POLITICS - Dumber Voodoo Economics

After the Dumb Voodoo Economics of the Reagan era, we have (TA-DA) Dumber Voodoo Economics of the G.W. Bush era.

"Voodoo Economics Jr." editorial, Daytona Beach News-Journal

There was a lot of gloating out of the Eisenhower Executive Office Building on Wednesday. President Bush was talking up the state of the economy and the budget at midyear, and predicting a budget deficit of about $200 billion by year's end, down from $248 billion last year, and a surplus of $33 billion in 2012. "The policies of low taxes and spending restraint have produced a clear and measurable record of success," he said. "You can't argue with what I'm telling you. These are the facts."

Well, they're his facts, anyway. You can argue with what he's telling you, because some of his facts are wrong, and some are smokescreens. Bush is among the wildest-spending presidents in the history of the nation. Discretionary spending -- that is, spending unrelated to mandatory spending out of his control, like Social Security and Medicare -- increased 57 percent in just five years on his watch, and counting. It took Ronald Reagan, the previous big spender who always preached fiscal discipline, eight years to increase discretionary spending by 59 percent. (Spending increased 14 percent in Bill Clinton's eight years.)

Bush is taking credit for reducing the deficit. But that's like a thief stealing the Mona Lisa, then trudging back to the Louvre in triumph five years later and saying, "Here's half the painting, anyway. Now call me a hero." Bush came to office after Bill Clinton spent the previous eight years cleaning up the budget mess and deficits left by Reagan and Bush's father. Clinton inherited a $290 billion deficit. He handed Bush a $236 billion surplus, which Bush promptly turned into record-breaking deficits again thanks to reckless and unneeded tax cuts that overwhelmingly favored the rich. "During the time when we cut taxes to today," he said, "our economy has grown by more than $1.9 trillion. This amount is larger than the entire economy of Canada."

Actually, if the deficit ends at "only" $200 billion this year, that'll bring the combined deficits of the Bush years to a staggering $1.6 trillion, also an amount larger than the entire economy of Canada. The more telling number is the growth in the federal debt: $3.1 trillion during the Bush years alone. That's more than the entire economy of China -- an appropriate comparison, considering how much Bush has compromised the American economy's fundamental soundness now that foreign governments like China own so much of Americans' public debt.

Yes, the economy grew in the last five years, adding more than 8 million jobs. But consumers and government powered the economy on an unprecedented borrowing-and-spending binge, helped in good part by a real estate bubble manufactured by Federal Reserve policy. The bubble has burst. Debts define the colossus that is the American economy. There's little to no wiggle room should the economy take a downturn. "That's how the economy works," Bush said. "When you've got more money in your pockets to save, spend or invest, this causes the economy to grow."

That's assuming that the money in your pocket is yours to spend. A national debt approaching $9 trillion, or 70 percent of the size of the economy, says the money isn't quite yours, while the economy is growing literally on borrowed time.

POLITICS - "Neocons" = "Dead-Enders"

"Neocons dissolve into chaos after GOP defeat" by CHARLOTTE RAAB, Capitol Hill Blue

Neo-conservatives, who laid out the intellectual underpinnings for US President George W. Bush's foreign policy, are in disarray following the Republicans' midterm election defeat.

Already battling with each other over continuing US military setbacks in Iraq, "neocons" are now more divided than ever following Tuesday's election nightmare which saw Republicans lose control of both houses of Congress.

Neo-conservatives essentially believe in America's ability to shape the world in its own image, and see the United States as a "benevolent hegemony" with the power to compel other nations to adopt liberal democracy.

That ideology was extended to Iraq which was supposed to become ultimately a bastion of democracy in the Middle East.

"Huge mistakes were made, and I want to be very clear on this -- they were not made by neoconservatives, who had almost no voice in what happened, and certainly almost no voice in what happened after the downfall of the regime in Baghdad," said noted neocon Richard Perle in an interview with Vanity Fair magazine.

Another top neocon, Ken Adelman, had assured the administration in February 2002 that "liberating" Iraq would be a "cakewalk," but today disavows all responsibility with how the venture has turned out.

"I just presumed that what I considered to be the most competent national security team since (president Harry) Truman was indeed going to be competent. They turned out to be among the most incompetent teams in the post-war era," he laments in the same Vanity Fair piece.

Joshua Muravchik, a leading conservative scholar with the American Enterprise Institute, agreed that the neocon role has been overstated.

"In reality, of course, we don't wield any of the power that contemporary legend attributes to us. Most of us don't rise at the crack of dawn to report to powerful jobs in government," he said in an article in Foreign Policy magazine.

"But it is true that our ideas have influenced the policies of President George W. Bush, as they did those of President Ronald Reagan. That does feel good. Our intellectual contributions helped to defeat Communism in the last century and, God willing, they will help to defeat jihadism in this one."

Even well-known proponents are beginning to back away from the neocon label, most notably Francis Fukuyama in his recently published book "America at the Crossroads, Democracy, Power and the Neoconservative Legacy."

"I have concluded," he writes, "that neoconservatism, as both a political symbol and a body of thought, has evolved into something that I can no longer support."

"Neo-conservatism has now become irreversibly identified with the policies of the administration of George W. Bush in his first term and any effort to reclaim the label at this point is likely to be futile."

Bold emphasis above is mine

Ah, Neo-conservatives, another group in denial. They will not admit that their philosophy is just wrong. No "one image" can be forced on the world, no matter how "powerful" a nation thinks it is. Dictators and conquerors have tired for centuries, and in the end, always have failed. The Roman Empire no longer exists, this is the history lesson on world domination.

Now it is the Islamic Extremists that need to relearn this.

