Five Myths About The Economy That Conservatives Keep Repeating

Five Myths About The Economy That Conservatives Keep Repeating

The Top Five

Here are five “conventional wisdom” doses of economic nonsense that we have been fed:

1. Business does everything better than government ?

Corporate conservatives argue that businesses and their one-dollar-one-vote system of decision-making is better and more efficient than We, the People's government and its one-person-one-vote system. They argue that constant competition, placing companies under constant fear of going under and people under constant fear of job-loss, focuses the mind like a pending execution. They say it leads them to do only what they should be doing and no more, in the best possible way, always looking for the best and most “efficient” ways, forcing innovation to occur.

But as we have seen, what actually happens in this kind of dehumanized “Force You” system (as in “F.U.”) is that businesses are forced to cut every corner, cheapen every product, cut out every service, lay people off, cut people’s wages while adding hours, gut benefits … and probably go under anyway because when every business does the same 99 percent of us can’t afford to buy or do things anymore.

The effect on people (human beings – remember them?) is worse. Stress-induced illness is rampant in our fear-based society. People do not get sufficient sleep, skip vacations, work long hours, spend less time with their families, spend very little time in nature, and the rest of the things that make us human.

This idea that people are best when operating under constant fear is similar to the conservative mantra that everyone should carry a gun because then you have “a polite society.” Perhaps constant fear and stress keeps people on their toes and makes them “behave” but in the long run it’s just no way to live.

Another “feature” of this top-down, one-dollar-one-vote, “market” system that the corporate conservatives advocate is that only those at the top levels of the corporate/financial ladder make the decisions for, and receive the benefits of, society. This is great if – and only if – you are in that 1 percent. But one-person-one-vote, democratic government decision-making means all of us have an equal say with equal access and equal opportunity, and society operates for the benefit of all of us.

2. Rich people are “job creators.”?

This is the old “trickle-down” idea -- that if you give enough money to the already-rich eventually some of that money will trickle down to the rest of us. This is also called the “getting peed on” theory of economics.

The basis of this thinking comes from the theories of Ayn Rand, who argued that society consists of “producers” and “parasites.” Rand’s fundamentally anti-democratic ideology says that democracy is a form of “collectivism” in which people who don’t want to work and produce use their numbers to steal from a gifted few who are the “producers” of goods and services. Rand’s followers claim that wealthy people are rich because they “produce.” The rest of us are “parasites” who “take money” from the productive rich, by taxing them. This revenue is “redistributed” to the parasites to pay for our “entitlements.”

They say that if wealthy people have more money they will use that money to start businesses and hire people. But anyone with a real business will tell you that people coming in the door and buying things is what creates jobs. In a real economy, people wanting to buy things – demand – is what causes businesses to form and people to be hired.

History – and a quick look around us today – shows that when all the money goes to a few at the top demand from the rest of us dries up and everything breaks down.  Taxing the people at the top and reinvesting the money into the democratic society is fundamental to keeping things going.

3. Government and taxes take money out of the economy?

Yes, they actually say that government and taxes “take money out of the economy.” They argue that the money government collects is a) pocketed by politicians; or b) stuffed under a giant mattress; or c) is just wasted.

In reality the taxes that government collects are invested in the “public structures” that create the prosperity and lifestyle we enjoy – or at least did before taxes were cut. Tax revenue builds the infrastructure of transportation, courts, schools, universities, research facilities and other institutions that enable our businesses to grow and prosper and the consumer protection, safety inspection, water and sewer, health, parks and arts that help us live and enjoy our lives.

But there is a powerful reason for people to feel the government does seem to be providing value for the money it costs us: so much of the federal budget goes to military and military-related spending. Spending on wars, the "Defense" department (military), intelligence, nuclear weapons, veterans, and related budget items (including interest on money borrowed for past military spending) is a significant portion of the budget, and people instinctively feel that the country is not getting back services that match what they are putting in.

High top tax rates also reduce the incentive to be greedy and destructive, which can overcome many of us and make us do things we shouldn’t. Cutting top tax rates in the '80s forced a change in business models away from long-term planning and building wealth by building sustainable businesses over decades. Instead, since you could take home a fortune overnight, it made more sense to go for the get-rich-quick, sell-the-farm-style schemes so prevalent today.

4. Regulations Kill Jobs?

Corporate conservatives say that “government just gets in the way” and costs money, which leaves less room for hiring. This is a corollary to the “business knows best” argument and to the idea that society consists of a few “producers” who are inherently superior to the masses of people. The thinking is that We, the People don’t know what we are doing, and businesses with their top-down structure will do the right thing more efficiently.

Those engaged in a business do know the business better than outsiders.  But regulations that protect the public, employees and the environment govern how the actions of businesses affect the rest of us.  A business wants to make a profit, and will only care how regulations affect that goal.  It makes sense for government to set up regulations because the rest of us are concerned about the larger world of the rest of us, and therefore understand more clearly how the actions of a business will affect the rest of us.

