Economic Illiteracy and Political Demagoguery

After the end of my third week in Economics 101 (my first economics class in high school) my teacher proclaimed that the class now knew more about economics than 90% of the population. At the time, I thought the teacher was being melodramatic however after watching the Democrats spin economics for the last twelve years and watching much of the public buy it hook, line, and sinker, I tend to think that my teacher was correct.

What the Democrats have done since the Clinton administration is turn economic nonsense into electoral bliss. They have turned what makes no economic sense into something the public actually believes.

Let's start with Bill Clinton's tax increase. The Democrats are fond of pointing to the mid and late nineties as a period of economic bliss. There is no doubt that it was, however Bill Clinton had ABSOLUTELY NOTHING TO DO WITH THAT BLISS. If anything, the period grew despite his best efforts. Ask a Democrat exactly what Bill Clinton did to help spur the economic growth and you will get one of three answers. First is "I don't know but he did". The second is that they will refer to the tax increases. On what economic planet does someone live that makes them think that tax increases do anything but slow down an economy. Do Democrats really think that tax increases spurred the technological revolution that caused all that bliss? Third, Democrats will say that Clinton balanced the budget and that spurred growth. Of course, its true he balanced the budget, but that was as a result of the growth, not the other way around. As a result of stunning growth in the economy, the federal government brought in a plethora of new tax receipts. With their own revenues growing, cuts in the military, it was easy to balance the budget. Of course, the two events are reversed from the way in which the Democrats see them.

The reality is that the nineties were a period of growth built on Reagan's tax cuts in the '80's. Those tax cuts created 20 million new jobs and many of those were in the technology sector. The roots of the internet and cell phones were developed in the '80's and they exploded just as Clinton was lucky enough to enter office. He had absolutely nothing to do with it and if anything tried his damndest to stop it. Furthermore, much of the growth was a myth. It was built on the backs of paper thin internet stocks that were shooting up in market cap throughout the nineties. Once the internet bubble burst so did the economy with it and a recession followed. Of course, Democrats conveniently forget that and most blame Bush for it.

Then, there is the Bush tax cuts. They are often referred to as for the rich and blamed for just about everything but the Kennedy assassination. They are blamed for everything from the income gap to the current recession. First, despite the outstanding spin of the Democrats, the tax cuts were in fact for everyone. Every single income bracket was reduced by three percent. The Democrats complain that they were heavily weighted toward the rich. Of course, they weren't. The rich received a three percent reduction in their rate the same as the poor and middle class. Since the rich make more and thus are taxed more, their cut was of course larger in dollar terms, but such is math.

Then, the Democrats conveniently forget that the tax cuts started in 2001, right as the recession started, and within 18 months the recession was over. It just so happens that any economic textbook says that tax cuts take about 18 months to take effect. For the next four years, the Democrats ignored an economy that grew north of 3% per annum (according to GDP growth, the best measure of growth), and now that the economy is weakening they blame the same tax cuts for the weakness. On what economic planet do the Democrats live where tax cuts from 2001-2003 cause an economic downturn FOUR YEARS LATER. Furthermore, I learned in my fourth week of ECONOMICS 101 that recessions are a natural, and necessary, part of any economy. Now, it appears the President is to blame for what naturally happens to any economy and more than that policies from four years ago are the culprit.

Then, there is the issue of free trade. Once again, every economic ill of America is blamed on free trade. Job outsourcing has become the calling card of Democrats. Free trade is a simple, logical, and basic concept. Every country has goods and services that are plentiful, and those that aren't. Furthermore, all companies should have access to as many markets as possible. So called job outsourcing is the free market at work. It seems Democrats would like companies to keep jobs in struggling U.S. cities even if there is a way for companies to do it cheaper elsewhere. In the heartland of Iowa, Ohio, and Pennsylvania, their economic malaise is blamed on free trade. Of course, free trade is not the culprit. These economies were built with absolutely no diversification. These towns relied on one steel mill or factory for the overwhelming roots of their economic base. Then, the factory left and the towns suffered. If all your money was in Enron stock and it tanked, you would have no money left. The same is true of towns that relied overwhelmingly on one factory that found another place to do its business. That isn't the fault of free trade but rather the business leaders that never thought to diversify their economies.

All of this demagoguery is quite dangerous of course. The Democrats have now convinced many that tax increases help an economy, tax cuts are only for the rich, and free trade costs jobs. This is the platform they are running and this is what they will try and implement in a time of economic weakening. Unfortunately, we have already seen such policies implemented 1930-1932, and we know what those results were.