Supply-side economics doesn't work. It's been tried for 30 years, to no avail.
And now, when our continuing economic crisis is so palpably being driven by inadequate demand, it's more bogus than ever. But try telling that to "the great compromiser" in the oval office.
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Krugman's take on all this
Debt relief for homeowners -- which could have done a lot to promote overall economic recovery -- has simply dropped off the agenda. The existing program for mortgage relief has been a bust, spending only a tiny fraction of the funds allocated, and yet there seems to be no interest in revamping and restarting the effort.
What lies behind this policy paralysis? It's a response to interest-group pressure: Consciously or not, policy makers are catering almost exclusively to the interests of those who derive lots of income from assets, and who lent large sums of money in the past, often unwisely, but are now being protected from loss -- at everyone else's expense. Economists call them "rentiers.' Others call them banksters.
Whatever you call them, their argument against helping the unemployed is framed in terms of the economic risks it would impose on themselves. "Do anything to create jobs, and interest rates will soar," they say. "Runaway inflation will break out," and so on. However, in the real world these risks keep not materializing. Interest rates keep staying near historic lows, while inflation (outside the price of oil -- which is inflated primarily by the gambling exploits of Wall Street speculators), remains low.
So against these hypothetical risks one must set the reality of an economy that remains deeply depressed, at great cost both to today's workers and to our nation's future. After all, how can we expect to prosper two decades from now when millions of young graduates are, in effect, today being denied the chance to get started on their careers? Ask the banksters for a coherent theory behind the abandonment of the unemployed and the newly graduated, and you won't get an answer.
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