Why Do We Continue to Believe Economic Hokum?

Noah SmithAlmost a month ago, Noah Smith wrote an article that really struck me, Free-Market Ideology and the Burden of Proof. I’m kind of shocked that it took me this long to write about it, but I think I had to let it sit in my mind for a while. It’s one of those things where what he is saying is obvious in retrospect. Basically, he posits that the Reagan revolution was super keen. All that lowering of taxes and cutting of regulation worked great and it created a great economy. (This is not true, of course.) But even if that’s true, why should we think it is still true? If cutting taxes in half caused an economic boom, why would cutting them in half again do the same thing?

The thing is that we have had a history since Reagan. Both Democrats and Republicans have done the same things. Clinton deregulated the financial industry and it didn’t help, except in allowing a huge housing bubble to form that brought down the entire economy. And Bush’s big tax cuts created incredibly disappointing economic growth. As Smith put it, “Reagan probably picked a lot of the low-hanging fruit.” But as Paul Krugman put it last Friday in regard to a different Noah Smith article, “In terms of the economy, his record is trumped by Bill Clinton’s on every front: GDP growth, job creation, family incomes.”

What’s shocking is that the Republican Party is stuck at Ronald Reagan. I commonly hear Republican politicians claim that Democrats are stuck in the past and have no new ideas. Clearly, it is the Republicans who just refuse to listen and are still hearing what George McGovern ran on in 1972. As for what ideas the Republicans have, they are exactly what Reagan and Kemp were pushing. It’s still supply-side economics: if only we make it easier for the rich, it will help everyone.

In the meantime, the Democrats went through a revolution of thought. I’m not keen on it, and I’m glad to see it receding to some extent. But it is still true that Democrats are very open to neoliberal ideas. If they can solve a social problem through the private sector, they will. Just look at Obamacare. The only way that Republicans have changed is in that they are now simply against solving any social problem. They are more focused on trying to turn back time and destroy everything that was done in the New Deal and the Great Society.

So the question is why we continue to accept this rhetoric from conservatives. The economy was pretty good under Reagan. This was mostly due to the Federal Reserve, but I understand that most people give credit to Reagan and his policies. But Clinton raised taxes and had an even bigger boom. And then Bush ran the whole Reagan playbook and had mediocre results — even before the economic crisis. So why is it that Bush’s brother is considered a reasonable candidate, when he is pushing the same stuff? It seems like as voters, we are willing to let our political leaders do anything at all. It’s like we are playing a game of craps rather than electing people based upon policies.

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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