“Recession!” is what they are crying these days. It seems that between interest-rate cuts, housing-market tribulations and the talking heads of cable news, the gloom of economic hard times is, perhaps, hanging over the U.S. horizon.
It is troublesome that thousands of banks accounts, families and jobs across the country could be lost. And yes, that perhaps could even affect you, working college student. Underlying the issue is a lesson many may overlook. What we are now facing is the result of years of bad supply-side economic policy.
Years ago while running for president, then-Gov. George Bush argued strongly for his view of U.S. economics. I remember he said he believed in cutting taxes, a thought that hardly anyone could argue with. The idea to get a nice cut in one’s taxes has always been popular. It’s easy to say, “cut taxes,” but which taxes are truly where the issue lies, and where many get deceived. What, perhaps, no one thought to ask was “whose taxes?”
What Bush didn’t divulge is that the taxes he wanted to cut weren’t for average Joe American. They were for a select few higher-income citizens and corporations. Supply-side economics is what this is called. The basic idea is that if you cut taxes for the highest-earning sector of society, then those people and corporations will put that extra money back into the U.S. economy. For example, if a company gets a chunk of change back from Uncle Sam, then that corporation can build a factory, hire more employees or expand, and so on. This would hopefully stimulate and create a prosperous economy.
Supply-side has been around for years now. It was dabbled with in the 1960s, but really took off with the Reagan administration, which advertised it as “Reaganomics” and implemented it vigorously. It has since been a cornerstone of the Republican economic mentality.
The problem with this seemingly logical policy is that it depends on the wealthy and corporations to give money back to society. The reality of the business world is that if a company gets money back from the government, it very well may spend that money on new employees, raises and factories in Indonesia, China, Jordan or some other country that is far cheaper to do business in than the United States. The inventors of supply-side economics may not have accounted for a global economy. It may have worked just great if the money had stayed in the country, in the hands of Americans.
Over the years, supply-side has grown more and more dominant, while more and more jobs have been shipped to other countries for the sake of saving on employees’ wages. Most people are aware of the manufacturing facilities many U.S. companies use in other countries, but it doesn’t end there. Just try and call up your bank’s customer service line. You will most likely find that the line spans overseas. As with our factories, a significant chunk of the service and technological job market has now been transplanted out of the country. Morgan Stanley predicts that over two million jobs will be outsourced overseas by 2014. These are white-collar, high-tech jobs that formerly provided a rather secure and exciting employment field here in the United States.
I am not an economic wiz–I am probably as good as the next guy at understanding the world of money. However, I do know the benefits of learning from history. What we have now found to be the result of supply-side economics is companies shoveling money out of the country along with the jobs that money paid for. If Americans are slim on jobs and not making money, how are we to purchase products, buy insurance and so on to contribute funds to the economy? If the market leaves the United States, we won’t be earning any money to buy these products that we once worked to produce.