Monday, March 07, 2011

Supply-siders sing a one-note tune...

The conservatives are delusional when it comes to believing that wealth trickles down. It is a widely accepted fact that, since the decline of American manufacturing, what keeps America ticking (financially) is the appetite of its citizens for consumer products.  In other words, when we go shopping and buy stuff, we feed our economy. We have an economy that is driven by demand rather than supply. At least for the middle class. Supply side economic policies push more money into the hands of the wealthy and it stays there - it doesn't trickle anywhere.

This leads to the logical conclusion that redistributing wealth is going to improve the economy - the middle class gets more money, spends more money and this drives the economy. Why are so many middle class Americans voting Republican?  I can't explain it, but it is not in their own best interests.

The following post from Alter-net illustrates how this worked during the Great Depression of the 1930s.  You can read more by clicking on the link.


AlterNet / By Larry Beinhart

The Astonishing Stupidity of Not Raising Taxes on the Rich When Budgets Are Tight

History shows that when spending is cut -- in the name of balancing the budget -- recessions immediately follow.
March 1, 2011

The current economy is routinely and universally referred to as the worst recession since the Great Depression.

It makes sense, therefore, to look back at government tax and spending policies during the Depression and what the results were.

1932 -- Hoover raises the top tax rate from to 25 to 63 percent.

1933 -- Roosevelt comes into office. He begins spending at the same time that new tax hike comes into effect. The Depression bottoms out.

1934 -- Recovery begins. The GNP rises 7.7 percent, unemployment falls to 21.7 percent.

1935 -- New government spending on public works and rural electrification. A push to strengthen labor and raise wages. New taxes through the creation of Social Security.

The GNP grows another 8.1 percent, and unemployment continues to fall.

1936 -- The top tax rate is raised again. This time to 79 percent.

GNP grows a record 14.1 percent; unemployment falls even further.

1937 -- Roosevelt is afraid of deficits! He cuts spending for 1937.

There's a new recession. It continues for a year.

1939 -- The U.S. borrows, resumes deficit spending, this time on a military build-up. The recession ends.

1941 -- America enters World War II.

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