Models and Movements

January 16th, 2012 at 7:53 pm

After writing this and this, it seems to me that while on the surface, the political debate is all about candidates—Mitt, Newt, Barack, et al—the thing we really need to focus on is their model of how the economy works.   Let me explain.

Supply-side, trickle-down economics is such a model (as in, “Oy…such a model!).  As with any model, granular policy measures fall out of the model; in supply-side’s case, it’s less government, less regulation, lower taxes on those with higher incomes.   The model coughs up readymade answers to the questions of the day: a new oil pipeline?  Absolutely—more supply!  Cut the corporate tax rate?  Lower the cap gains rate?  Deregulate financial markets?  Again, absolutely.

This particular model is pernicious for three reasons.  First, it doesn’t “work.”  Like any model, it generates testable hypotheses—tax cuts will mostly pay for themselves with more growth; the economic activity supply-side policies unleash will trickle down to the middle class—and these have consistently been found to be false (see second link above and this).

Second, even worse than not working, it fits snugly into a political power structure that itself is strengthened and enriched by supply-side policies. Trickle down has played a significant role in the upward distribution of income and opportunity and in doing so it has interacted with power and money to firmly ensconce itself in national and even international economic policy.

Third, like a virus, it keeps itself alive and thriving by eating away at the parts of the system that oppose it.  Its adherents campaign on the premise that government is the problem.  Then, when they get elected, they prove it to you.

In case you think this is all old hat, peruse this—it’s the playbook from all the R candidates and it’s almost pure supply-side.

That’s one dominant system in the mix today and for my money it’s the most important thing we’re arguing about when we talk about Mitt Romney, for example.   His tenure at Bain Capital—did they create or destroy jobs!?—his flipping on his own record—repeal Obamacare! (which is pretty much Romneycare)—and all the rest are fodder for debate, and not unimportant.  But what’s most revealing is the model of how he views the economy.   And that is supply-side trickle down, YOYO economics.

[To be clear, the supply-siders do not really eschew government at all—part of the agenda is tilting activist policies in their direction’ e.g., in Bain’s case, favorable tax treatment for debt financing.]

But how can it be that a model so bereft of evidence and so damaging to the incomes and opportunities of most of us has survived and flourished?  That’s where we get to the role of movements.

As noted, trickle down has a real advantage, a leg up on the national stage, because it boosts the wealth and power of its beneficiaries, who sell it back to the world as the best way to raise middle-class living standards.  (Another part of the dance here, as Tom Franks has documented, is how supply-side politicians garner support on social issues, like choice and religion.)

But that kind of top down support for the policies has been going on since at least President Reagan.   What’s new is bottom up support from the Tea Party.   Here, the connection is less go-go free marketeering than anti-government ideology, specifically targeted at federal spending.  But from the perspective of giving supply-siders the running room they need, it amounts to the same thing.

Again, if you think I’m getting all wound up over a bunch of noise with no real consequences, let me point out that last year we legislated over $2 trillion in deficit reduction (over ten years), and every dollar has come from cuts to the spending side…not one from has come from more revenues on the tax side.

What can be done about this?  Part of the problem, which I’ll explore in detail in my next post, is that it’s not like Democrats have an alternative model, or at least one that can be summarized as simply and eloquently as supply side.

But, and I say this as someone who’s just come off the road presenting these arguments to sizable crowds, facts are not exactly held in high regard these days.  Some audiences (by no means all) don’t want to know from facts right now.  Others, after like 30 slides, are like: great facts, but facts won’t help.  We need…what?

No one seems to know how to banish this fairy tale and I’m not sure either.  But I’m not ready to give up on facts.  For one, I gotta be me, and if you’ve read this far, you gotta be you.  Eyesight matters, even—especially—in the land of the blind.

And frankly, I’m beginning to think that this “facts don’t matter” meme is being overplayed.   Simple truths in the face of falsehoods, like this one, have great currency especially if they go even a little bit viral.  Moreover, in decades of this work, I’ve never seen concerns about inequality breaking through like they are today, something for which the OWS movement is very much responsible.  Linking these concerns to the trickle-down policy agenda will be an important part of forthcoming work.

