Call this tax scam “trickle down economics” or “making it rain at the club” or whatever code words they’re calling it these days. Economists tend to call this scam “supply side economics.”
By now, anyone who is not a troll living under a bridge knows this “economic theory” has been thoroughly debunked by everyone, beginning at least as early as Will Rogers in 1932:
“We when the rich get richer, benefits do not trickle down.”
We’ve established cutting taxes for rich people intentionally makes filthy-rich people richer and everyone else poorer. That’s the first part of the scam. The Hoover effect.
1. Cut taxes for filthy rich people whenever the Republican party is in power. At the same time, spend every dollar you can on things like warfare to stimulate the economy.
So what’s the second part of the scam?
2. Scream about the budget whenever the Democratic party is in power.
Economists call this austerity. The point being, because taxes on the rich have been cut by part 1, the amount of money available for the government to spend on programs which actually have some benefit for the American people is greatly decreased.
Therefore, because the Democratic party is in power, now is the perfect time for Rs to point and say, “We have no money!”
Blame the overspending and money shortage on Ds, with their “liberal” social programs, because of the temporal correlation. “Liberal” social programs being defined as anything which helps regular people. The non-filthy rich.
That’s the scam. It’s a two-step dance move. 1.2. 1.2. 1.2… repeat until we can make this nice chart plotting the dance steps:
What does this red-blue chart show?
Simple. Over my father’s lifetime (say the last 70 years), we see a clear trend:
In the 1950s, the fruits of American work went mostly to regular people, represented in blue.
By the time we get to the year 2000, all the fruit goes in the red basket, which is the basket owned by the folks whose basket runneth over because they were already filthy rich to begin with.
And by the time we get to today, the filthy rich are getting even frutier. And these fruits are being picked not from some collective American prosperity, but rather directly from the pockets of regular people.
Now there is a red mountain and a blue hole.
It’s legalized theft. Oh yes it is, you remember where it goes.
The day after the Republican government passed the tax scam of 2017, Speaker of the House, Paul Ryan received a $500,000 “gift” from Charles & Elizabeth Koch. Maybe gift isn’t the right word… let’s call it a “bribe.”
That’s how the scam works. Collusion between politicians and the filthy-rich who bribe the politicians to do this theft legalization for them.
Looking for a conspiracy? Here’s a real one. No Russians. No aliens. Just Americans.
Which isn’t to say the Democratic party is blameless in all of this. It isn’t.
Though Democrats come up with comic labels for themselves such as “The Resistance,” it is more accurate to think of the Democratic politicians as corporate partners rather than as their opposition.
Pssttt… the Democratic Inauthentic Resistance Party is actually on board with most of these Republican scams.
Pssttt… regardless of what we have been told, there has been no left wing of any importance in American politics during my lifetime.
Double ppssttt… despite what we’ve been sold, Rs and Ds are both right-wing parties now.
There is an extreme faction of the right wing embodied by politicians such as Trump.
Also, there is a centrist faction of the right wing embodied by politicians such as the Clintons.
The D & R parties care nothing about the interests of regular people, except for the obligatory pretense show of caring around election time to secure our votes.
The top Democratic donor, Tom Steyer, gave the Democratic party $100,000,000 in the last election year. In return, the Democratic party does what oligarchs such as Steyer tell them to do.
In other words, both the Democratic and Republican parties of the United States of America embrace neoliberal economics. This is the default state for our American capitalist economy.
Since both parties support neoliberalism, there effectively has been no viable alternative to it considered since the election of Ronald Reagan.
Hence, the Democrats’ neoliberalism is synonymous with the Republicans’ trickle down is synonymous with libertarian free market fundamentalism and so on.
In America 2018, there is basically one economic theory practiced with some mild variation here and there of little significance to the bottom line.
As Fortune says, “US politics is an industry—a duopoly about as anti-competitive as you’re likely to find these days. The result, as a prominent 2014 study by Princeton’s Martin Gilens and Northwestern’s Benjamin Page shows, is the preferences of the average voter have a near-zero impact on public policy.
It wasn’t always this way. America’s political system was long the envy of the world. The system advanced the public interest and gave rise to a grand history of policy innovations.
Today, however, it serves as only a barrier to solving nearly every important challenge our nation needs to address.”
