So what I'm saying is that it just ain't gonna work. And it's very interesting that the man who invested this type of what I call a voodoo economic policy … “ — George W.H. Bush (Carnegie Mellon University April 10, 1980)
GOP AZ Senate hopeful Kari Lake is a poster child for MAGA. The election loser is an election denier and a lips-to-ass Trump fanatic. But lurking behind the embrace of fresh new Republican madness is a devotee of the GOP’s traditional insanity. The magical thinking that allows a sensate human being to believe that the government can reduce revenue, increase expenditure, and balance the budget.
She lays out her fiscal plan on her campaign website. You could charitably call it an exercise in unfounded optimism. But, more accurately, it is a long-debunked, many times warmed-over, shit sandwich.
She starts with a rare moment of truth, quickly followed by a lie.
The federal government is spending money it doesn’t have, papering over a now more than $1.5 trillion annual deficit by printing more of it.
The 2023 deficit was big — bigger even than Lake’s number — $1.7 trillion. In 2024, it is trending bigger. Through January 2024, the deficit in fiscal 2024 (which started on October 1, 2023) was $72 billion higher than in January fiscal 2023.
However, the federal government is not printing more money — quite the opposite. The US money supply is declining. Something it has not done in at least 65 years. She goes on:
That’s what causes inflation, why Americans are struggling just to afford everyday necessities.
There is no evidence that budget deficits cause inflation. The numbers do not point to it. The US ran large deficits in 2008, and prices fell. The last Democratic President, Barack Obama, was the most successful budget hawk since Bill Clinton. Yet the low inflation rate he presided over continued through his debt-addicted successor’s reign of deficit explosion.
Inflation did ramp up during Biden’s early years, but it is now back to historic lows. No one likes price increases, but a capitalist economy needs some inflation to illuminate where to allocate scarce resources — that is Macroeconomics 101. In addition, when you factor in the high employment rate, Americans are better off than they had been.
The structural problem for the middle and working classes is not inflation but stagnant wage growth — an economic travesty that looks even worse when you consider the skyrocketing increase in CEO pay, and the flow of wealth to the top.
Low wage growth has nothing to do with government deficits and everything to do with the GOP’s pro-profit, anti-worker policies — first exhibit, “Right to Work Laws” and other anti-union measures. These people even voted against gender-equal pay while the Supreme Court made it harder for women to sue for wage justice under Title VII of the 1964 Civil Rights Act.
Lake goes on:
Kari Lake will cut spending, reduce bureaucracy, and free American workers to grow our economy: because increasing our total economic output is the surest way to tame inflation now, and in the future.
Is bureaucracy a problem in the US? Is the government over-employing? Nobody likes red tape, forms, and all the other penny-ante bureaucratic bullshit. However, in terms of employment numbers, the federal government is leaner now than in 1948. During the Truman administration, federal workers (1.6 million) represented 2.8% of all workers (58.1 million). In 2023, federal workers (3.0 million) represented 1.9% of all workers (161.0 million).
Note: Federal employment peaked at 3.1 million workers In April 1990 — after nine years of Reagan/Bush fiscal policies.
Lake’s claim that increasing economic output reduces inflation has it backward. High GDP growth pressures prices and leads to higher interest rates — because the Federal Reserve has to raise interest rates to keep inflation in check. Slow GDP growth can lead to deflation — an economic sin. Stagflation (a shrinking economy and high inflation) is an exception, last seen in the US in the 1970s — credit the oil crisis.
Also, if Lake wants “American workers to grow our economy,” she should lobby for higher pay. She could start with the federal minimum wage.
Lake goes on:
Markets around the world are increasingly concerned about the stability of the dollar and our growing debt. Right now, countries and investors around the world are financing our overspending by continuing to buy T-Bills, but they’re not going to keep buying them if we continue on this reckless course to national bankruptcy.
Are markets around the world concerned about the dollar and US debt? That is hard to measure. However, the fact that foreigners are still buying our debt 40 years after Reagan said the federal deficit had to be balanced or America would go bankrupt suggests conservative hysteria is unfounded.
Lake finishes:
Kari will work to limit the growth of the federal budget until we return to the point where annual tax revenues are higher than what we’re spending. Once we do that, we can slowly pay off our debt and, over time, free more revenue to directly benefit American citizens.
Here’s a solution. Raise taxes on the wealthy to Eisenhower levels (top rate 91%) — which should appeal to the nostalgic-for-the-1950s Republicans. That was a decade which saw an average GDP growth of 6.9%. (Almost as good as the Democratic 1960s, when GDP growth averaged 7.0%)