President Ronald Reagan famously used that line for the first of several times in the 1980 Presidential Debate against incumbent President Jimmy Carter. Carter began arguing the fact that former Gov. Reagan had been staging a 20-year battle against Medicare, what Mr. Reagan continually called “socialized medicine”–he wasn’t wrong, but sounded much more sinister back then. Mr. Reagan successfully disarmed the debate situation and changed the subject with the, now famous, quote.
I borrow the quote now, not to deflect, but rather to call attention to Donald Trump’s recent speech on how American economics should be run.
My thinking has always been that if Mr. Trump knows anything at all, it should be about money and how it works. So, I was listening last week when he delivered a major speech revealing his economic plan. I was expecting to take notes and see if there were ways I could compare his new plan to any others. I expected new stuff.
It only took a few words into the speech to realize that I had heard it all before.
Mr. Trump’s economic plan is simply a rehash of Pres. Reagan’s nearly disastrous plan to cut taxes for the royal class with the hope that money would percolate through the web of business and ownership, and eventually drip into the wallets of the people who actually need the infusion of cash–the working class. I say “nearly disastrous” because Pres. Reagan, unlike Kansas Gov. Sam Brownback and Michigan Gov. Rick Snyder, saw the error of his ways and raised taxes 11 different times in the next years, undoing most of the harm he had done to the American economy.
Govs. Brownback and Snyder, along with other Republican governors, have drastically cut taxes and remain steadfast. Now, due to insufficient funds, teeter on the verge of having their states dry up and blow away, like the tumbleweeds that dot Brownback’s Kansas prairie landscape.
The tired old Reagan plan has been called Supply-Side Economics, Trickle-Down Economics, and most accurately by Pres. George H. W. Bush, “Voodoo Economics” during his run for the presidency in 1988 while Pres. Reagan was still in office. Of note is the fact that the Reagan administration did not push back at the vice president’s derogatory characterization of his boss’s plan.
What is plain is that Pres. Reagan’s economic plan of money trickling down through the wealthy to the poor simply does not work. And, here Mr. Trump goes again, dusting off what has been tried and proven to be faulty economic theory, presenting it to American voters as if it were some new, shiny, simplified object.
To think that the rich and owners of big business will take windfall monies and put them back into the workings of their companies is folly. They take the money out of circulation by putting it in their trophy savings and money-making accounts, often not even in the United States.
There is one and only one factor that will make business owners invest more money and expand companies–demand. If their goods or services are selling, they grow, if they are not, they stand pat or downsize. There is no evidence or history to the contrary.
The best way to create demand is to put more money directly into the hands of people who will spend, not save it. The poor and working classes of Americans spend every penny. When they get extra money, they begin buying items on their wish lists. President George W. Bush saw the wisdom of this thinking and sent us all a check for around $1,000 in 2008. He urged us to spend it immediately. What he didn’t make clear was that it was a loan of our own money and that we’d have to repay it at income tax time. But, that is fodder for another column.
Mrs. Making-Sentences and I bought a new mattress. We’re good citizens doing our part.
Money given to poor, working poor, and even the middle class, is money that gets dumped right back into the economy. We buy stuff creating demand. People who are looking for jobs get hired to make/offer more goods and services to satisfy customers. Then, in turn, have more money to spend on even more stuff–creating more jobs, making the economy hum. The origin of the money doesn’t matter. Whether it is welfare, stimulus money, tax breaks for the bottom 80%, or simply a handout, it gets spent and makes the economy stronger.
Mr. Trump, there is no reason to give the handout to the rich and watch it disappear from circulation. Give it directly to the people who will keep the cash moving within the American economy.