Krugman, W, malaise, and GOP's American Way. Ole.

[untermensche]

So I just wanted to make sure people also think Keynesian policies are also considered bunk because the supply side policy of government running a surplus to stir up the economy is wrong?

Yes we always read conservative analyst's stuff to understand liberal economic policy.
The Untold Story Of How Clinton's Budget Destroyed The American Economy http://www.businessinsider.com/how-bill-clintons-balanced-budget-destroyed-the-economy-2012-9

Yes Clinton did get a tax increase passed that resulted in a balanced budget.

No, it was Bush who insisted we focus on increasing home ownership. It was Bush policy that tanked Freddie and Fannie. Clinton's economy slows as the result of a high tech bubble related to Y2K. Remember the "Irrational exuberance" comments of Greenspan in ought-96?

...and I thought ignorance was just tea party "I wanna, I wanna" pouting.

This so-called "untold" story has been told about a million times. It is the same old crap that was trotted out as an excuse from early on.

The problem was no-check mortgages. This is what drove the entire disaster. Combined with these credit default swaps that insured the bad investments.

The Bush administration watched housing prices rise in a manner that made no economic sense.

And did absolutely NOTHING.

 

[SimpleDon]

Supply side economics forms the basis of our current economic policies that have produced the unprecedented income inequality that we have now, thirty five years of mediocre growth, massive government debt, a massive infrastructure deficit to leave to our children and the largest recession since the Great Depression.

Free market economics is based on nothing but the hope and faith of a small number of anarchists and other utopian dreamers and describes not how the economy works but how they wish that the economy works.

Your analysis is flawed, but we agree that free market and supply side are different, so thank you for agreeing that free market and supply side are different.

No, I don't agree. The free market delusion plays a huge role in the flawed supply side economics. It is what convinced the Fed, the OTC, OTM, OCC and the SEC to believe the financial markets could self-regulate and to not act to bring the MBS's, CDS's, CDO's, mess that finally caused the Great Financial Crisis and Recession under some type of control. These regulators in the Bush administration were firm believers in the self-regulating free market.

It was this free market delusion that convinced Congress and the Clinton administration to remove the barriers between retail banking and speculative investing that spawned the alphabet soup of toxic financial instruments. Retail Banking has the ability granted by the government to produce money out of thin air. It is very dangerous, as we learned, for about the third time, to combine this ability with speculation in the financial market. Do you understand this? Do you understand why?

This is a discussion board. I would appreciate it if you would discuss my post, tell me why my analysis is flawed, and to do something other than just deflect arguments that leave the impression that you have no answer to my analysis.

A very good start would be for you to answer my original question.

What evidence has convinced you that the self-regulating, self-organizing free market can exist?

 

[SimpleDon]

Your analysis is flawed, but we agree that free market and supply side are different, so thank you for agreeing that free market and supply side are different.

I think you are going to have to expand more on what you see is the differences. Most people see supply side economics just as giving more money to the rich by giving them tax breaks and then the wealth supposedly flows down.

But I am not sure how the affects of supply side economics would actually be measured.

I afraid that you might wait for a long time before Jason answers you. I am not sure that he can explain the difference. It strikes me as something that he believes to separate what he really, really believes in, the free market, from the disaster that has been supply side economics.

I hear this all of the time. How do we know that supply side economics has caused these problems? Or, how do we know that the supply side economic policies caused the problem, couldn't it be some other unknown factor in the economy that caused them?

I can of course, ask the obvious question. Why won't the economic policies of the nation affect the economy? Our current economic policies are clearly supply side economic policies.

(There is one person here who believes that our current policies aren't supply side economic policies because taxes have been raised since Reagan and more regulations have been written since then even by Republicans. Of course, taxes for the rich are considerably lower than they were when Reagan came into office and the fact that more regulations have been written is because more regulations are required for an increasingly complex economy.)

If you maintain that our existing supply side economic policies didn't affect the economy then you are saying that the policies failed. If they failed then there shouldn't be any problem with reversing them and restoring a more equitable income distribution.

The only reason to increase the income inequality under the supply side economic policies was to increase the amount of business investment in the economy, thereby increasing growth and the number of good jobs in the economy compared to the previous Keynesian demand side economic policies. But both investments and growth have been lower, not higher.