But it’s going to be very important to get behind the people—on both sides of the ticket—and into their models.  Because at the end of the day, whether the President is a guy or gal with whom you’d like to share a beer really doesn’t matter.  What matters is their roadmap for America’s future, and we’d better be as clear-eyed as we can about that.

Next: what’s President Obama’s model?


Print Friendly, PDF & Email

5 comments in reply to "Models and Movements"

  1. readerOfTeaLeaves says:

    At the present historical moment, few things seem as important as revealing and explicating the models and beliefs of those running for office, as well as those in government service.

    Last week, I happened to catch a Jan 12th segment of MSNBC’s Last Word, in which Lawrence O’Donnell was interviewing ‘Morning Joe’ Scarborough about Gingrich’s heretical conduct toward Romney.

    Significantly, Scarborough said (6 min into the segment):
    1. “I think [Gingrich] could talk about tax reform… [however] he seems to go at the very nature of capitalism.**
    2. “… just like you [liberals] proudly proclaim to be socialists, … the GOP proudly proclaims to be capitalists…” ***
    3. “The job of Bain Capital is not to create jobs. The job of Bain Capital is to create profit…. If you are a Free Market Conservative, there is nothing wrong with that… You don’t attack The Free Market [although] you can talk about tax codes.”*****

    ** Implication: any discussion of the *nature* of financial capitalism is absolutely taboo, although we may be permitted to speak in quiet voices (no doubt in Back Rooms) about ‘tax codes’.

    *** Implication: we in the GOP are ‘the real capitalists, and since you (Dems, liberals) aren’t really full capitalists, nothing you say has legitimacy. {They have no clue how many of us have made money ‘investing’, which seems to be their highest form of economic achievement, but I digress…}

    *****Implication: “No economics discussions about the nature of financial capitalism for the likes of youuuuuuu!!” Then he offers a rhetorical lollipop — a cheery little chat about ‘tax codes’.

    At the present historical moment, explicating the economic models of in positions of power is of the utmost necessity.
    We need more economic heresy.

  2. Michael says:

    I have a feeling we’re going to disagree that the President has a “model.” His actions are far too unfocused and contradictory.

    “But how can it be that a model so bereft of evidence and so damaging to the incomes and opportunities of most of us has survived and flourished?”

    Conservatives hate America and the people who live in it. Things used to be different, but then African-American people started to enter the middle class. That was not an America they wanted a part of.

  3. cat says:

    The GOP has “Trickle down” and the DEM should have “The 1% are looting the country”. The only reason this will never be the DEM model is because their leadership are all in the 1%.

    Even if the Walton’s only were worth $9B rather then $90B they would still be extremely wealthy. That $90B was taken from their workers and from their suppliers and the suppliers workers for no reason other then they could.

    The tax rate IMO is almost completely resposible for the looting the wealthy are engaged in.

  4. perplexed says:

    Dean Baker has written two books (“The Conservative Nanny State” and “The End of Loser Liberalism”), published them under creative commons licenses so they are free for anyone to download & read. These books and others like them (“Winner Take All Politics” for instance) cut right to the heart of these issues. Instead of these books (and the well articulated exposure of the fallacies we have been living under they contain) dominating the public discourse as they should, they are relegated to “quiet rooms” while we continue to debate long discredit ideas like “supply side economics.”

    We do not have to let Republicans continue to drive the agenda by having us respond to their long discredited notions of how the world works; it is a choice we are making. IMHO, a disastrous one. There’s a reason you don’t see Republicans responding to the ideas expressed in these books: engaging in the discussion gives them added credibility they wouldn’t otherwise receive. Maybe we can learn from their success in driving the agenda & achieving unprecedented wealth and power for the 1% they represent.

  5. alex says:

    it occurs to me that YOYO isn’t just a handy acronym but a perfect description of what happens…the wealthy’s taxes go down and their income shoots up.