By: Tim Duff, Tonka Bay, Minnesota
The United States Republican Party has been operating a sophisticated long-term scam on the American people, and their new tax-cut proposals are merely the latest iteration of the scam. The plot involves scamming the Democrats into shooting Santa Claus, like Clinton cutting welfare, and Obama opting to link to the CPI in order to weaken social security, using tax policy to enshrine a Santa Claus costume on the Republicans.
You can be assured that everything the Republicans say about taxes today are outright lies. Tax reductions and lowering tax rates will not pay for themselves, and they never have. They are simply craven attempts to cut spending for the poor, when revenues collapse and deficits increase. There has never been any evidence that this sort of tax reform increases growth.
Just how do the Republicans pull off this blatant lie and why does the media let them pull it off? Here's the deal.
In 1964, when Barry Goldwater was crushed in the election, the Republicans were deeply dejected. Goldwater was an avid acolyte of Herbert Hoover's economic policies. From Hoover's perspectives and all Republicans of the past, other than Teddy Roosevelt, market fundamentalism was their firm dogmatic belief. Economists from Ludwig von Mises to Friedrich Hayek to Milton Friedman had postulated that government could not deal well with economics. They believed the arena of banking and finance should be run by Wall Street and international finance.
In 1931, Hoover happily followed the advice of Andrew Mellon, the United States Treasury Secretary, a multimillionaire himself and founder of the Mellon Bank. His advice was to liquidate labor, liquidate the farmers, liquidate stocks, liquidate real estate, and wring the debauchery out of the system. He believed the high costs of living would disappear and "smart" people would accumulate the carnage from the ignorant masses. Here, we see the mantra of the Republicans; to lower taxes, reduce the size of government and balance the budget.
This ideology, however had a large chink in it. The Republicans saw that the Democrats always seemed like the giver of gifts, while the Republicans were viewed by the public as stingy tight-fisted capitalists, hell bent on making the lives of workers harder, while making the ultra-wealthy even wealthier. The Republicans knew then that it was not a good strategy to defeat Democrats.
So it was that, after Goldwater's defeat, the Republican Party was again adrift, as it had been after Hoover's catastrophic presidency and stock-market crash. The ensuing Nixon and Ford administrations could not come to believe in fiscal conservatism, because they were afraid to adopt it because of the dread of subjecting the Republican party to another 40 years in the electoral dumpster.
Enter Jude Wanniski, who by 1974 changed the course, and began the charade. He saw the Democrats playing the beneficent Santa Claus, when they created Social Security and unemployment compensation, both programs part of the New Deal. Their government projects like public schools, hospitals, roads, bridges, and highways were built bringing valuable union paychecks to workers, driving economic vitality. Democrats, as did Eisenhower, maintained high taxes on businesses and the wealthy, and a proportional progressive tax system that drove demand, with wages steadily going up for the working people of America. Working people were happy, and every time the Republicans ranted against the New Deal programs, they lost to the Democrats.
We all understood at the time that our economy was successful because it was driven by demand. When factories are successful at meeting the demand, then more factories get built, more of our citizens find good work, and those newly employed earn a paycheck that increases demand.
Wanniski wanted to flip the classical world of economics, which had operated on simple demand creation for seven thousand years, on its back. So he invented a new term, a thought virus in 1974, with the term "supply-side economics," and said that the reason economies grow was because things were made available for sale, getting people to spend their money. No demand creation growth here. Instead, the more things there were, the better the economy would be.
Then, Arthur Laffer, remember the Laffer Curve, took the false meme a step further, by stating that not only was supply-side a right concept, but that as taxes went down, revenue to the U.S. treasury would increase. These concepts made no sense, and have been proven to be complete nonsense. Yet, this was the Republican strategy to climb back to popularity.
Then came the bad actor, Ronald Reagan. He became the first Republican politician to say that he could cut taxes on the rich and businesses, and with their surplus money and more supply, grow the economy. In the 1980 GOP primary George Bush was shocked, calling Reagan's policy "voodoo economics," stating that Wanniski's supply-side and Laffer's tax-cut proposals would steer the nation into a huge debt spiral, and the ultimate crash into another Republican-created Great Depression.
Wanniski however was just getting started on how to pitch the supply-side fraud. In 1976, he introduced to the extreme right-wing faction of Republicans the "Two Santa Claus" proposition, which would facilitate the Republican takeover of rule in America for future generations.
Republicans could be Santa Claus two times over he theorized by cutting Americans taxes. For laboring people, it would be a token tax cut, no more than a few hundred dollars a year, but the marketing spin would be intensely marketed. For the wealthy it would be billions of dollars in tax cuts, which would be money used to import more slave-labor commodities to market, increasing supply and stimulating the economy. That growth in the economy would imply that people paying taxes would pay more because they were earning more. Wanniski said that Democrats could never win again, because they would be forced to be anti-Santas, forced to raise taxes and cutting spending.
When supply-side economics was brought forth in the early 1980s, dramatically cutting taxes while exploding spending that was mostly military, all seemed lost as the budget deficit rapidly increased and the United States fell into deep recession. It was then that David Stockman formulated a nasty new theory, that they were "starving the beast" of government by building up such massive deficits that the Democrats would be helpless in the future to ever talk again about universal health care or increasing Social Security and unemployment compensation.