You measure the effects of the supply side economic policies by comparing the promised results, higher investment and higher growth, with the results over time, lower growth and lower investment. Simple.

 

[SimpleDon]

But I am not sure how the affects of supply side economics would actually be measured.

Well, one thing we can look at is the performance of the economy and the size of the deficit under supply side policies.

Whenever supply side policies are tried we see slower economic growth and bigger deficits.

See Kansas under Brownback as the most recent example.

The main way that supply side economics redistributed income from the poor and the middle class to the rich was to reduce taxes on the rich. Reducing taxes causes budget deficits. The supply siders' claim was that the increase in investment would boost the economy and increase tax receipts to compensate for the lower tax rates. This didn't happen. The total taxes collected from the rich are about the same that they were under the higher tax rates but this is because the incomes of the rich under the supply side income redistribution have increased about three times, but it came at the cost of a decreased income share for the poor and the middle class and the decreased relative tax receipts from them.

All of the Republican presidential candidates are proposing to further decrease taxes on the rich and to increase taxes on the poor and the middle class, to reduce Social Security benefits and to reduce Medicare and to eliminate the ACA and its benefits for the poor, the health insurance companies and the middle class. All of these will further shrink the middle class, increase the number of the poor and further increase income and wealth inequality by increasing the incomes of the wealthy. There is no question about these results, this is exactly what has happened over the last thirty five years.

 

[SimpleDon]

Well, one thing we can look at is the performance of the economy and the size of the deficit under supply side policies.

Whenever supply side policies are tried we see slower economic growth and bigger deficits.

See Kansas under Brownback as the most recent example.

I agree with you about Kansas. Whacking 1% of the tax rate isn't going to do what is intended. However with it on larger scales it will always be debated on when you need to look the affects and how long.

What is debatable? That we have changed our economic policies over the last forty years or so from demand to supply side? That we did this by intentionally increasing income inequality? That we intentionally suppressed wages of the poor and the middle class by reducing the power of the unions, by increasing globalization, by allowing the minimum wage effectively drop, and many other ways? That business investment and overall economic growth are lower under supply side than they were under demand side? These are facts.

 

[coloradoatheist]

I afraid that you might wait for a long time before Jason answers you. I am not sure that he can explain the difference. It strikes me as something that he believes to separate what he really, really believes in, the free market, from the disaster that has been supply side economics.

But it seems like most people do too. Supply side isn't about tax cuts. It was about getting government out of running the economy. So in thirty years we've done some things and at other times we have done the opposite. The government has done thousands of things but you point to a small one tangentially related and blame it on that.

I hear this all of the time. How do we know that supply side economics has caused these problems? Or, how do we know that the supply side economic policies caused the problem, couldn't it be some other unknown factor in the economy that caused them?

I can of course, ask the obvious question. Why won't the economic policies of the nation affect the economy? Our current economic policies are clearly supply side economic policies.

Of course they can. But I asked you for counter examples. What country from 1980 to 2007 grew faster than the US? How did it's unemployment rate change? What companies and industries did it create?

(There is one person here who believes that our current policies aren't supply side economic policies because taxes have been raised since Reagan and more regulations have been written since then even by Republicans. Of course, taxes for the rich are considerably lower than they were when Reagan came into office and the fact that more regulations have been written is because more regulations are required for an increasingly complex economy.)

The US has one of the highest progressive federal taxes in the world, so it's funny. We've approaching a time when half the tax payers don't even pay federal taxes. You say there are more regulations and laws, but those have no affect on business creation and growth?

If you maintain that our existing supply side economic policies didn't affect the economy then you are saying that the policies failed. If they failed then there shouldn't be any problem with reversing them and restoring a more equitable income distribution.

The only reason to increase the income inequality under the supply side economic policies was to increase the amount of business investment in the economy, thereby increasing growth and the number of good jobs in the economy compared to the previous Keynesian demand side economic policies. But both investments and growth have been lower, not higher.

You measure the effects of the supply side economic policies by comparing the promised results, higher investment and higher growth, with the results over time, lower growth and lower investment. Simple.

The only way to know what would have happened really is to find the wormhouse into the Universe where Reagan didn't become President.

