscal conservatism, which is such a widely believed -- and cherished! -- myth that it continuously boggles my mind. People repeat it kind of mindlessly. They don't really understand why Republicans are fiscally conservative, exactly, but since everyone says it all the time they've come to treat it like a fact.

Except it's not.

Memo to America: cutting taxes while running a deficit doesn't count as fiscal conservatism. It would be like you telling your boss you want a 5% paycut and then using a charge card to buy new clothes, a Toyota Landcruiser, and a trip to Grand Cayman. Sadly, by the way, most of that money you just spent on imported goods isn't even for the greater good of the national economy... it's on a one way trip out of the country.

Reagan turned the whole 'taxcut and spend' scheme into a masterful sleight of hand. He said, in effect, "Here, look at these shiny new tax cuts!!" while diverting attention away from his irresponsible pile of debt. Later, poor Papa Bush took the hit for the fallout from Reagan's policy. He made a feeble attempt to raise taxes in order to cover the debt before it sank the economy (remember where interest rates were at that point?). Everyone saw Papa Bush as the bad guy but he was really just paying the price for Reagan's drunken cowboy economic policy... heartbreaking, really. Reagan's legacy remains intact today, an icon of the Republican party. Papa Bush will be remembered for "Read my lips."

Clinton, on the other hand, was two parts lucky and one part smart. Luck brought him the tech boom, one of those freakish moments in time that changes the course of the entire world practically over night. In a flash, a single industry propelled the US to instant prosperity. And he was one part smart because, instead of spending it all, he conspired with Greenspan to balance the budget. The tech market became over-invested and burst at the end but the ginormous productivity gains from the tech boom itself were a solid contribution to the US economy. They were real and not undone by the market adjustment. Plus, we weren't saddled with debt... we had some cash in the bank. *whew

As an aside, I kind of liked the "pay as you go" philosophy. Remember when that was a widely used phrase? Haven't heard that lately, have we?

So anyway, along comes Bush the Lesser, determined not to make the "mistakes" of his father, focused instead on making the mistakes of Reagan. Bush The Lesser's economic policy is turning out to be the unmitigated disaster it was destined to be, though, without the divine intervention of a tech boom. Unfortunately for Bush, his only boom was in real estate, triggered by playing loose with monetary policy. Unlike the tech boom, which actually made a solid underlying contribution to the economy via productivity, when the real estate bubble burst it was like watching money evaporate into thin air. POOF! On top of our pre-existing mountain of debt, the long term fallout is going to be bad. Very bad. We've effectively announced a fire sale on US assets.

I don't mean to simplify this. Obviously there have been a ton of variables interwoven into the fabric of US economic performance over the last few decades... not the least of which is globalization. It is complicated, which is why true cause and effect relationships often get masked.

I am getting tired of hearing the same old GOP talking points regurgitated in this election cycle as the economy becomes of more and more importance. This election counts, people. We need to bring our economy back into balance or else we're going to become as irrelevant as the other half of the Wonder Twin superpowers, the former USSR.


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