Debunkng Supply Side Economics

This is a very interesting analysis of the both the origins of supply-side or Vodooo economics, it’s effects over the past 30 years and the reason why the Republican party threw their arms around it.

While it is a rather lengthy article I can summarize it in just a few words. Supply-side economics is the looting of the middle class and all it’s institutions.

Think about that for a moment. Remember back when banks paid more than a piddling 1 or 2 percent on a savings account, where fees were $5 for a returned check, or ATM fees didn’t yet exist?

Remember when utility costs were low, even housing prices were reasonable.

I think in the last election we finally saw the great awakening to what the Republican party has been all about for these past 30 years.

And we’re seeing this play out in the stimulus bill working its way through congress right now. The Republicans of course are still trying to do the supply-side thing with tax cuts. But time and again it has been shown that the economic benefit of tax cuts only generates $1 or less for each dollar in tax cuts. Meanwhile stimulus like Unemployment Insurance, or Welfare returns $1.50 to $1.73 per dollar spent. Imagine that.

John Maynard Keynes wasn’t wrong as the Republicans would have you believe. He was absolutely correct, you must spend to dig out of a recession or depression. And right now this is looking increasingly like a depression.

Here are the current economic numbers:

Current Economic Indicators
February 06, 2009 (Close of Day)

    Indicator Value

Inflation % -0.09
GDP Growth % -3.86
Unemployment % 7.60
Gold $/oz 913.00
Oil $/bbl 40.17
Prime % 3.25

See that bolded number, we’re in negative growth. A depression is defined as negative growth for more than. There has been a bit of an uptick but nowhere near the levels when the housing bubble burst.

Here’s a graph of GDP growth from 1947 to the present. I wish I could find one that ran 1920’s through present because that would be more telling.

GDP Growth 1947 to Present
GDP Growth 1947 to Present

This graph appears a bit dated since we haven’t sunken below the zero line. Indeed, it only covers to 2007 before the housing bubble started to burst in earnest.

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