In may cases regulations keep businesses from doing things that kill jobs – and people.

5. “Protectionism” hurts the economy.

Corporate conservatives argue that “free trade” is always good under all circumstances. They say we get lower prices and our businesses are able to reach more customers. Of course trade can be a wonderful thing, increasing the standard of living on both sides of the trade border.

But the trade deals of recent decades have not been free or fair, and can’t really even be called “trade.” What has happened is countries sell to us but do not buy equally from us, causing huge trade deficits that have drained our economy and our jobs and our wages. Instead of increasing prosperity they have been used to increase exploitation of working people and the environment for the benefit of a wealthy few.

Our prosperity is the fruit of our democracy. 

Conservatives say that it is good that businesses in countries like China are more competitive because they don’t have a lot of regulations to comply with. Countries where the people have little say in things don’t have to spend the money to pay minimum wages, keep the environment clean, keep workers safe and keep products up to standard and they don’t have to worry about lawsuits. They are more “efficient.” So they can charge less.

Conservatives who argue that we should have less regulation, lower wages, fewer benefits, fewer consumer, worker and environmental protections are really arguing that we should abandon democracy. By opening our borders to goods made where people do not have a say we made democracy a competitive disadvantage.

Fed Up With the Nonsense

So as we see all around us today, the economic conventional wisdom nonsense that we were force-fed for decades didn’t work, messed things up, and people finally got fed so much if it that they are fed up. The #occupy crowd got fed up and showed up. They sleep in the park and on sidewalks, marched, and took the batons and pepper spray that seem to always come at us when we protest. They persisted, and awakened the rest of us. Now it has spread to cities across the country.

They shook loose from the shadow-fog of propaganda that shrouds us from morning to night, from radio to TV to newspaper. They didn’t prepare a media strategy with a savvy focus-group-tested message targeting key demographics. They didn’t care how they looked or how they would be seen. They didn’t care what the media would say. They certainly didn’t care what Wall Street would do. They saw clearly where the problem is, and decided to just go ahead and do something.

They said that what is going on is wrong, it is bad, it is hurting people, and that they were not going to put up with that for one more minute. They said it is time to be citizens not consumers.  They are choosing to have some meaning in their lives beyond just being worker bees helping perpetuate a destructive system.

So they decided to “occupy Wall Street” in the name of the 99 percent of us who have been losing out in this economy, and the honesty and clarity of that has caught on.

    “No one is confused about the message. Wall Street got bailed out; Main Street was abandoned. The top 1% rigs the rules and pockets the rewards. And 99% get sent the bill for the party they weren't even invited to.” – Robert Borosage

    Poets, priests and politicians
    Have words to thank for their positions
    Words that scream for your submission
    And no-one's jamming their transmission
    And when their eloquence escapes you
    Their logic ties you up and rapes you

    -“De Do Do Do De Da Da Da,” The Police

When is the last time you heard someone in big corporate media challenge any of these conservative myths. The reason we hear so much news about scandals and missing persons ( stories worthy of coverage, but not the over done exploitative coverage we get) is because those stories take up lots of air time and are easy to cover. The corporate media also tend to act like the most popular kids in school, they don't want to do or say anything that goes against the conventional wisdom because it would put a dent in their popularity.

What Caused The Deficit? In Short, Conservatism

What Caused The Deficit? See Chart.

One of the most effective Republican themes of the last two years has been blaming President Obama for the explosive growth in the budget deficit since 2009. The accusation that "Obama's spending binge" has blown up the deficit has discredited any further fiscal stimulus, and helped encourage Republicans to use the debt ceiling as a hostage. The White House fought back with a chart showing that its policy changes contributed only a small fraction to the worsening deficit picture:



Megan McArdle dismissively responds, "The duck starts here." Her rebuttals are extraordinarily weak. McArdle begins:

this graph attributes decisions made by Obama and an all-Democratic Congress--like doubling down in Afghanistan--to Bush, while taking responsibility for basically nothing except the stimulus. When Obama extends the Bush tax cuts for the rich under pressure from Congressional Republicans, that disappears from his side of the ledger, because after all, he didn't want to do it. When Bush enacts Medicare Part D under pressure from Congressional Democrats, the full cost is charged against his presidency. The list of such silliness goes on.

The notion that Bush passed his prescription drug bill "under pressure from Congressional Democrats" is bizarre. Republicans controlled both houses of Congress at the time, and exerted massive pressure to pass the bill. The coalition that squeezed the bill through after the vote was held open for hours consisted of 207 Republicans and 9 Democrats. Some pressure!

