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The Same Old Supply-Side Song
April 19, 2003
By Martin Matheny

If George W. Bush had chosen music as a career instead of politics, his entire body of work would be limited to one laboriously long treatment of 999,000 Bottles of Beer on the Wall. You can see it in his economic policy, a string of tax cuts, followed by tax cuts, followed by - guess what? - more tax cuts. Paul Begala comments, "You get the sense that if someone broke their leg, Bush would advise them to take two tax cuts and call him in the morning."

Call it what you will, re-Reaganomics, Trickle-Down II, or other words too explicit for a family column, Bush's economic policy is simply a rehash of the supply-side debacle that his father once referred to as "voodoo economics."

Supply-side economics was reborn on the cocktail napkin of economist Arthur Laffer, and foisted on an unsuspecting public in the 1980's by Ronald Reagan. But economist Jean-Baptiste Say conceived the whole thing almost two centuries ago. Little did he know what a maelstrom of economic dissidence he would one day unleash. Say's Law, simply put, states that supply creates its own demand. Put into modern application, pumping money into corporations should create jobs, boost the economy, create consumer confidence, and generally make everyone fat and happy.

So, based on Say's law, the Bush-league economists have put together a pretty simple plan. Faced with a slumping economy, they unleash a round of tax cuts for the wealthy and breaks for corporate behemoths. The theory behind this policy assumes that money siphoned to corporations and the wealthy will seep down and eventually fertilize the economy at all levels. The burden of the economic compost will rest squarely on the shoulders of the poor, where the Republicans like it, and on the shoulders of the shrinking middle class, where they like it even better.

There are numerous problems with Mr. Say's theory, however. First, it doesn't seem to be particularly well suited to the American economy, or for that manner any industrialized economy. Many economists believe that Say's Law only works in economic systems still based on the barter system. By extension then, supply-side economics would be the answer to all of our problems is we paid for our clothes with wheat, or our intercontinental ballistic missiles with live chickens, or whatever. So apparently, President Bush has given us an economic theory that would be perfect, if we didn't have all that pesky legal tender sitting around.

One of the most famous economists of the 20th century, John Maynard Keynes, did a fine job of not only disproving Say's Law, but in the process, entirely rewriting it. According to Keynes, the exact opposite of Say's Law is true; demand creates its own supply. Following Keynes' logic, which seems to make a bit more sense, then a government that wants to counter or stave off an economic recession should pump more money into the demand segment of the economy, meaning the middle class, who represent the largest number of spenders in America.

But, let's give the Bush-league economists the benefit of a doubt on that one, and move on to another slight problem with supply-side economics. Say's Law has never really been proven. Think about that for just a moment. The President's economic team is willing to risk your economic future, and the prosperity of our nation on a theory that experts accept as fact, although there isn't exactly a preponderance of empirical evidence to prove it. Remember, many experts accepted it as fact that the earth was flat until it was proven otherwise by empirical evidence.

Proponents of the Bush plan would argue that a plan based on this theory is a long-term policy investment, and it is probable that the legacy of a full implementation of supply-side economic theory would not be known for generations. True enough, but can our economy wait years before it returns to an acceptable level of employment? Can we wait a few generations for the markets to return to Clinton-era levels of production and investor confidence?

Of course not. Supply-side economics, while an interesting theory, is just that, a theory. Our economy needs a solution now, and fortunately there are many options available. Of course, none of them appeal to the White House, since they tend to leave wealthy corporate and private donors out in the cold, while providing assistance to the citizens who really need it, namely the other 99% of us.

The theory behind Say's Law has not, and probably never will be, proven. But if the theory remains a mystery, the realities of supply-side economics have been demonstrated all too well. One need only look at unemployment rates from the majority of the Reagan years to see the awful effects of the Laffer curve on American jobs.

So what have the team of Bush-league economists given us exactly? A new round of tax cuts for the wealthy and the corporate behemoths, based on a theory that hasn't been proven, that probably won't work in our economy, and even if it does, won't show any effects until well after most of us are broke and homeless. The time has come for new solutions to our economic crisis. Americans are tired of the same old song.

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