The main points of neo-liberalism include:
THE RULE OF THE MARKET
Liberating “free” enterprise or private enterprise from any bonds imposed by the government (the state), no matter how much social damage this causes.
Greater openness to globalization through international trade and investment, as in NAFTA. Reduce wages by de-unionizing workers and eliminating the workers’ rights won over many years of struggle. No more price controls.
All in all, total freedom of movement for capital, goods, and services. To convince us this is good for us, they say “an unregulated market is the best way to increase economic growth, which will ultimately benefit everyone.” It’s Reagan’s “supply-side” and “trickle-down” economics — but somehow the wealth doesn’t trickle down.
CUTTING PUBLIC EXPENDITURE FOR SOCIAL SERVICES AND REDUCING THE SAFETY-NET FOR THE POOR
Such as education and health care, and including maintenance of roads, bridges, water supply — again in the name of reducing government’s role. Of course, they don’t oppose government subsidies and tax benefits for business.
Reduce government regulation of everything that could diminish profits, including protecting the environment and safety on the job.
Move state-owned enterprises, goods, and services to ownership by private investors. This includes banks, key industries, railroads, toll highways, electricity, schools, hospitals, and even fresh water.
Although usually done in the name of greater efficiency, privatization mainly has had the effect of concentrating wealth even more in a few hands and making the public pay even more for its needs.
ELIMINATING THE CONCEPT OF “THE PUBLIC GOOD” or “COMMUNITY” and replacing it with “individual responsibility.” Pressuring the poorest people in a society to find solutions to their lack of health care, education, and social security all by themselves — then blaming them, if they fail, as “lazy.”
And that, ladies and gentlemen, is the exclusive economic ideology to which America has no viable alternative on deck at the moment. It is Plan A, and there is no Plan B. Again, there hasn’t been a Plan B during my lifetime.
Hence, the perpetual motion of the scam machine, no matter which faction of the business party is in power.
Wherein lies the keys to our two-step:
Everyone should be aware of what the intent of this scam is, how it works, how we got here, and why our economic situation continues to get worse and worse. But we aren’t.
This is mainstream economic information, folks:
Jude Wanniski coined the phrase “supply-side economics” to describe his idea a reduction in personal tax rates would stimulate productive investment, the production side of the economy, and spur economic growth. He immodestly called this idea, which he formulated in the early 1970s, “a general theory of the world political economy.”
Others view it as the branding of traditional Republican “trickle down” economics, meaning the benefits accruing to wealthier taxpayers supposedly filter throughout the economy, eventually making their way to all members of society.
However, the idea “tax cuts are always a good idea” indisputably became a tenet of not only Republican but Democratic campaigns.
Hey, Jude! This shit sucks, dude!
As Forbes reports, “Non-Partisan Congressional Tax Report Debunks Core Conservative Economic Theory and GOP Suppresses Study”
As Fortune reports, “Even the IMF Now Admits Neoliberalism Has Failed”
In sum, here’s the current State of the Union, such as it is:
Step 1: Tax cuts for the filthy rich. Check. Comically titled “Tax Cuts and Jobs Act”
Simultaneous increase in government spending for military projects and assorted boondoggles to further stimulate the economy. Check.
Step 2: Scream about budget cuts. Check. Comically titled “Brighter American Future”
But wait… there’s more!
Repeat Step 1: Tax cuts for the filthy rich. In progress. Comic title “To Be Decided”
Update: the initial tax cut for the filthy rich has resulted in record levels of stock buybacks enriching CEOs and corporate stock holders, rather than the significant wage increases for the regular American promised by politicians.
Surprise, surprise, surprise.
Meanwhile, no word on whether tax cut architect and Medicare assassin Paul Ryan still believes the $1.50 a week raise for some random woman in Lancaster coincidentally got is going to change her life, or whether he ever realized she was trolling him.
Umm… does Ryan realize a Costco membership doesn’t actually include any groceries?
As in, she still has to buy the actual food.
That’s enough from me for now. Here’s more detail from Thom Hartmann on how the politicians fool the American people with this Two Santa Clauses game, in which the Republicans do the tax cuts for the filthy rich, and the Democrats do the austerity for the regular people… and the irregular ones.
This shit is for the birds.
The only thing wrong with the U.S. economy is the failure of the Republican Party to play Santa Claus.
