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View Diary: Conservative misunderstanding of the economy: The fundamental issue of the hour. (63 comments)

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  •  But their view results from indoctrination (13+ / 0-)

    in a false reality, and it is not done by accident.

    Republican political messaging is based on portraying non-Republican views negatively to create a powerful and emotional memory - even if it is completely false.

    The goal is to make Republican views - especially views that simply defy logic, math and science - to appear as a reasonable solution. What is not evil must be good.

    It is also slight of hand - Republican warning about Liberal indoctrination distracts attention from the indoctrination that they have been doing for some time.

    The Republican view of the economy is very flawed, as Lui and Hanauer showed in "Gardens of Democracy".

    Republicans view the economy as a machine, that if you give more money to rich people (the so called 'job creators') in the form of tax cuts and loopholes, the economy grows and jobs are created. The problem is that while that may have been how the economy worked in the 19th century, it is not how the economy works today. That's why the tax cuts in 2001 and 2003 never generated the 5 million jobs as planned and only increased incomes for corporations and the wealthy.

    Today's economy is more of an ecosystem, with feedback loops between middle class workers/consumers and business owners. If workers have more money, they spend more which creates demand. More demand increases profits but also requires more jobs to meet demand. But if only business owners have more money while workers have less, the feedback loop is broken. That's why we have sluggish job growth while businesses have $2 trillion in profits sitting on their books and the top 1% have ever increasing incomes. This is something that Henry Ford realized 100 years ago: workers have to be able to afford to buy what you are selling.

    What Republicans have proposed for the last two decades and are still proposing for the next two decades is based on a 19th century economic policy with $4+ trillion in new tax cuts for businesses and top earners that will raise taxes on the workers and consumers and reduce social safety nets. While they believe funneling more money into the economic machine will create jobs and economic growth, it actually further breaks the feedback loop, weakens demand and increases income inequality. Extra income for top incomes will not lead to hiring without a corresponding increase in demand, and the top incomes cannot create sufficient demand to make up for the loss of worker/consumer spending.

    •  but it does lead to (3+ / 0-)

      let them eat cake moments.

    •  Great post, but it's (5+ / 0-)

      crucially important to articulate why 19th century economics doesn't work now.  The answer is finance capital.  The vast majority of investment isn't in jobs and production, but in finance and things like rents where money is made by investing in "money".  Where there was a real trickle down effect in industry, there isn't in this form of investment.  The new form of capital is things like rent, loans, debts, etc.  These investments produce little or no gain for anyone outside the elite.  

      We need a way to clearly and concisely express this point to the American people, because the idea that if we cut taxes big businesses will be able to invest more in in jobs sounds so intuitive to people.  There are a couple problems here that people don't understand.  First, there's there problem of finance capital I just mentioned.  Second, people don't understand that businesses are only taxed on their profits.  Cutting taxes on big business actually disincentivizes investment in jobs because where that money is going to be taxed less there's no reason to shelter it by investing it back in the business.  Finally, third, it's always important to remind people that it is not businesses that create jobs so much as consumers.  It's not as if businesses just magically create jobs.  No, there has to be a need for them to invest in jobs because there's a demand for their products.  If you take money out of the pockets of the working and middle class, then they can't buy products.  If they can't buy products there isn't the demand to create more jobs.  Fiscal conservatives are cutting off the branch on which they're sitting on (one of the internal contradictions of capitalism this diary mentions).

      I commend the content of what this diary is saying, but don't feel terms like "capital formation" and economic-speak in general are helpful to our political goals.  These things need to be expressed in ways even the dullest American can understand.

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