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As millions of Americans lose their jobs, congressional Republicans are on a mission to obstruct the new administration’s efforts to address the economic crisis.  Despite the severity of the situation, the news is dominated by the likes of John Boehner, John Cornyn, John McCain, Dick Armey (wtf?), and a host of Reaganomics ideologues and pundits criticizing, obstructing, and offering the same tired old ideas (tax cuts for the wealthy and corporations) that got us into this nightmare economic situation in the first place.

Thom Hartmann has written an important article entitled: Two Santa Clauses or How the Republican Party Has Conned America for Thirty Years.  It is a must read.

Jump off the cliff with me below the fold:

As our economy is falling off the cliff and into the second Republican Great Depression, while AIG and the financial industry are spending billions of our taxpayer funded bailouts on million dollar bonuses, millions of Americans are spending the last of their money, are reaching the maximum of their credit, and up against the prospect of absolutely no jobs to be found anywhere.

One of my favorite authors is Thom Hartmann.  In addition to hosting a radio show, he has written several books on a wide range of topics.  He is a baby boomer from a working class family,  has lived abroad, and run several small businesses.

Check out his bio here:  Thom Hartmann

Thom presents the case of “supply side” economics and how it was sold to Ronald Reagan by Jude Wanniski.  The political sales pitch in which Alan Greenspan plays a critical role duped many, including Bill Clinton, among others.  

As a direct result of 30 years of right wing conservative economic ideology, started by Ronald Reagan and accelerated these past 8 years by George W. Bush, we are now facing the Second Republican Great Depression.  Tax cuts for the wealthiest (in a time of war) have left huge excesses of capital in the hands of a few.  With so much money they don’t even know what to do with, these “masters of the universe” devised such schemes as credit default swaps and other “creative diversification”  to invest their billions. This has caused the most recent manifestation of  “bubble” economies which eventually pop--leaving the rich to “skim the cream off the top” just before crashing down on working Americans.  Irresponsible wealth resulting in unaccountable power.

This is a well written easy-to-understand article that even those of us with no formal training in economics can grasp.

Typical of Thom Hartmann, he presents the historical perspective and the motivations behind the philosophy.

Beginning with economists like Ludwig von Mises, Friedrich Hayek, and Milton Friedman, this ideology

“preached that government could only make a mess of things, economic and that world finance should be left to the Big Boys--the Masters of the Universe, as they sometimes called themselves- who ruled Wall Street and international finance.”

“Lower taxes, reduce the size of government and balance the budget” was their mantra.  Republican Presidents such as Hoover followed, and we got the first Republican Great Depression.  

But, there was a political problem with this ideology:

“The only problem with this ideology from the Hooverite perspective was that the Democrats always seemed like the bestowers of gifts, while the Republicans were seen by the American people as the stingy Scrooges, bent on making the lives of working people harder all the while making richer the very richest. This, Republican strategists since 1930 knew, was no way to win elections.”

Get that?  It’s all about winning elections.

After FDR, the standard economic model, that economics are driven by demand, began to work quite nicely and grew the largest middle class in America.  People had good paying jobs, money to spend, strong labor unions, good benefits, and their wages were steadily rising.  This demand led to more factories being built, more jobs to run the factories and sell the products, and thus stimulating more demand.

Enter Jude Wanniski, supply side economics, and Santa Claus.

“The Democrats got to play Santa Claus when they passed out Social Security and Unemployment checks – both programs of the New Deal – as well as when their "big government" projects like roads, bridges, and highways were built giving a healthy union paycheck to construction workers. They kept raising taxes on businesses and rich people to pay for things, which didn't seem to have much effect at all on working people (wages were steadily going up, in fact), and that made them seem like a party of Robin Hoods, taking from the rich to fund programs for the poor and the working class. Americans loved it. And every time Republicans railed against these programs, they lost elections.”

Supply side economics was pulled out of  Wanniski’s rear to help Republicans win elections and to ensure a wealthy class to wield power over the middle class.  The concept made no sense whatsoever, but boy did they gather some motivated followers.

“In 1976, he (Wanniski) rolled out to the hard-right insiders in the Republican Party his "Two Santa Clauses" theory, which would enable the Republicans to take power in America for the next thirty years.
Democrats, he said, had been able to be "Santa Clauses" by giving people things from the largesse of the federal government. Republicans could do that, too – spending could actually increase. Plus, Republicans could be double Santa Clauses by cutting people's taxes! For working people it would only be a small token – a few hundred dollars a year on average – but would be heavily marketed. And for the rich it would amount to hundreds of billions of dollars in tax cuts. The rich, in turn, would use that money to import or build more stuff to market, thus increasing supply and stimulating the economy. And that growth in the economy would mean that the people still paying taxes would pay more because they were earning more.
There was no way, Wanniski said, that the Democrats could ever win again. They'd have to be anti-Santas by raising taxes, or anti-Santas by cutting spending. Either one would lose them elections.”

Predictably, after Reagan instituted his tax cuts for the rich, it resulted in an explosion of the budget deficit and a huge recession.

So what did they do?