~ Jude Wanniski, March 6, 1976
The Republican Party has been running a long con on America since Reagan’s inauguration, and somehow our nation’s media missed it, even though it was announced in The Wall Street Journal in the 1970s, and the GOP has clung tenaciously to it ever since.
Republican strategist Jude Wanniski’s 1974 “Two Santa Clauses Theory” is the main reason the GOP succeeded in producing our last two Republican presidents, Bush and Trump, despite both losing the popular vote.
It’s also why Reagan’s greed-is-good, big-spender economy seemed to be “good.”
Here’s how it works, laid out in a simple summary:
First, when Republicans control the federal government, particularly the White House, spend money like a drunken sailor and run up the US debt as far and as fast as possible.
This produces three results: it stimulates the economy, thus making people think the GOP can produce a good economy; it raises the debt dramatically; and it makes people think Republicans are “tax-cut Santa Claus.”
Second, when a Democrat is in the White House, scream about the national debt as loudly and frantically as possible, freaking out about how “our children will have to pay for it!” and “we have to cut spending to solve the crisis!”
This will force the Democrats in power to cut their own social safety net programs, thus shooting their welfare-of-the-American-people Santa Claus.
Think back to Ronald Reagan, who more than tripled the US debt from $800 billion to $2.6 trillion in his 8 years. That spending produced a massive stimulus to the economy, the biggest non-wartime increase in the debt in history.
Nary a peep from Republicans about that 218% increase in our debt; they were just fine with colossal money pits such as the Star Wars program.
Then along came Bill Clinton. The screams and squeals from the GOP about the “unsustainable debt” of nearly $3 trillion were loud, constant, and echoed incessantly by media from CBS to NPR.
Newt Gingrich rode the wave of “unsustainable debt” hysteria into power, as the GOP took control of the House for the first time lasting more than a term since 1930, even though the increase in our national debt under Clinton was about 37%.
The GOP “debt freakout” was so widely and effectively amplified by the media, Clinton himself bought into it and began to cut spending, taking the axe to numerous welfare programs. “It’s the end of welfare as we know it” he famously said. “The era of big government is over!”
Clinton also did something no Republican has done in our lifetimes: he supported several balanced budgets and handed a budget surplus to George W. Bush.
When George W. Bush was given the White House by the Supreme Court (Gore won the popular vote by over a half-million votes), he reverted to Reagan’s strategy and again added a trillion in borrowed money to pay for his tax cut for GOP-funding billionaires, tossing in two unfunded wars for good measure, which also added at least (long term) another $5 to $7 trillion.
There was not a peep about the debt from any high-profile in-the-know Republicans then. Dick Cheney famously said, essentially ratifying Wanniski’s strategy, “Reagan proved deficits don’t matter. We won the midterms [because of those tax cuts]. This is our due.”
Bush and Cheney raised the debt by 86% to over $10 trillion (although the war debt wasn’t put on the books until Obama entered office).
Then comes Democratic President Barack Obama, and suddenly the GOP is hysterical about the debt again. So much so, they convinced a sitting Democratic president to propose a cut to Social Security (the “chained CPI”).
Obama nearly shot the Democrats’ biggest Santa Claus program. And, Republican squeals notwithstanding, Obama only raised the debt by 34%.
Now we’re back to a Republican president, and once again deficits be damned. Between their tax cut and the nearly-trillion dollar spending increase passed on February 8th, in the first year of Trump’s administration, they’ve already spent more stimulating the economy (and driving up debt by more than $2 trillion, when you include interest) than the entire Obama presidency.
Consider the amazing story of where this strategy came from, and how the GOP has successfully kept their strategy from getting into the news; even generally well-informed writers for media like the Times and the Post – and producers, pundits and reporters for TV news – don’t know the history of what’s been happening right in front of us all for 37 years.
Republican strategist Jude Wanniski first proposed his Two Santa Clauses strategy in 1974, when Richard Nixon resigned in disgrace and the future of the Republican Party was so dim, books and articles were widely suggesting the GOP was about to go the way of the Whigs.
There was genuine despair across the Party, particularly when Jerry Ford began stumbling as he climbed the steps to Air Force One and couldn’t even beat an unknown peanut farmer from rural Georgia for the presidency.
Wanniski was tired of the GOP failing to win elections. And, he reasoned, it was happening because the Democrats had been viewed since the New Deal as the Santa Claus party by taking care of people’s needs and the General Welfare.
