30 years ago, the Republican candidate for President, the sainted Ronald Reagan, was touting his supply-side economics plan. During the primaries earlier that year, the man who would become his Vice President called it Voodoo Economics. Today, virtually all Republicans and even some Democrats embrace Voodoo Economics. I don't know whether Voodoo is an appropriate metaphor or not, but it doesn't work.
We learn in Economics 101 that supply and demand are the invisible hands that guide the markets of capitalism. What is apparently not obvious is that it is demand that drives supply and not the other way around. There is an old expression that says, "Build a better mousetrap and the world will beat a path to your door." What if you lived in a world with no mice?
Does anybody think for a second that the automobile industry would have built all those gas-guzzling SUV's in the '90's if nobody was buying them? Imagine if President Bush had told the American People after September 11th that the most patriotic thing they could do was help reduce our addiction to oil. The demand for fuel efficient cars would have driven the market.
For 30 years, our economic policies have increasingly favored the supply side of markets. During that time, the deficit has gone from under $1 trillion to $13.6 trillion. Median income has fallen, and we've suffered the worst collapse in our economy since the Great Depression. It is time to switch to policies that encourage the demand side.
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