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Outside View: Supply Side Insanity

By CLIFF SCHECTER, A UPI Outside View commentary   |   March 31, 2003 at 11:05 AM
WASHINGTON, March 31 (UPI) -- "This looks like a rerun of a bad movie." So says President George W. Bush when it comes to the failures and limitations of Iraq weapons inspections. He should of, however, been using this phrase to discuss another left-over policy failure of his father's and of Ronald Reagan's administrations: Supply-side economics.

When will it finally sink in, that if insanity is repeating the same inanity ad nauseam, and expecting a different result, Bush's current economic stimulus plan is the Howard Hughes of fiscal policy. All this because some ideologue named Arthur Laffer was bored one night in a bar and drew some farcical design on a napkin, which then came to be called Reagonomics.

Here are the facts, plain and simple. President Reagan did not cut spending during the 80's as is so often claimed, but increased it overall with his huge defense budgets, and even through restructuring Social Security to add federal workers into its universe.

He cut marginal tax rates by historic amounts, but then raised payroll taxes, closed corporate loopholes -- Read: raised corporate taxes -- and even raised the gas tax. Still, he managed to quadruple our national debt while enacting this "conservative" program.

Two presidencies later, Bill Clinton, that "economic liberal" that he was, with the help of Hamiltonian treasury secretary and former chairman of Goldman Sachs, Robert Rubin, did much the opposite. "Rubinomics" as it is derisively called by captivated tax-cutting conservatives, put a premium on balancing the federal budget and bringing down long-term interest rates in the process, giving us a decade of historic prosperity.

I don't need to go through all the figures here. Well, how about just a few. Twenty-three million new jobs created under the Clinton Administration. Unemployment at 4 percent. An explosion in technological innovation. Ahh, remember those days.

Now splash some cold water on your face and come back to the dreary present.

The Texas Chain Saw Massacre of an economy that Bush, the former Lone Star State governor has given us during the first two years of his presidency seems to have no end in sight. The three leading stock market gauges, The Dow, S&P and Nasdaq all have fallen precipitously over the past four weeks. As I write this column, the Dow has actually fallen below 7,800. Two million jobs have disappeared faster than David Frum from the White House invitation list. I am sure, though, that Bush's own little private war in Iraq and the behavior of his good friends at Enron have nothing to do with this.

And while the Bushies talk a good game about punishing corporate crime, the band marches on. Pick up almost any copy of the New York Times or the Wall Street Journal and you will see enough stories of crony capitalism and outright corruption to make you want to do as Bush's father did on to the lap of the Japanese Finance Minister -- vomit.

In a recent Saturday New York Times edition of the white collar "Cops", we have bad boy Christos M. Cotsakos resigning as chairman of the E*Trade Group. This man, in the spirit of Haliburton and Harken, took $80 million in compensation from his online brokerage firm while its stock price tanked, and then had the kindness to give some back after a public relations fiasco.

On the same page, a nice little piece highlights how Kmart executives engaged in a "broad pattern of abusive practices" such as "dispensing generous loans to themselves." One former executive even ordered $850 million in merchandise, "without authorization" which "substantially contributed to Kmart's liquidity crisis in the fall of 2001."

It really makes you wonder why people have no faith in our financial markets. And it sure makes me feel better to know that Harvey Pitt, over three months after resigning as Securities Exchange Commission chairman under the veil of election night victory, is still on the scene fighting for the little guy. But, hey, I am sure that dividend tax cut will cure all ills.

Worst of all, this will all seem like pleasant memories if we enact President Bush's corporate Ken Lay giveaway of a stimulus plan. Because, you know, we should really reward corporate insiders with income rate cuts and dividend dodges ,that will do nothing for the economy and allow them to amass larger bank accounts in the Grand Caymans.

But wait a minute, I have a crazy idea. Why don't we use the $674 billion "stimulus" Bush is proposing for his campaign contributors to actually help the economy, by providing workers who might actually spend the money with a tax rebate? And how about giving funds to the states to help close their almost insurmountable budget shortfalls, including shoring up homeland security at soft targets such as ports, rail systems and power plants.

Or maybe, in the words of former Bush Treasury Secretary Paul O'Neill, we could use these funds to shore up Social Security. Just to remind you, that is the retirement plan that President Bush promised not to plunder, and once in office did exactly that. We could even try that wacky Rubinomics thing again. You know, the one that gave us all that prosperity by doing what the Gingrichites "Contract with America" set to accomplish with an amendment to the Constitution in 1994: Balancing the Budget.

But that doesn't seem to be part of the Republican economic model anymore. The tradition of spending only what you have, or real economic conservatism, that had been part of Republican orthodoxy from Roosevelt until the beginning of the Reagan Administration, is as passe as their support for term limits. Now we just hear about how structural deficits are acceptable as long as they are not a large percentage of GDP. Somewhere John Maynard Keynes, who Republicans used to dismiss as pretty much a kook for espousing a similar philosophy, is smiling.

Is it possible we that we could provide some Brawny paper towel to Bush's current economic team and let them draw up a new economic philosophy? Possibly one that will not bankrupt this country, will concentrate funds on real priorities and bring back the Clinton prosperity?

-- Cliff Schecter is a Democratic public affairs consultant. He is a frequent guest commentator on the FoxNews Channel

-- Outside View commentaries are written for UPI by outside writers on subjects of public interest.

© 2003 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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