AlterPolitics New Post

NY Times’ Paul Krugman: Supply Side Economics Creates Deficits

by on Thursday, July 15, 2010 at 10:43 am EDT in Politics

Nobel Prize winning economist, Paul Krugman, attempts to educate a largely ignorant Republican/Tea Party constituency on the documented failures of Supply Side economics.  He focuses on the Carter and Reagan years (since Republican politicians tend to cite Reaganomics as their model for economic success), and he demonstrates that revenues actually dropped decisively with Reagan’s tax cuts:

… the revenue track under Reagan looks a lot like the track under Bush: a drop in revenues, then a resumption of growth, but no return to the previous trend:

Matt Yglesias contends that “the conservative movement in America doesn’t [actually] care about the budget deficit,” and the proof is in the policies for which they advocate:

1) There have been two presidents who were members of the modern conservative movement, Ronald Reagan and George W Bush, and they both presided over massive increases in both present and projected deficits.

2) The major deficit reduction packages of the modern era, in 1990 and 1993, were both uniformly opposed by the conservative movement.

3) When the deficit was temporarily eliminated in the late-1990s, the mainstream conservative view was that this showed that the deficit was too low and needed to be increased via large tax cuts.

4) Senator Mitch McConnell says it’s a uniform view in his caucus that tax cuts needn’t be offset by other changes in spending.

5) The deficit reduction commission is having trouble because they think conservative politicians won’t vote for any form of tax increase.

In sum, there are zero historical examples of conservatives mobilizing to make the deficit smaller.

Senate Republican Leader Mitch McConnell recently made the following assertion about George W. Bush’s tax cuts for the wealthy:

“There’s no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue, because of the vibrancy of these tax cuts in the economy. So I think what Senator Kyl was expressing was the view of virtually every Republican on that subject.”

Here Ezra Klein of the Washington Post resoundingly slams McConnell’s fictitious allegations:

There’s an ontological question here about what, exactly, McConnell considers to be “evidence.” But how about the Congressional Budget Office’s estimations? “The new CBO data show that changes in law enacted since January 2001 increased the deficit by $539 billion in 2005. In the absence of such legislation, the nation would have a surplus this year. Tax cuts account for almost half — 48 percent — of this $539 billion in increased costs.” How about the Committee for a Responsible Federal Budget? Their budget calculator shows that the tax cuts will cost $3.28 trillion between 2011 and 2018. How about George W. Bush’s CEA chair, Greg Mankiw, who used the term “charlatans and cranks” for people who believed that “broad-based income tax cuts would have such large supply-side effects that the tax cuts would raise tax revenue.” He continued: “I did not find such a claim credible, based on the available evidence. I never have, and I still don’t.”

Of course, the Right rarely if ever lets factual evidence get in the way of their deep-seated, largely debunked, ideologies.

Still, it is good to see the Left finally doing a better job of educating the public about the real track record between the differing economic policies — something necessary if we are serious about promoting positive change in this country.