While the GOP, opposing everything from Social Security to Medicare to unemployment insurance, was widely seen as the party of Scrooge.
The Democrats, he noted, 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 and making our country shine.
Democrats 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 added to the perception the Democrats were a party of Robin Hoods, taking from the rich to fund programs for the poor and the working class.
Americans loved the Democrats back then. And every time Republicans railed against these programs, they lost elections.
Wanniski decided the GOP had to become a Santa Claus party, too. But because the Republican politicians and camaign financers hated the idea of helping working people, they had to figure out a way to convince people they, too, could have the Santa spirit.
“Tax cuts!” said Wanniski.
To make this work, the Republicans would first have to turn the classical world of economics – which had operated on a simple demand-driven equation for seven thousand years – on its head.
Everybody understood demand – aka “wages” – drove economies because working people spent most of their money in the marketplace, producing demand for goods and services.
In 1974, Wanniski invented a new phrase – “supply side economics” – and suggested the reason economies grew wasn’t because people had money and wanted to buy things with it. Instead, they supposedly grew because things were available for sale, thus tantalizing people to part with their money.
The more things there were, he said, the faster the economy would grow. And the more money we gave rich people and their corporations (via tax cuts), the more stuff they’d generously produce for us to think about buying.
At a glance, this move by the Republicans seems irrational, cynical and counterproductive. It certainly defies classic understandings of economics. But if you consider Jude Wanniski’s playbook, it makes complete sense.
To help, Arthur Laffer took the equation a step further with his famous napkin scribble. Not only was supply-side a rational concept, Laffer suggested, but as taxes went down, revenue to the government would go up!
Neither concept made any sense – and time has proven both to be colossal idiocies – but together, they offered the Republican Party a way out of the wilderness.
Ronald Reagan was the first national Republican politician to fully embrace the Two Santa Clauses strategy. He said straight out, if he could cut taxes on rich people and businesses, those tax cuts would cause them to take their surplus money and build factories, and the more stuff there was supplying the economy, the faster it would grow.
George Herbert Walker Bush – who, like most Republicans in 1980 hadn’t read Wanniski’s piece in The Wall Street Journal – was horrified.
Ronald Reagan was suggesting “Voodoo Economics,” said Bush in the primary campaign, and Wanniski’s supply-side plus Laffer’s tax-cut theories would throw the nation into such deep debt, he believed, we’d ultimately crash into another Republican Great Depression.
But Wanniski had been doing his homework on how to sell “voodoo” supply-side economics.
In 1976, he 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 forty years.
Democrats, he said, had been able to be “Santa Claus” by giving people things from the largesse of the federal government. From food stamps to new schools to sending a man to the moon, the people loved the “toys” the Democrats brought every year.
Republicans could do that, too, the theory went – spending could actually increase without negative repurcussions. 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 it would be heavily marketed. And for the rich, which wasn’t to be discussed in public, it would amount to hundreds of billions of dollars in tax cuts.
The rich – so Reagan, Bush, and Trump told us – would then use this money to import or build more stuff to market, thus stimulating the economy and making average working people richer.
There was no way, Wanniski said, the Democrats could ever win again. They’d be forced into the role of Santa-killers by raising taxes, or anti-Santas by cutting spending. Either one would lose them elections.
When Reagan rolled out Supply Side Economics in the early ’80s, dramatically cutting taxes while exploding spending, there was a moment when it seemed to Wanniski and Laffer that all was lost. The budget deficit exploded and the country fell into a deep recession – the worst since the Great Depression – and Republicans nationwide held their collective breath.
But David Stockman came up with a great new story about what was going on: they were “starving the beast” of government by running up such huge deficits, 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 doubling 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, and back then a dollar could buy far more than it buys today. 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. And that’s just how it turned out.
Bill Clinton, who had run on an FDR-like platform of a “New Covenant” with the American people that would strengthen the institutions of the New Deal, strengthen labor, and institute a national health care system, found himself in a box.
A few weeks before his inauguration, Alan Greenspan and Robert Rubin sat him down and told him the facts of life:
Clinton was going to have to raise taxes and cut the size of government. Clinton took their advice to heart, raised taxes, balanced the budget, and cut numerous programs, declaring an “end to welfare as we know it” and, in his second inaugural address, an “end to the era of big government.”