“David Stockman came up with a great new theory about what was going on – they were "starving the beast" of government by running up such huge deficits that Democrats would never, ever in the future be able to talk again about national health care or improving Social Security – and this so pleased Alan Greenspan, the Fed Chairman, that he opened the spigots of the Fed, dropping interest rates and buying government bonds, producing a nice, healthy goose to the economy. Greenspan further counseled Reagan to dramatically increase taxes on people earning under $37,800 a year by increasing the Social Security (FICA/payroll) tax, and then let the government borrow those newfound hundreds of billions of dollars off-the-books to make the deficit look better than it was.
Reagan, Greenspan, Winniski, and Laffer took the federal budget deficit from under a trillion dollars in 1980 to almost three trillion by 1988.....snip....They and George HW Bush ran up more debt in eight years than every president in history, from George Washington to Jimmy Carter, combined. Surely this would both starve the beast and force the Democrats to make the politically suicidal move of becoming deficit hawks.”

The article goes on to illuminate how their devious plan worked beautifully under Bill Clinton after he was given a heart to heart by Alan Greenspan and Robert Rubin.  Clinton had to raise taxes and cut popular social programs.

“He was the anti-Santa Claus, and the result was an explosion of Republican wins across the country as Republican politicians campaigned on a platform of supply-side tax cuts and pork-rich spending increases.”

Of course we all know how George W. Bush embraced the theory with abandon with his huge tax cuts and unprecedented federal spending.  “Economic terrorism” is a term Hartmann uses to describe what these con artists have done to America.

And now the Republicans are doing it again, trying to out-Santa Claus the Democrats perpetrating this massive fraud.

Will they be successful?

I encourage you to read the article in its entirety.  

Originally posted to rlharry on Sun Feb 01, 2009 at 10:07 AM PST.

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Comment Preferences

  •  i caught (10+ / 0-)

    this one at common dreams too.  you're right, it's definitely a must read.  thanks for linking it here to reach a wider audience.

    John Cornyn has cooties!

    by labwitchy on Sun Feb 01, 2009 at 10:10:35 AM PST

  •  well done, rlharry! (6+ / 0-)

    I too like to read Hartmann.  Apropos of this diary, here are some graphs of the federal debt.  The second one at that link, on the logarithmic scale, is the visually striking one.  Prior to Reagan, debt increases occurred in huge blips correlating almost exactly with large wars.  Reagan put in a significant rate increase for the debt, Clinton got it leveled off, and Bush... well... you know "the rest of the story."

    (-8.00,-7.85) 'The idiot is not our greatest problem. It is the moron type that is our great problem." -- H. H. Goddard

    by bubbanomics on Sun Feb 01, 2009 at 10:13:48 AM PST

  •  The Three Santa Claus Party (5+ / 0-)

    Southerners are promilitary because it was a relatively well paying job compared to the ones back home. If you think of the military as a giant jobs program for Republican voters, it makes sense.

  •  It never ceases to astound me how powerful (7+ / 0-)

    a dogmatic and well funded lie can become.

    Somehow poor folks have been convinced that unions are bad for them, that we no longer need a manufacturing base, and that cutting taxes for rich people will make everybody prosperous.

    It was always nonsense, but through various right wing "think tanks" (I call em fantasy factories) where very bright people are well paid to make stuff up and have available at all times spokesmen ready to spout partisan nonsense at the behest of any media outlet whatsoever, they have moved our country into an "All spin zone" where media "reality" bears no resemblance to the real world.  (Whew!  Say that three times fast!)

    Ninth amendment: The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

    by UneasyOne on Sun Feb 01, 2009 at 11:14:04 AM PST

  •  Cheney put it in a nutshell: (2+ / 0-)
    Recommended by:
    rlharry, KenBee

    "Reagan taught us deficits don't matter".

    Then reality taught us otherwise.

    "Justice is indivisible." - MLK

    by Bob Love on Sun Feb 01, 2009 at 08:53:27 PM PST

  •  gotta love Thom (3+ / 0-)
    Recommended by:
    rlharry, KenBee, princesspat

    his knowledge of history is phenomenal and he always puts things into their historical contexts.

    "Everybody does better, when everybody does better" - Paul Wellstone 1997

    by yuriwho on Sun Feb 01, 2009 at 09:15:33 PM PST

  •  Seems to me anyone who hasn't been (1+ / 0-)
    Recommended by:

    paid off or living a life of wishful thinking for the past thirty years knew this all was voodoo economics and completely unsustainable.  I guess that's why so many people - from the "brilliant" to the brain-dead - have swallowed this sewage.  Those two descriptions seem to have covered the majority of Americans until now, when finally the bottom has fallen out and the blinders have been ripped away.

    "In this world of sin and sorrow there is always something to be thankful for; as for me, I rejoice that I am not a Republican." - H. L. Mencken

    by SueDe on Sun Feb 01, 2009 at 09:21:06 PM PST

  •  Thanks. Great link. n/t (1+ / 0-)
    Recommended by:
  •  Both the Keynesian (0+ / 0-)

    and Chicago schools of economics are flawed so trying to argue that one is superior to the other won't ever solver our problems.

    Reagan didn't start the idea that governmental deficits were ok, you can thank John for that one and the stagflation of the 70's that resulted in the monetarists take over of economic policy.

    While the monetarists had some good ideas they completely failed to adjust to or embrace the idea that macroeconomics itself is a complex system.  It cannot be easily caged, regulated, or controlled flawlessly by any command decision monetarist or not. Interest rate manipulation was certainly a more fine instrument than the simple tax/spend dynamic but it brought with it a host of other problems all unforseen.

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