On Monday, Paul Krugman wrote, Partisan Growth Gaps. It seems that Carly Fiorina claimed that Hillary Clinton flunked economics. Clinton claimed that the economy does better under Democratic presidents than they do under Republicans. Except, as we know from the great Mark Thoma, not only is this true, there are reasons for it. Krugman is much more cautious. But there is no doubt that the economy does do better. The only question is why.
The standard answer that conservatives give is to credit Republicans regardless. Clinton shouldn’t get credit for the economic boom during his presidency. No, it was Ronald Reagan’s policies from 15 years earlier. Ronald Reagan is for conservatives what God is for Christians. If something went wrong under Reagan, it wasn’t his fault. If something went right after he was out of office, then it was thanks to him. Whatever. Conservatives are by and large crazy.
Thoma’s main argument was that Democrats do better with the economy because they care about helping it. Republicans just want to do certain things for ideological reasons. They are going to do them whether it helps or hurts the economy. If the economy is good, they want to cut taxes on the rich. If the economy is bad, they want to cut taxes on the rich. In the end, Republicans always end up costing more money. If the electorate were rational, the Republicans would never win a national election. But you know how it goes.
I want to propose something slightly different. Republicans are committed to policies that increase income inequality. Now when inequality was fairly low, that wasn’t necessarily the worst thing in the world. It wasn’t great under Reagan, but it wasn’t terrible. But since that time, more and more money has gone to the rich and it has just sat around. So policies that reduce income inequality will generally be good for economic growth. Poor people spend the money they get. Rich people go looking for places to invest. But given that there aren’t enough poor people buying stuff, that money looking to invest finds few opportunities.
So I think it is as simple as that: Republicans move money to where it does the least amount of good. Imagine that you have two people at a kitchen table and you are serving food. But you only give food to one of the people. Eventually, she is full. The other diner is not, because he hasn’t gotten any food. But the server just keeps giving food to her, even though she isn’t eating. That’s Republican economic policy. Democrats make sure that the starving guy gets at least some food.
But I’m not surprised that Carly Fiorina would think that she has things to teach Hillary Clinton. For one thing, business people always think they understand macro-economics, even though there is literally no crossover. Running a business is nothing at all like running a country. Add to that that Fiorina was terrible at running her own company. And then add her conservative ideology that claims that the best thing is always to give millionaires like herself ever more money, and you have a recipe for failure. Fiorina is the kind of person who could destroy our economy over four years and walk away still thinking she had done a great job. Just like she did at HP.