Clinton was the anti-Santa Claus. 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. State after state turned red, and the Republican Party rose to take over, ultimately, every single lever of power in the federal government, from the Supreme Court to the White House.
Looking at the wreckage of the Democratic Party all around Clinton by 1999, Winniski wrote a gloating memo that said, in part: “We of course should be indebted to Art Laffer for all time for his Curve…”
Art Laffer and the Intellectual Rot of the Republican Party: The godfather of supply-side economics and inventor of the “Laffer Curve” is largely discredited by his peers, but revered by Trump and the GOP.
“As the primary political theoretician of the supply-side camp, I began arguing for the ‘Two Santa Claus Theory’ in 1974. If the Democrats are going to play Santa Claus by promoting more spending, the Republicans can never beat them by promoting less spending. They have to promise tax cuts…”
Ed Crane, then-president of the Koch-funded Libertarian CATO Institute, noted in a memo that year: “When Jack Kemp, Newt Gingrich, Vin Weber, Connie Mack and the rest discovered Jude Wanniski and Art Laffer, they thought they’d died and gone to heaven. In supply-side economics they found a philosophy that gave them a free pass out of the debate over the proper role of government.
Just cut taxes and grow the economy; government will shrink as a percentage of GDP, even if you don’t cut spending. That’s why you rarely, if ever, heard Kemp or Gingrich call for spending cuts, much less the elimination of programs and departments.”
Two Santa Clauses had gone mainstream. Never again would Republicans worry about the debt or deficit when they were in office; and they knew well how to scream hysterically about it as soon as Democrats took power.
George W. Bush embraced the Two Santa Clauses Theory with gusto, ramming through huge tax cuts – particularly a cut to the capital gains tax rate on people like himself who made their principle income from sitting around the mailbox waiting for their dividend or capital gains checks to arrive – and blew out federal spending.
With his wars, Bush even out-spent Reagan, which nobody had ever thought would be possible again. And it all seemed to be going so well, just as it did in the early 1920s when a series of three consecutive Republican presidents cut income taxes on the uber-rich from over 70 percent to under 30 percent.
In 1929, pretty much everybody realized instead of building factories with all that extra money, the rich had been pouring it into the stock market, inflating a bubble that – like an inexorable law of nature – would have to burst.
But the people who remembered that lesson were mostly all dead by 2005, when Jude Wanniski died and George Gilder celebrated the Reagan/ Bush supply-side-created bubble economies in a Wall Street Journal eulogy:
“Jude’s charismatic focus on the tax on capital gains redeemed the fiscal policies of four administrations. Unbound by zero-sum economics, Jude forged the golden gift of a profound and passionate argument the establishments of the mold must finally give way to the powers of the mind. He audaciously defied all the Buffetteers of the trade gap, the moldy figs of the Phillips Curve, the chic traders in money and principle, even the stultifying pillows of the Nobel Prize.”
In reality, his tax cuts did what they have always done over the past 100 years. They initiated a bubble economy that would let the very rich skim the cream off the top just before the ceiling crashed in on working people. Just like today.
The Republicans got what they wanted from Wanniski’s work. They held power for forty years, made themselves trillions of dollars, and cut organized labor’s representation in the workplace from around 25 percent when Reagan came into office, to around 6% of the non-governmental workforce today.
Over time, and without raising the cap, Social Security will face an easily-solved crisis. And the GOP’s plan is to force Democrats to become the anti-Santa, yet again.
If the GOP-controlled Congress continues to refuse to require rich people to pay into Social Security (any income over $128,000 is SS-tax-free), either benefits will be cut or the retirement age will have to be raised to over 70.
The GOP plan is to use this unnecessary manufactured crisis as an opening to “reform” Social Security – translated: cut and privatize. Thus, forcing Democrats to become the Social Security anti-Santa a different way.
When this happens, Democrats must remember Jude Wanniski, and accept neither the cut to disability payments nor the entree to Social Security “reform.” They must demand the “cap” be raised, as Bernie Sanders proposed and the Democratic Party adopted in its 2016 platform.
Hopefully, some of our media will begin to call the GOP out on the Two Santa Clauses program. It’s about time Americans realize the details of the scam killing wages and enriching billionaires for nearly four decades.