 

[coloradoatheist]

I agree with you about Kansas. Whacking 1% of the tax rate isn't going to do what is intended. However with it on larger scales it will always be debated on when you need to look the affects and how long.

What is debatable? That we have changed our economic policies over the last forty years or so from demand to supply side? That we did this by intentionally increasing income inequality? That we intentionally suppressed wages of the poor and the middle class by reducing the power of the unions, by increasing globalization, by allowing the minimum wage effectively drop, and many other ways? That business investment and overall economic growth are lower under supply side than they were under demand side? These are facts.

Comparing it to a previous time when there were huge other factors that were different. You are comparing it to a period after a major global war, China wasn't a major world power, women and blacks were second class citizens, the age of the population was lower. These policies have had a much more profound affect then the few supply side policies have changed.

 

[SimpleDon]

I mentioned this in passing in another post above. Many supply side apologists advance the opinion that greater income inequality and lower growth and business investment under supply side economic policies compared to the previous demand side policies are because of some unknown factor or factors that have changed the economy and the way that it reacts to stimulus. That while we don't know what these factors are, they could have produced the lower growth and kept supply side economics from realizing its full potential. That demand side economics could have suffered the same or even a worse result.

That one of these factors might be that the economy is now rewarding education more than it did previously. Or that it rewards technology more than previously. Or that automation is cutting much further into the incomes of the middle class than can be quantified.

Welcome to truly post modern, subjective economics. The dismal science becomes unattached from any connection to reality. There are no provable, objective facts, only conjecture. It can be molded to justify any set of policies that we want.

This idea that supply side economics hasn't achieved its stated goals, the reason for us to adopt it, because unknown and apparently unknowable factors have taken hold, while intellectually bankrupt, additionally ignores the following,

1. The income inequality that we see now isn't an unintended consequence of supply side economics, it is the way that it works. Without income inequality there is no shifting of income to the rich to invest.
2. If there are some unknown factors in the modern economy that are producing this huge amount of inequality this is an even better argument for rolling back the supply side policies intended to produce even more income inequality. Isn't it?
3. Thirty five years should be long enough to identify and to prove the unknown factors if they really exist, shouldn't it?
4. The greatest growth in income has been in the financial sector, a sector of the economy whose portion of the corporate profits grew from just 2% in 1970 to more than 40% of in 2007, before the meltdown that they created. The financial sector is notoriously resistant to technology and probably the only sector of the economy that has only one half the productivity that it had in 1910 when clerks wrote into ledgers in ink.
5. The most basic assumption that you have to make to accept supply side economics is that the economy is still supply side lead, isn't it? That before you can have growth you must have investment. That capital for investment is a limited resource that the economy must carefully and judicially employed.
6. And yet anyone who has been in business understands exactly the opposite, that you don't invest unless there is unfulfilled demand for the product in the economy.
7. And economists have finally caught up to the fact that capital, money, is endogenously created by the economy itself in reaction to the demand for it. That capital, money, isn't a limited resource.
8. That companies big and small make their own investment decisions based on market conditions and their own detailed analysis of the future. And these decisions are almost completely independent of the stock market and what the investors there believe.
9. That companies use retained earnings, corporate bonds or bank loans to fund investments, they don't issue stock to raise the money. Issuing stock is like taking out a permanent loan that can't be paid off, whose principal and interest keep growing.
10. All of this means that the equity markets are largely irrelevant to the real economy of producing products for consumption and paying wages that the 99% depend on to live and to raise children.
11. This leaves the equity markets as somewhere between a casino and a massive Ponzi scheme. It is like a casino because any profits made in the markets is provided by the player/investor who buys the stock. It is like a Ponzi scheme because there is no increase in the equity value in the whole market unless there is an increase in the new money entering the market.
12. The largely irrelevant equity markets are where the majority of the supply side redistributed income to the rich went. Or at least the portion left over after the Treasury bills were brought to finance the government debt from the reduced taxation and the wage suppression for the poor and the middle class.
    
13. When they weren't boosting stock valuations the redistributed wages turned into money for investment built asset bubbles in gold, collectables, commodities and finally in real estate, the bursting of which caused untold damage to everyone but the bankers who caused it.

