How to reveal your pet economic theory is a crock in one sentence.

27 Nov 2009 04:16 pm
Posted by: Donna

Hope everyone had a nice Thanksgiving yesterday, surrounded by family and warmth and good food and celebration. Yada, yada, yada….

Anyhow, back to the main business of this blog, which is slamming the GOP and their stupid ideas. And of all their stupid ideas, one of the stupidest by far, is the steaming pile of malarkey known as supply side economics. Ever since that nitwit Arthur Laffer drew a curve on a napkin to demonstrate a “theory” he basically pulled out of his posterior – that reducing tax rates, especially for businesses and wealthy individuals, stimulates investment for the benefit of everyone – we’ve felt the disastrous consequences of this idiocy on the national level and in many states’ economies. George H.W. Bush referred to it as “voodoo economics” back in 1980, before he drank the koolaid and became Reagan’s VP.

Arizona has garnered national attention for our fiscal debacle that puts us second only to California (depending on how you measure it) in terms of per-capita deficit. Today’s LA Times gives a decent overview of the current situation. I’m grateful that they don’t let the Governor get away with blaming the Democrats.

On Monday, Brewer and GOP legislative leaders are scheduled to meet to discuss how to get a possible tax increase on a future ballot. Kim Sabow, a spokeswoman for the governor, said the delay has been because “every single Democrat and a handful of GOP extremists have prevented solutions from passing — choosing only to vote ‘no’ instead of being responsible for participating in solutions that have a chance of passing.”

The budget battle has so far been an all-Republican affair. The GOP holds commanding majorities in both houses of the Legislature. Democrats, who have voted against every major budget bill, complain that Brewer would not negotiate with them until days before the July 1 budget deadline.

“She has been unwilling to work with the Democrats to get her proposal through,” said David Lujan, minority leader of the House of Representatives. “The problem’s so big we can’t cut our way out of the crisis. We have to raise revenue.”

Cue the inevitable spouting of Reaganomics horsehockey by a Republican legislator in response:

Steve Pierce, majority Senate whip, said the state may be able to come up with ways to raise money — by cutting taxes. He said that cuts in business taxes may raise tax revenues, an argument made by believers in supply-side economics, a theory that most economists say is flawed.

I love when the Voodoo Economists resort to this particular defense because they unwittingly expose the utter fraudulence of their precious theory. Assuming that tax cuts to businesses and very wealthy individuals actually did lead to higher tax revenues, then why would Pierce and his “limited government” cohort want that? Shoot, you’d think they’d be loudly agitating for higher taxes, since that would hasten the glorious bathtub drowning for which they so yearn.

Pierce, a signatory of Grover “Bathtub” Norquists’ no-tax pledge, displays exactly the kind of cognitive dissonance I’m talking about in the comment that immediately follows:

Pierce said Arizona would have to find a new way to govern itself. “We’re going to have to redo government here,” he said. “There are good programs that were created in the past that we just can’t afford anymore.”

He floated the idea of cutting both the government workweek and the public school week to four days, and of violating the minimum funding levels the state needs to meet in K-12 education and healthcare to qualify for stimulus funds.

Gosh, with all the tax cuts AZ has given to businesses and the wealthy over the past several years I can’t imagine why we’re even considering those possibilities!


  1. Comment by todd on November 27, 2009 8:02 pm

    As Laffer has said – “The Laffer Curve should not be the reason you raise or lower taxes.”

    Anyways, as usual these conservatives don’t even understand the basics of the economic theory they espouse, regardless of whether the theory is right or wrong. In fact the Laffer curve would actually predict a loss of revenue based on the amount of taxes currently being paid. Ooops.

    Both Pierce and Pearce have put out this idea of ignoring maintenance of effort requirements which would mean a further loss of federal dollars and a larger hole to fill.

  2. Comment by Donna on November 27, 2009 10:05 pm

    But Todd, the economic theory they are espousing was massively wrong to begin with. The notion that amassing the lion’s share of wealth into the hands of the upper elites leads to prosperity for everyone has been exposed as a ridiculous lie throughout human history. If you don’t attach conditions on it there’s nothing stopping them from sitting on it, gambling it on high-risk investments, or using it to create low wage jobs elsewhere. Back during the Eisenhower administration when the wealthiest Americans had a 90% marginal tax rate, barely any of them paid it. They avoided it by investing their profits back into the American economy. Rich people still enjoyed a very nice lifestyle.

  3. Comment by dude on November 28, 2009 10:14 am

    We’ve been cutting taxes to stimulate the economy for close to 30 years now, which is why the biggest problem our state government is facing in this recession is how to get rid of the trillions of dollars in surplus revenue we’ve accumulated. Right?

  4. Comment by todd on November 28, 2009 10:57 am

    Donna – I know the theory is largely wrong, just pointing out how doubly wrong that makes Pierce.

  5. Comment by Eli_Blake on November 28, 2009 8:28 pm

    Tax cuts, trickle down, deregulate.


    Tax cuts: made the rich richer, and they banked it in offshore bank accounts.

    Trickle down: actually has something to it, only not what they told us. The theory is that when businesses have more money in their pocket they will invest it in ways that grow their companies and create jobs. Which is exactly what has happened with the Bush tax cuts during the 2000’s, and they invested in factories and call centers where (just as the market would predict!) labor was the cheapest. In Asia. So we added $1.3 trillion to the national debt to finance shipping millions of (previously) American jobs to Shanghai and Mumbai.

    Deregulate: S&L crisis, Michael Milken, Enron, World Com, Bernie Madoff, subprime mortgages, housing bubble, bailouts… (need we say more?)

  6. Comment by Timmys Cat on November 30, 2009 10:07 am

    Ahhh, the old Republican trickle down trick. What they don’t want you to notice is what’s trickling down.

  7. Comment by Mark Manoil on November 30, 2009 9:48 pm

    Jon Talton calls them the Kookacracy, but that’s making light of the real damage you identify. Tax cutting has been in vogue 20-30 years, but in Arizona it is pretty much irreversible, because of a 1992 Constitutional amendment that requires 2/3 approval by both houses of the legislature for any tax increase. One might ask if such numbers could be made up of Dems and moderate Republicans, but our legislative friends say the latter group just don’t exist. In the short term we need to elect more statesmen and stateswomen; and then we need to repeal the ’92 amendment so that our legislature has something more than stale ideology with which to govern.

  8. Comment by Mark Manoil on November 30, 2009 9:54 pm

    A longer, more detailed version of my argument:

  9. Comment by Alan Scott on December 4, 2009 5:25 pm

    I predict that as the mid term elections get closer and the economy improves too slowly, President Obama will start sounding like a supply side Republican. You socialists will be more angry with him over this than even the 30,000 extra troops he is sending to Afghanistan.

    Actually it is the only thing that could save his Presidency. Will he be a realist like Bill Clinton and get reelected, or will he cling to his impractical principles and be Jimmy Carter II.

    It should be great theater to watch the Comrades turn on him, if he does veer right.

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