George W. Bush campaigned in 2000 as an apostle of the "supply side" economic theory championed by Ronald Reagan back in the 1980s. When he took office in 2001 he began putting it into effect right away. A look at the past 7 years is in order because the presumptive Republican nominee for president, Senator John McCain, has embraced the supply side tenets as the centerpiece of his economic policy.
This economic model is based on large tax cuts, particularly weighted in favor of the wealthy, investors, and corporations. It also entails cutting regulation and as many government services as possible. The idea is that flush with cash, the well-heeled will plow it back into the economy and create millions of good new jobs that will ultimately benefit the middle and working classes as well. The theory holds that cutting government revenue with the tax cuts will not result in deficits because the economy will grow tremendously and the newly-prosperous workers will need fewer government services.
When implemented in the 1980s, this plan resulted in reasonable growth, but it all went to the upper class. The rich got richer, the poor got poorer and the middle class worked longer hours to stay even. The deficit grew to all-time highs. Critics of the supply side theory began derisively calling it "trickle down," a sobriquet correctly implying that little did trickle down. So how has it done in its second go-around?
On the debt, Bush inherited a surplus of $236 billion. This year there will be a projected $354 billion deficit. The national debt has grown by $3,500 billion ($3.5 trillion) during Bush's 7 years in office, an all-time record.
All this borrowing has contributed to the devaluation of the dollar. The Euro was worth $1.01 in 2001 and is worth $1.45 now. Gold was $319 an ounce then and is $892 per ounce now. Oil sold for $26 a barrel and is currently over $130. The average price of a gallon of gas has gone from $1.47 to $3.96. The annual trade deficit has gone up from $380 billion to $759 billion.
Have there been any benefits from this policy? Well, the overall economy (GDP) has grown by an average of 2.65% these past 7 years, though that is less than the average 4.09% growth during the eight years of the previous administration. The ruinous price increases and job losses have, of course, left most people worse off. But it has been very good for some. Productivity per worker has gone up by 18%. Corporate profits after tax have grown from $503.8 billion to $1,351.9 billion. The profits of the Standard & Poor's 500 top companies were 8.6% of GDP in 2006, a record high. The number of billionaires has increased from 186 to 415, and their combined wealth has quadrupled from $816 billion to $3.5 trillion. The top 1% of Americans have received cumulative tax cuts of $546 billion. For the biggest corporations and the wealthiest individuals, times have been good indeed.
How about for regular working folks? Well, the median household income has fallen from $49,158 to $48,201. We have lost 3.1 million manufacturing jobs. The official unemployment rate has gone from 3.5% to 5%, an increase of 2.1 million people. The percentage including those discouraged and no longer seeking work and those underemployed (the real unemployment rate), has grown from 6.3% to 9%. Consumer credit debt has gone from $7.65 trillion to $12.8 trillion, home foreclosures are up 68% and the savings rate has fallen from +2.3% to -0.5%.
In addition, there are 46.9 million Americans without health insurance, an increase of 8.5 million. The average cost of family health insurance has gone from $6,230 to $12,106 a year. The average cost per year at a 4-year public university has gone up $4,600 to $13,000 and at a private university has risen $7000 to $29,000. The maximum Pell Grant now leaves a student $8,746 short of covering public university costs. These factors have resulted in a 75% increase in the average debt a graduate leaves school with, which now stands at $21,000.
I regret deluging you with all these figures. It may have seemed a bit tedious going through them all. But seeing them in print may provide a tangible picture for what you have probably been feeling in your gut. Giving more money to the top few percent and cutting services to everyone else has not resulted in general improvement for the American people. It has instead resulted in an enormous accumulation of wealth at the top, a steady worsening of conditions for the overwhelming majority and has left the nation awash in debt. These are the same results produced when the supply side theory was applied in the 1980s. You might want to keep this in mind when considering how to cast your vote this November. I know I will.
1 comment:
A devastating legacy is left for the Obama Administration. There is a huge need to invest in an energy policy that can bring significant independence, education and infrastructure that will return us to national competitiveness, and health care to protect everyone. Add to this list the hardly incidental costs of caring for our veterans, retooling the military, and supporting the retiring baby boomers. Any one of the above means huge investments. Having squandered our wealth, the big concern I have is, can we really afford to do the things that we can't afford not to do?
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