Skip to main content

If you accept the tongue in cheek definition of insanity being “Doing the same thing over and over and expecting a different outcome”, you would have to conclude that the current crop of Republican Presidential hopefuls are insane.

If you accept the tongue in cheek definition of insanity being “Doing the same thing over and over and expecting a different outcome”, you would have to conclude that the current crop of Republican Presidential hopefuls are insane.

In the New Hampshire debate last night, these Republican Presidential hopefuls suggested a return to the same economic ideas that President Bush implemented that at the end of his Presidency led to the worst economic downturn since the great depression. If those ideas are so great, why did we have a great recession? Why wasn't the economy strong enough to shrug off the mortgage and banking crisis?

The rationale that you typically get for the modern Republican model of handling the economy was repeated by Newt Gingrich last night in his comments and that is that we had this great economic recovery and bull market during the Reagan administration after he implemented supply side economics. The problem is, that isn't true.

We had an economic recovery because at the beginning of Reagan's Presidency the oil supply crisis that started in 1979 due to the Iran hostage crisis and the Iran-Iraq war started to ease. The price of a gallon of gas went from around $1.50 a gallon at the beginning of Reagan's Presidency to around $1.00 a gallon in the middle of his Presidency, a decrease of around 33%. Coincidentally, unemployment rose during the first half of Reagan's Presidency and then, after the price of gas began to fall, unemployment similarly started falling.

An equivalent in today's gas prices would be if gas prices decreased from an average of $4 a gallon now to $2.66 a gallon. The economy would take off like a rocket. We would have unemployment under 5% inside of 2 years.

You can disagree with my interpretation, but the fact is that both Republican Presidents after Reagan implemented similar economic policies and the result in both cases was a recession and increased unemployment at the end of their Presidencies and very weak job and economic growth before that. Contrast that with the growth during the Presidency of Bill Clinton who implemented more traditionally Keynesian demand side policies.

In fact, you can go back before Clinton to the Presidencies of Truman, Eisenhower, Kennedy, Johnson and Nixon since every modern President before Reagan implemented traditional Keynesian economic policies. With minimal cyclical outliers, we had steady growth during the Truman-Nixon years, low deficits and low unemployment.

The one instance that supply siders can point to where it appears that Supply Side economics worked has an alternate explanation that, given that the two other supply side administrations failed to grow the economy, is much more plausible.

Tim Pawlenty suggested that he had a plan to grow the economy by 5% using supply side economics. The problem for him is that in the 12 years of supply side economics after Reagain (4 years of George H. W. Bush and 8 years of George W. Bush) only three of those twelve years featured growth at or above 5%. If you want steady economic growth over 5%, supply side economics cannot get you there.

There is not a single person running for the Republican nomination for President that has an alternative idea for how to run the economy. All of the candidates propose one variation or another of supply side economics featuring lower taxes. One question I would love to see a debate moderator ask some of these candidates is, “If supply side economics featuring lower taxes do not work, let's make that assumption, what is your plan B for growing the economy?” Of course we would get some pithy remark that would allow them to dodge the question, but just to see the expression on their faces for a moment or two would be priceless.

Supply side economics do not work. They have never worked. I only wonder how long it will take before Republicans and other conservatives begin to realize this.

Poll

How many years will it take before Republicans realize that Supply Side economics do not work?

0%0 votes
0%0 votes
0%0 votes
0%0 votes
20%2 votes
0%0 votes
80%8 votes

| 10 votes | Vote | Results

EMAIL TO A FRIEND X
Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags

?

More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

  •  every moment in history (0+ / 0-)
    The one instance that supply siders can point to where it appears that Supply Side economics worked has an alternate explanation that, given that the two other supply side administrations failed to grow the economy, is much more plausible.

    has alternate explanations. That's why economsits disagree on so many things and the discipline has such a poor track record of making predictions.

    Contrast that with the growth during the Presidency of Bill Clinton who implemented more traditionally Keynesian demand side policies.

    In this case the obvious alternative is that the internet boom happened which drove the economy in the 90s until the dot.com bubble burst in 2000.

    The intactable problem is that we never get to know what would have happened if X had not been done.

    Would the economy have been better without the Bush tax cuts? We can guess and build models, but no one Knows.

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site