Archive for the ‘supply side economics’ category

The GOP Good Life?

September 9, 2015

There are several distressing trends passing before our eyes and also those of Presidential candidates. High school standardize test scores continue to drop and the ranking of US high school graduates continues to slip compared to other industrialized countries. This is in the face of the US spending $9000 per capita, the most in the world on K-12 education.

We have blamed “bad” teachers and many districts have poured much more money into new schools and new approaches (which include new expensive text books, tablets, and other digital paraphernalia. On top of this, more and more students who go on to higher education, receive a seemingly meaningless degree, a huge debt, and the prospects of no or only low paying employment to follow. What’s wrong with this picture.

This picture is the prettier side of the coin. The other side of this coin reflects all the kids who either do not graduate or do not go onto higher education. These “unlucky” ones do not have a debt but they share everything else. Poor job prospects and little or no pay if they fail to find employment . We hear that most of these unlucky ones are caught in poverty’s grip. Oh, if only we could break the cycle of poverty, everything would be ok. Hmmm.

Listening to the GOP Presidential candidates, the answer lies in getting rid of immigrants and freeing up thousands and thousands of jobs.  Of course there are two big conflicts with reality. Immigrants from Mexico, for the most part, occupy low paying agricultural or manual labor jobs. This honorable work, however, pays minimum wage or below. The second problem is even more insidious. Immigrant laborers work extremely hard and conscientiously, and are far more productive than almost all US citizens who might attempt to replace them. Think about the lawn maintenance, restaurant kitchen and busing help, and construction workers you see everyday. Hmmm.

Jeb Bush weighed in on this yesterday when he met with fiscal policy advisors. You guessed it, the only thing between jump starting the American economy and providing thousand of good paying jobs is the absence of “supply side” economics. What? Its just that easy, according to Jeb.

Supply siders fawn over lower tax rates. Lower rates will simply unease the creative, entrepreneurial talent so many American possess. Bush has previously promised to double the US economic growth rate and now we are getting a hint at how he would accomplish this. Lower taxes, why didn’t others think of that?

There is scant evidence that American businesses will pass on any tax savings to employees and troubling little that businesses would use this windfall to expand their current businesses (and pay higher wages).

A far more likely outcome, were we to believe lower taxes would stimulate growth, is building inventory in anticipation of customers coming is a real credibility stretch. It harkens back to, dare I say, the central government designed economies of Communism. What is more efficient than making all red paint in one factory and filling warehouses hoping consumers will buy this much. Business owners know this fallacy too. Given windfall tax incentives, businesses will wait until demand builds before gearing up their factories… and hiring people.

GOP candidates this year have been woefully short on solutions to real problems but not bashful about using “voodoo” economics to divert attention to their apparent real mission in life, pandering to the wealthy.