 

[Cheerful Charlie]

One of the far right's tropes is that regulation destroys economic success. But then how to explain the success of the Clinton years with little change in these bad, bad regulations the far right is always shrieking about? Part of this that gets ignored is the rights long time habit of pronouncing doom and destruction if Bush cuts a deal with Congress, Clinton gets elected, Obama gets elected et al, none of which ever came even close to the disasters the right has trumpetted for decades now. The right knoweth not about economics. Never has, never will. There are always hairsplitting excuses for getting it wrong, self serving rationalizations as to why its really the Democrats that destroyed us with GOP economics etc.

But no, anytime the GOP runs things it all goes into the toilet. Recent analysis of Trump and Bush's tax plans indicates vast deficits if they win and get their way. They have learned nothing at all from the W. Bush debacle. And the mainstream press seems little interested in that sort of fact.

 

[Jason Harvestdancer]

I think you are going to have to expand more on what you see is the differences. Most people see supply side economics just as giving more money to the rich by giving them tax breaks and then the wealth supposedly flows down.

But I am not sure how the affects of supply side economics would actually be measured.

I afraid that you might wait for a long time before Jason answers you. I am not sure that he can explain the difference. It strikes me as something that he believes to separate what he really, really believes in, the free market, from the disaster that has been supply side economics.

Supply Side = Government attempts to steer the economy through stimulating supply
Demand Side = Government attempts to steer the economy through stimulating demand
Free Market = Government does NOT attempt to steer the economy

Why is that so hard to understand? This isn't the first time I've pointed out the difference, and likely won't be the last because this difference will soon be forgotten by those who want them to be the same.

 

[Cheerful Charlie]

The problem with the doctrinaire "free market" free from all government control is that it does not work. We tried that in the US for years and reeled from financial panic to financial panic. We had trusts and monopolies and other ugliness that gave us anything but a free market. Free market is the Big Rock Candy Mountain of libertarian day dreamers. And has become the rallying cry of the far right that has given us economic crisis, massive debt and an economy that rewards the very rich and stiffs the lower economic levels.

 

[Jason Harvestdancer]

The problem with the doctrinaire "free market" free from all government control is that it does not work. We tried that in the US for years and reeled from financial panic to financial panic. We had trusts and monopolies and other ugliness that gave us anything but a free market. Free market is the Big Rock Candy Mountain of libertarian day dreamers. And has become the rallying cry of the far right that has given us economic crisis, massive debt and an economy that rewards the very rich and stiffs the lower economic levels.

Yes, that is what we are supposed to believe. Your dedication to that belief earns you a gold star.

 

[Horatio Parker]

The problem with the doctrinaire "free market" free from all government control is that it does not work. We tried that in the US for years and reeled from financial panic to financial panic. We had trusts and monopolies and other ugliness that gave us anything but a free market. Free market is the Big Rock Candy Mountain of libertarian day dreamers. And has become the rallying cry of the far right that has given us economic crisis, massive debt and an economy that rewards the very rich and stiffs the lower economic levels.

The govt issues the currency and demands tax payments. Seems rather intimately involved.

 

[arkirk]

The problem with the doctrinaire "free market" free from all government control is that it does not work. We tried that in the US for years and reeled from financial panic to financial panic. We had trusts and monopolies and other ugliness that gave us anything but a free market. Free market is the Big Rock Candy Mountain of libertarian day dreamers. And has become the rallying cry of the far right that has given us economic crisis, massive debt and an economy that rewards the very rich and stiffs the lower economic levels.

Yes, that is what we are supposed to believe. Your dedication to that belief earns you a gold star.

He may not have a gold star, but at least he does not accept the fairy story you go by. Let us all be free and everything will be milk and honey. You keep laying out this idea and it has absolutely no connection with environmental reality. There is nothing inherent in absolute freedom that keeps a man from doing his fellow man wrong, from cheating him, from enslaving him, from killing him. Libertarians generally seem to believe in firearms and militias and relationships between companies and their customers that do not exist. They believe in ownership of property that entitles owners to do anything they want with what they "own." Again, there is no way to restrict the absolutely free and unregulated person from hurting his fellow man. We simply have to learn to share and get along. Libertarians stand foursquare against the efforts of good hearted communitarians, pacifists, and environmentalists. Libertarianism gives no value to cooperation, and in the end, even to law and order. So don't shake your finger at Cheerfull Charlie.