McArdle is probably correct that Bush only endorsed the concept of extending Medicare coverage to prescription drugs in order to avoid being outflanked on a popular issue, just as Obama did on middle class tax cuts. But Bush did not have to design the bill so as to maximize profits for the insurance and pharmaceutical industries, rather than to maximize value for taxpayers. The Republicans also suspended the pay-as-you-go rules, which, had they remained in place, would have forced them to offset the cost of providing prescription drug coverage. When Democrats won back the House, they reinstated those rules, forcing them to offset the cost of the Affordable Care Act, which as a result was far more painful and less popular than if they had simply put the whole thing on the credit card as Bush's Republicans did.

McArdle ends this passage by asserting, "The list of such silliness goes on," but she does not continue the list. If Medicare prescription drugs is her best example, I suspect the list does not go on at all. Instead, she turns to her next point, which is to point out that budget deficits have in fact been higher under Obama than under Bush:

It's not really very easy to look at these graphs and tell a story where the deficit is 1.6% under George Bush in 2007, and then suddenly balloons to 10% under Obama a few years later--and does so almost entirely as a result of policies initiated under George W. Bush, and only those initiated under George W. Bush. (Not because of say, Medicare, Medicaid, and Social Security.) What changed about Bush policies that made them so much more expensive once Barack Obama took office?
Nor is it exactly obvious to look at the $2.4 trillion in additional debt incurred during Bush's eight-year presidency, and say that he is nonetheless actually responsible for $7 trillion of our current debt load--and then turn to the $3.1 trillion of debt incurred during Barack Obama's three-year presidency, and declare that his policies are actually responsible for only $1.4 trillion.
What changed about the Bush policies that made them more expensive when Obama took office? What changed is that the economy underwent its deepest crisis since the Great Depression. Bush inherited a budget that was structurally balanced, which became a large surplus at the peak of the business cycle. His policies turned it into a budget that was structurally in deficit even at the peak of the business cycle. And then when the economy collapsed, those structural deficits became massive.

McArdle is implying, without quite openly arguing, that presidents should be judged on the deficits that occur under their watch, not on whether their policies increase or decrease the deficit. This ignores the reality that the business cycle plays a huge role in year-to-year deficits. Take George H.W. Bush. His policies significantly reduced the deficit. But the deficit ran at extraordinarily high levels under his presidency, and McArdle's data would suggest he was a massively irresponsible president. In reality, what happened is that he presided over a recession and the necessary bailout from the Savings and Loan crisis, which bloated the deficit despite his (eventually successful) efforts to tame it.

It also ignores the reality that the U.S. political system makes significant policy change hard, and that raising taxes or reducing spending tends to be unpopular. Status quo bias is enormous. It's bizarre and unrealistic to treat the federal budget as a kind of blank slate for which a president bears responsibility once he assumes office. If George W. Bush had not cut taxes, does McArdle think Obama would have set tax rates at the current level? Of course not. But, once established, that policy requires immense political capital to overturn.

Finally, McArdle turns to a theme she's explicated before -- she's tired of hearing excuses about who caused the deficit. She wants Obama to take responsibility and fix it:

Settling whether "Bush policies" or "Obama policies" were the "cause" of the deficit wouldn't tell us a damn thing about what we should do--unless you're the sort of person who thinks that the most important fact about a policy is who was president when that policy was enacted. ...
These seem like more important questions than which items to put in the "Bush" ledger and which items to put on the "Obama" side. And I'm afraid that the White House graphic doesn't offer any answers.

McArdle is insisting here that we shouldn't care who caused the deficit, we should care about fixing it. That is a strange case to make immediately after trying to affix Obama with the blame for the deficit. It seems also to assume that understanding which policies caused the deficit interfered with the task of reducing the deficit. I don't understand the logic of this. It might make sense of Obama were arguing that the fact that he inherited the deficit absolves him of any responsibility to address it, but in fact Obama is arguing the exact opposite of that.

Indeed, Republicans are the the party determined to attach the questions of "who is responsible" and "what should we do." The Republicans have proceeded from the erroneous premise that Obama's spending caused the explosion of the deficit to their syllogistic assertion that "we have a deficit because the government spends too much, not because it taxes too little." Given that they have done so, Obama's effort to recontextualize the cause of the deficit is highly relevant to the solution.

McArdle's item contains a great deal of signalling about her lack of interest in partisan finger-pointing, such as disdaining "the sort of person who thinks that the most important fact about a policy is who was president when that policy was enacted." Obviously, you can care about both long-term fiscal re-balancing and determining which policies led to the deficit. Elected officials often enact policies whose effects, good or will, are felt long after they depart office, complicating the ability of voters to assign responsibility, and giving the officials an incentive to take short-term benefits and long-term costs. Determining which policies led to what outcomes seems like an important function in an electoral democracy.

In so many words McArdle's argument is that conservatives and libertarians are never responsible for anything. If that is true shouldn't it also be the case that if by some miracle they do something good, they should not get credit for that either.