Gene Sperling: 'Rising-Tide Economics'
Issue #6, Fall 2007
" ... Supply-Side Blindness: Rising Tide as Trickle Down
" ... Supply-Side Blindness: Rising Tide as Trickle Down
For many conservatives, the notion of a "rising tide lifting all boats" is not a test but an automatic assumption that growth–and specifically tax relief to upper-income Americans–will trickle down and lift everyone else up. Supply-siders even argue that Kennedy devised the "rising tide" metaphor to defend his decision to reduce the absurdly high marginal tax rates that existed at the time. For example, promoting the 2003 Bush tax cuts, former Treasury Secretary John Snow said, "I think it was President Kennedy who talked about ‘a rising tide lifts all boats,’ when asked to characterize his tax plan back in 1962, I think. There is a lot of merit in that idea." But as his presidential papers reveal, Kennedy never used the "rising tide" line to defend tax cuts of any type. Indeed, the first time he used the line as president was, fittingly, in Colorado on August 17, 1962, to praise congressional approval of a giant dam project.
History aside, the ideological faith in trickle-down economics is wrong on three counts. First, while supply-siders see Reaganomics as a golden period, the 12 years of Reagan-Bush were more like a period of rising yachts and sinking row boats. From 1980 to 1993, average incomes of the top 5 percent rose 62 percent, the top 20 percent rose 34 percent, and the middle was stagnant. The bottom quintile actually saw its income decline by 10 percent in real terms. Second, the "don’t worry, be happy" attitude of the supply-siders shows a profound blindness towards the increased sense of risk and economic anxiety being felt by working Americans. Fear of outsourcing is not just the province of manufacturing workers; rather, 61 percent of Americans think their or a friend’s job may be at risk from globalization. A 2006 Pew Research Center poll found that half of the respondents worried that their children would be grow up to be worse off than they are. And while the Bush Administration’s rhetoric may show insensitivity to rising economic anxiety, its economic policies have been like a boxer leaning into a left hook–responding to that anxiety by imposing even more risk on the individual, from partially privatizing Social Security to pushing incentives to move more Americans into an often callous individual health market. Taken together, these policies amount to what Economic Policy Institute economist Jared Bernstein calls YOYO ("you’re on your own") economics. And finally, their ideological insistence on small government prevents conservatives from embracing growth-maximizing public policies that can help attract high value jobs, encourage more risk taking, and reduce the backlash against globalization, precisely by mitigating the negative effects of job loss. ... "
http://democracyjournal.org/article.php?ID=6547
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