Follow on TwitterNY Times’ Paul Krugman: Supply Side Economics Creates Deficits
Nobel Prize winning economist, Paul Krugman, attempts to educate a largely ignorant Republican/Tea Party constituency on the documented failures of Supply Side economics. He focuses on the Carter and Reagan years (since Republican politicians tend to cite Reaganomics as their model for economic success), and he demonstrates that revenues actually dropped decisively with Reagan’s tax cuts:
… the revenue track under Reagan looks a lot like the track under Bush: a drop in revenues, then a resumption of growth, but no return to the previous trend:
Matt Yglesias contends that “the conservative movement in America doesn’t [actually] care about the budget deficit,” and the proof is in the policies for which they advocate:
1) There have been two presidents who were members of the modern conservative movement, Ronald Reagan and George W Bush, and they both presided over massive increases in both present and projected deficits.
2) The major deficit reduction packages of the modern era, in 1990 and 1993, were both uniformly opposed by the conservative movement.
3) When the deficit was temporarily eliminated in the late-1990s, the mainstream conservative view was that this showed that the deficit was too low and needed to be increased via large tax cuts.
4) Senator Mitch McConnell says it’s a uniform view in his caucus that tax cuts needn’t be offset by other changes in spending.
5) The deficit reduction commission is having trouble because they think conservative politicians won’t vote for any form of tax increase.
In sum, there are zero historical examples of conservatives mobilizing to make the deficit smaller.
Senate Republican Leader Mitch McConnell recently made the following assertion about George W. Bush’s tax cuts for the wealthy:
“There’s no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue, because of the vibrancy of these tax cuts in the economy. So I think what Senator Kyl was expressing was the view of virtually every Republican on that subject.”
Here Ezra Klein of the Washington Post resoundingly slams McConnell’s fictitious allegations:
There’s an ontological question here about what, exactly, McConnell considers to be “evidence.” But how about the Congressional Budget Office’s estimations? “The new CBO data show that changes in law enacted since January 2001 increased the deficit by $539 billion in 2005. In the absence of such legislation, the nation would have a surplus this year. Tax cuts account for almost half — 48 percent — of this $539 billion in increased costs.” How about the Committee for a Responsible Federal Budget? Their budget calculator shows that the tax cuts will cost $3.28 trillion between 2011 and 2018. How about George W. Bush’s CEA chair, Greg Mankiw, who used the term “charlatans and cranks” for people who believed that “broad-based income tax cuts would have such large supply-side effects that the tax cuts would raise tax revenue.” He continued: “I did not find such a claim credible, based on the available evidence. I never have, and I still don’t.”
Of course, the Right rarely if ever lets factual evidence get in the way of their deep-seated, largely debunked, ideologies.
Still, it is good to see the Left finally doing a better job of educating the public about the real track record between the differing economic policies — something necessary if we are serious about promoting positive change in this country.
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Great post. I couldn’t agree more that the left needs to do a much better job educating the public on the absolute failure that is supply-side (or trickle-down) economics.
I have tried to do the same thing – explode right-wing myths about tax cuts for the wealthy spurring economic growth and the hypocrisy on the right that deficit reduction is priority number one when they were the ones to create it.
http://bit.ly/cYNEky
Thanks SF. The Left is politically inept. They don’t seem to understand that the history accepted by the masses is most often formulated by the things repeated over and over (regardless of whether those things are fact or fiction).
The Left thinks that just because the historic facts show that Republican policies are abysmal failures that that automatically translates into public awareness. Unfortunately, the ones who spout lies over and over again (the GOP) tends to rewrite history in the public consciousness.
When the GOP accuse the Dems of constantly bringing up George W. Bush (which they rarely do considering all the calamity he unleashed on us and the world) it’s because they know that if they can dissuade the Dems from shining a light on how W’s failures translate into today’s spending, then the Dems will lose the war of words. Here’s a post I wrote on this very topic.
By the way, I like your site The Donkey Edge. This is a great post.
Thanks, Stan. I like your site as well and have added it to our blog roll.
I also read your “War of Words” post and couldn’t agree more. My biz partner and I have been in the entertainment/advertising business for years and have watched in horror as time and again the Democrats have failed to refute Republican lies and memes and have inexplicably chosen instead to adopt conservative frames in the misguided belief that moving further and further to the right will endear themselves to the voters.
Harry S. Truman once said: “Give the people a choice between a Republican and a Democrat who talks like a Republican and they’ll choose the Republican every time.” Sage advice that the current establishment Dems would be wise to heed.
SF,
Great points. The political spectrum has moved so far to the right that the Dems today look like Republicans back in the 80s. Here’s a good video by Cenk of TYT (filling in for Dylan Ratigan on MSNBC) on the rightward movement of both parties.
BTW, I liked your Glenn Beck article @ The Donkey Edge. Hadn’t seen that Monty Python film in a long time. Love it!
You’re site is now on my blog roll.
Why is the GDP log values being used here?
From Paul Krugman, the source of the graph:
Looking at trends on log scale/values is not correct. It should not be done for this data.
Suppose you have a 3 number series:
10, 100, 800
The difference between the fist 2 numbers is 90 (diff 10, 100)
The difference between the last 2 number is 700 (diff 100, 800)
Clearly there is bigger difference between the last 2 numbers than the first 2 numbers in the series.
Now let’s take the log values of the 3 number series from above:
1, 2, 2.9
Now as you can see the opposite has occurred. The difference between the first 2 numbers is now larger than the last 2 numbers in the series.
By taking the log values, you have shrunk the divergence of the data.
Log scale should be used to show trends for exponential growth or exponential decay.
You’d have to direct your question to Nobel Prize winner in Economics Paul Krugman, at the NYTimes, as he obviously disagree with you on the best way to measure revenue trends across different administrations.
If you get an answer from him, please share it here, as I’d be curious to hear what he has to say about it.
Not only is supply side economics responsible for the mounting US debt, I believe it is also responsible for the ever increasing market bubble.
For example:
Deregulation in financial market has resulted in lack of transparency, understating risk premium and the spreading of such risks increased moral hazard and undermined the mechanism of supply meeting demand.
The 2008 housing bubble was over supply spurred on by these loose financial regulations with absolutely no regard for demand. The subsequent inability to clear the over supply at lower prices is a counter example of supply side economist’s claimed.