The “New Rules” Economy
I haven’t yet read the whole thing. It’s about 40 pages, so it won’t take long, and I’ll get to that tonight. But it’s not off to a really good start (emphasis added):
Over the past six years, conservatives have had their shot at coping with the economyâ€™s new rules. In keeping with Reaganâ€™s philosophy, they have tried to shrink governmentâ€™s reach in the economy with massive tax cuts for mostly the wealthy, wholesale deregulation, and attempts to eliminate or privatize safety net programs for the elderly and those at lower incomes. By any objective standard, the results have been a disappointment. On the plus side, economic growth during this time of change has been generally steady. But it has also been alarmingly uneven: average wages have been flat, income disparity has widened, and there is widespread anxiety about the nationâ€™s economic future. Other measures of economic security, such as health care and pension coverage, have declined.
So let’s look at the first of the italicized sections, “they have tried to shrink governmentâ€™s reach in the economy with massive tax cuts for mostly the wealthy, wholesale deregulation, and attempts to eliminate or privatize safety net programs for the elderly and those at lower incomes”. For the sake of argument, I’ll grant that the tax cuts for the wealthy. Personally, I’ll take a tax cut any time I can get one, and I’m not sure that I even agree that it is “for the wealthy”, but that’s a talking point that is an axiom to the left, and not up for debate, so I’m not interested in starting that fight.
But first, they suggest that conservatives have tried to shrink their reach into the economy. If so, they haven’t done a good job, because the increase in government expenditures from $2.1T to $2.7T will necessitate reaching a heck of a lot deeper into the economy in the future. Second, I don’t see where the “wholesale deregulation” accusation comes from. Sarbanes-Oxley was a very large increase in economic regulation, and McCain-Feingold was an increase in political regulation. The last six years haven’t seen any deregulation, as far as I can tell. Last, they accuse conservatives of “attempting” to eliminate or privatize safety net programs. Well, maybe they attempted to privatize Social Security, but they’ve dramatically increased federal control and spending on education and prescription drugs for seniors. So all three points they accuse conservatives of doing over the last six years are false.
Then, look at the second italicized portion, “average wages have been flat, income disparity has widened, and there is widespread anxiety about the nationâ€™s economic future”. No argument here that this has occurred. The question is why. I would point out that over the last six years, when the market went through a tough recession, the government resorted to fiscal policy to inflate the currency. When that occurs, you see all of these things. Wages for wage-earners can hardly hope to keep up with inflation, but the investor class can use their money to make more. This is where widening “income disparity” comes from. Those who can invest tend to move money into locations where it will track inflation, while salaries commonly lag inflation. While “core” inflation hasn’t yet spiked, it’s coming, and people vaguely see that on the horizon.
But what “progressive” policies will reduce inflation? One of the primary drivers of inflation, historically, has been socialist governments’ desire to buy things it can’t afford, forcing them to print money to pay for it. Look at Zimbabwe and Venezuela. It’s very rare that a country can balance on the head of socialism while retaining a stable currency (Switzerland, perhaps, being a good example, because they kept a 40% backing by gold until 2000). American leftists are typically Keynesian, who believe that government deficits and money supply can “prop up” an economy, and I don’t believe I’ve ever heard American progressives advocate for a return to currency backed by something more than government promises.
As I said, I haven’t even read past the second page of this document yet, but I’m already finding some fundamental disagreements with it… I’ll try to go through the rest, and I expect there may be more to come.
Hat Tip: Catallarchy