Syntax Error; Sin Tax Error

Okay, let's talk about the 43 Bush Administration. Let's talk about finances.

First, we need to lay some groundwork. Alright, in the 1980s, a number of leading U.S. economists began to champion the thinking of neo-conservative Austrian economists. Incidently, the Austrians were largely influenced by philosopher/author/activist Ayn Rand. Ayn Rand--possibly one of the cleverest conservative minds in human history. Anyway, one of these leading U.S. economists happened to be George Gilder. Gilder was an economic adviser for the Reagan administration. An advocate of supply-side economics, he would later help shape one of the greatest economic debacles in recent history: Reaganomics. Gilder influenced President Reagan so much that Reagan decided to adopt this Austrian, Randian philosophy. Meanwhile, the United States was being buried under inflation, high nominal interest rates, and budget defecits. We needed a new strategy to rise above our financial woes. But a rise above would not come without a "trickle down". The phrase "Trickle-down Economics" was how Reagan described his ideas. The crux of it basically involved a real tax cut benefitting the wealthy which would eventually result in a "trickle down" effect that will benefit the poor. Look at it this way. Reagan thought that if we give a bunch of tax cuts to big businesses and rich people, then that will put more money in their pockets. Therefore, unemployment will be reduced because firms will have greater incentive to hire. Economic activity will increase which will in turn increase the standard of living...yada yada yada.

Now, when someone lowers taxes everyone shouts "Hooray! Our leader is a man of the people!" The problem is that, when you mess with taxes, you stand to mess things up for a long time. And things did get messed up. Unfortunately, not all the boats rose when Reagan implemented his new policies. Some "trickle down" did occur, but income inequality began to grow at an alarming rate. Here's why T.D.E. does not work.

Warning: This is very simple. This example is of course ceteris paribus.

Let's pretend there are 5 people in a room. John, Karen, Larry, Matt, and Nancy. There is a total of $10.00 in this room. John has $4.00, Karen has $3.00, Larry has $2.00, Matt has $1.00, and Nancy is Broke Phi Broke with $0.00. Let's say George enters the room with $10.00 more dollars. He says he wants to give it to John. Well, this makes everyone else very upset. They threaten to stab John repeatedly and with reckless abandon if he accepts the money. George then asks everyone if it would be okay to give John $6.00 as long as he gave everyone else $1.00. They agree to this deal. Now, John has $10.00, Karen has $4.00, Larry has $3.00, Matt has $2.00, and Nancy has $1.00. Hooray??!! Not so much.

Before George came in, John had 40% of the total value of the room. Karen had 30%, Larry had 20%, Matt had 10%, and Nancy had 0%. With the addition of $10.00 into the economy, John now has 50%, Karen has 20%, Larry has 15%, Matt still has 10%, and Nancy has a whopping 5%. Income inequality has actually grown. The only person who really benefitted from this is John (and arguably Nancy who had nothing in the beginning anyway). This was a simplified version of what happened in the 1980s. Yes, trickling did occur, but not enough. Income inequality is at an all-time high today in part because of the divisive policies of Ronald Reagan. Why is income inequailty important? It's what revolutions are made of. The French Revolution was instigated largely by the fact that 2-3% of the population controlled a majority of the entire nation's wealth.

So now you're thinking "Wasn't he supposed to be talking about Bush?" Here we go. George W. Bush has brought the Austrians back from the dead. Remember those huge tax cuts he made in the beginning of his first term? Remember how they were largely going to benefit the wealthy? But Bush isn't as good as Reagan. After all, we have a war to worry about. We have Social Security to fix. We have health care that needs to be paid. Amidst this revival of neo-conservative, supply-side economics, how can Bush succeed? How on earth can he say "smaller government" when our government is spending so big? A war doesn't stimulate a faltering economy. It stimulates a failing economy. Our economy isn't failing, but it certainly is faltering. And I don't want to hear about recent stock market successes. Yeah, yeah. Cheney's stock options rose about %3000 in there somewhere. Way to go, Halliburton.

Maybe you can't teach an old dog new tricks, but you also can't teach a new dog old tricks and expect people to be impressed. That's what Bush is doing. Trying to fix a new economy using old solutions. And believe me, I'm using "solutions" in its broadest sense.

I don't know how my title for this entry fits in, but I thought it sounded awfully clever.