Hymanomics

Hyman dusts off mantra of tax cuts as the definition of good government in this rehashed "Point." He suggests, among other things, that Kennedy, Reagan, and George W. Bush showed that tax cuts lead to economic growth.

Here’s the problem. Kennedy’s tax cuts were demand-based, not supply-based. He recognized that the economy isn’t driven by investment, it’s driven by consumption. You don’t need to be an economics wiz to get this. If the average working or middle class family has extra money, they are likely to spend it on goods and services, thus creating demand. If there’s a demand, investors don’t need a tax break as incentive to invest; the profit motive kicks in, and Adam Smith’s “Invisible Hand” takes over. On the other hand, if working and middle class people are squeezed, they won’t spend money. In this case, no matter how low you drop capital gains tax rates, investors won’t invest because people aren’t buying goods and services. Even a 0% capital gains or dividend tax rate means nothing if there aren’t any profits to begin with.

Republicans have been eager to link their regressive taxation policies with JFK, but the comparison just doesn't hold water.

Hyman also says that Reagan’s 1981 tax cuts led to a boom in the economy. Really? Actually, Reagan enacted large tax hikes almost immediately after his tax cuts, but we still suffered a recession and a ballooning deficit thanks to the silliness of “supply-side” economics. Conservatives still like to tout such tax breaks (although they tend to forego using the phrases “supply-side” or “trickle-down” these days) not because they actually believe these policies help the majority of Americans, but because they help those Americans conservatives believe have demonstrated their character and worthiness by becoming rich in the first place. Tax cuts are rewards for a job well-done, not part of a coherent economic policy to help the country as a whole.

Most laughably, Hyman says that Bush II’s tax cuts have led to similar economic gains. This fails the giggle test. In the space of two years, the Bush administration turned a 125 billion dollar surplus and turned it into a 375 billion dollar deficit. The percentage of debt compared to GDP has risen, and the economy has suffered as a result. And the results aren’t just in the spreadsheets at the Congressional Budget Office—they’re seen in the lack of jobs for working and middle class Americans. Not since Herbert Hoover and the Great Depression has a president presided over a net loss of jobs. Some “economic boom.”

As we know, the largest continuous peacetime economic expansion occurred under Clinton. This was also accomplished while lowering unemployment and erasing an astronomical budget deficit. Progressive taxation, not regressive taxation, leads to a healthy democracy, as history has shown. And as far as financially “responsible” legislators are concerned, you don’t need to look any farther than the makeup of the current administration, House leadership, and Senate leaders to see who’s responsible for the growing debt and cavernous budget deficits we now have.

Is that the sound of chickens coming back to the roost I hear?

And that’s The Counterpoint.