 

[Jason Harvestdancer]

Oh, you think "this is better" is equivalent to "this is perfect". No wonder you think that the idea that things can be better is utopian.

 

[ksen]

Supply Side = Government attempts to steer the economy through stimulating supply
Demand Side = Government attempts to steer the economy through stimulating demand

Seems clear enough.

Free Market = Government does NOT attempt to steer the economy

I'm not sure how this would look or work in practice.

How would power imbalances be addressed? Do they even need addressing? Or won't power imbalances happen in a Free Market system?

Anyways, thanks for spelling it out! :wave:

 

[Cheerful Charlie]

The times and places with true free trade and no central government and taxes has been places where aboriginal hunter gatherer societies held sway for millenia. Do you really want an Australian bushman society? Lesse faire gave us the horrors of the industrial revolution. Nobody that knows that history wants to return there.

Positing some sort on non-existent Golden Era past we are to return to is a fairy tale among the far right today, or is an ideal the Libertarians keep promoting but its all nonsense. The recent failures of far right supply side stupidity should warn us off of the big promises of Trump, Bush et al to run anything, much less a nation returning to massively failed ideas that have failed over four decades now.


Obviously conservatism of any stripe you want to name hasn't a clue about economics.

 

[laughing dog]

I afraid that you might wait for a long time before Jason answers you. I am not sure that he can explain the difference. It strikes me as something that he believes to separate what he really, really believes in, the free market, from the disaster that has been supply side economics.

Supply Side = Government attempts to steer the economy through stimulating supply
Demand Side = Government attempts to steer the economy through stimulating demand
Free Market = Government does NOT attempt to steer the economy

Why is that so hard to understand? This isn't the first time I've pointed out the difference, and likely won't be the last because this difference will soon be forgotten by those who want them to be the same.

It is hard to understand because it is simply wrong. Supply side economics at its core is simply reducing non-market obstacles to production - there is nothing inherent in supply side economics to steer the economy. In other words, supply side economics, at its core, is simply reducing gov't interference in market decisions.

 

[Cheerful Charlie]

Supply Side = Government attempts to steer the economy through stimulating supply
Demand Side = Government attempts to steer the economy through stimulating demand
Free Market = Government does NOT attempt to steer the economy

Why is that so hard to understand? This isn't the first time I've pointed out the difference, and likely won't be the last because this difference will soon be forgotten by those who want them to be the same.

It is hard to understand because it is simply wrong. Supply side economics at its core is simply reducing non-market obstacles to production - there is nothing inherent in supply side economics to steer the economy. In other words, supply side economics, at its core, is simply reducing gov't interference in market decisions.

Supply-side economics is the claim that cutting taxes, especially for the wealthy will pay for itself by stimulating the economy. This has never worked as claimed. It creates at best, massive deficits. It has nothing really to do with "reducing government interference" which is a strawman argument meant to eliminate programs that work for good ends. We see ignorant politicians for example, promising to eliminate the EPA as if clean water and air are merely impedements to big business with no merit in their stated goals.

The supply side programs currently pushed by Trump and Bush will, if enacted, simply bury us in massive deficits and debts.

The “adrenaline” metaphor was one that Brownback deployed frequently, like in this July 2012 Wichita Eagle op-ed: “Our new pro-growth tax policy will be like a shot of adrenaline into the heart of the Kansas economy.


It ain't. It wasn't for W. Bush either. Nor is it working in Jindal's Lousiana, where Jimdal enacted big tax cuts with the same promise.

 

[coloradoatheist]

The problem with the doctrinaire "free market" free from all government control is that it does not work. We tried that in the US for years and reeled from financial panic to financial panic. We had trusts and monopolies and other ugliness that gave us anything but a free market. Free market is the Big Rock Candy Mountain of libertarian day dreamers. And has become the rallying cry of the far right that has given us economic crisis, massive debt and an economy that rewards the very rich and stiffs the lower economic levels.

Nothing is ever that simple though. There was several large variables that caused the financial meltdown and only one small part dealt with deregulation.


I actually agree we are in a position of cutting taxes won't do much. As a society now we are going to have to accept that with the population and current social programs that economic growth will stay very sluggish for a long time.