ECONOMICS - A Tale of Two Theories

"A Tale of Two Theories: Supply Side and Demand Side Economics" by Robert Freeman, Common Dreams

It was the best of times. It was the worst of times. It was the era of low taxes. It was the age of high deficits. Prices were up. Wages were down. Oil and gold soared. Housing and big cars cratered. Foreign powers threatened. Foreign currencies beckoned. Some saw a new Jerusalem in the nation’s future. Others saw only the glaucoma of gluttonous greed. It was the summer of economic hope. It was the winter of economic despair.

In short, the early eighties were an economic time not unlike our own — a time that scared the Dickens out of most sober observers.

The common thread that unites the two times is Supply Side Economics. In the eighties it was new and promising. In the aughts it is recycled and damaging. In both eras, it stood against Demand Side Economics in its prescription for how to manage the economy. But it is in their outcomes that the two theories present such stark and measurable differences.

Traditionally, to fight inflation, governments raise interest rates and cut spending, tampening down demand. To fight unemployment, they do the opposite: cut interest rates and raise spending, increasing demand. But now they had both problems at the same time. The cure for stagnant growth (lower interest rates and higher spending) would only aggravate the inflation. And the cure for inflation (higher interest rates and lower spending) would only aggravate the stagnation. The problem seemed insoluble. Enter Supply Side Economics.

Supply Side Economics claimed that if the government cut taxes on the wealthy, it would jump-start the economy as the wealthy plowed their tax savings back into investments. New factories fitted with new technologies would produce goods at lower cost, taming inflation. And the newly hired workers would tame unemployment. It would, in effect, square the economic circle, fixing both inflation and unemployment at the same time.

Even better, more output meant government tax receipts would grow. The government could continue to spend money without having to raise taxes — it would simply materialize as a byproduct of higher levels of production! The economy would bootstrap itself in an ever-expanding, virtuous circle of tax cuts, investment, productivity, employment, and rising tax revenues. It was the proverbial “something for nothing” story. It seemed too good to be true.

It was.

Reagan’s first budget swelled the deficit to $128 billion. By the next year, 1983, it had exploded to $208 billion and was creating severe problems for the economy. By 1992, at the end of the “Reagan Revolution,” (under Reagan’s Vice President and successor, Bush, Sr.) the deficit was approaching $300 billion a year.

Annual deficits, of course, accumulate to the national debt. In 1980, the national debt amounted to less than $1 trillion. By the end of 1992, it had reached $4.35 trillion. In other words, the debt, which had taken over 200 years to reach $1 trillion, quadrupled in the 12 years of Supply Side Economics. A more complete, definitive repudiation of Supply Side’s claims could not be imagined. What went wrong?

According to Supply Side “theory,” tax cuts should go to the wealthy for only they can afford to use the extra income to invest in the economy — to increase its capacity to “supply” goods. But there is nothing to make sure they actually invest, especially in the U.S. economy.

The new money might simply sit in the bank, or be spent on expensive foreign imports. It might be wasted in misdirected speculation, or invested in fast growing markets like southeast Asia. Without the ability to ensure that tax cuts are, in fact, invested in new productive assets, Supply Side Economics cannot ensure any real linkage between tax cuts and the hoped-for economic boom.

Revealingly, Supply-Siders strenuously resisted calls to tie tax cuts to actual productive investments, that is, give the tax cut only after the investment had been made. This led critics to suspect the real motives behind the “theory.” The only thing that was certain was that the rich would become richer and revenues to the government would be lower. Beyond that, it is all just wishful thinking.

Contrast this wishful thinking with Demand Side Economics. Demand Side Economics, says that if taxes are to be cut, they should go to those who earn the least amount of money. The reason is that low-income workers spend virtually all of their incomes. Money given to them goes right back into circulation, fueling a boom in consumer spending. This is essentially the policy that rescued the U.S. economy from the Great Depression. This, say the Demand Side economists, is the real foundation for an expanding economy. How has this theory held up in practice?

Bill Clinton reversed Reagan’s Supply Side policies, raising taxes on the wealthy and lowering them on the working and middle class. This Demand Side formula was fiercely resisted by Republican leaders in Congress who predicted a stock market crash and another Great Depression. Indeed, every single Republican member of Congress voted against it. It took a tie-breaking vote by Al Gore in the Senate to get the bill passed. What happened?

The economy produced the longest sustained expansion in U.S. history. It created more than 22 million new jobs, the highest level of job creation ever recorded. Unemployment fell to its lowest level in over 30 years. Inflation fell to 2.5% per year compared to the 4.7% average over the prior 12 years. And overall economic growth averaged 4.0% per year compared to 2.8% average growth over the 12 years of the Reagan/Bush administrations.

It wasn’t even close. The economy performed dramatically better in almost every way once Supply Side policies were replaced with Demand Side policies.

As to the Republican and G.W.'s revival of Supply Side economics.....

The one thing the Supply Side revival did excel at — not surprisingly — is debt. Bush turned a $136 billion surplus from Bill Clinton into a $158 billion deficit in his first year. When he took office, the national debt stood at $5.8 trillion. It now stands at $8.1 trillion and is projected to hit $10 trillion by 2008 when Bush’s second term is over. The ten-year cumulative deficit forecast by the non-partisan Congressional Budget Office has changed from a $5.6 trillion surplus in January 2001 to a $3.4 trillion deficit in March of this year—an almost inconceivable swing of $9 trillion to the worse in only six years.

After more than 17 years of experience with Supply Side economics, we now know beyond doubt that this is not an accident.

These mammoth debts are a huge boon to that rich “base” that Bush loves to coddle.

This is most defiantly not a accident. It is the big-money corporate control of our government, and "Aunt Milly" be damned.