Since the 90s we've had a cycle of the GOP running the same con over and over again. Initially some of the more sane Republicans would push back. It was George Herbert Walker Bush who called Reagan's economics a con, "Voodoo Economics" and who helped coin the term "trickle down economics." The more honest cons in the Reagan Administration soon knew that their con didn't work. David Stockman would admit it later. Summarized in the famous quote:
“None of us really understands what's going on with all these numbers.” —David Stockman
The Atlantic Magazine describes his cognitive dissonance in an article titled "The Education of David Stockman." The entire Reagan Administration knew from 1981 on that lowering marginal taxation on the wealthy and making up for tax cuts with cost shifting to workers, doesn't help the economy.
Big Lie
Even so “trickle down” was very popular among the "donor class", so its shills held (and still hold) their noses and supported the con anyway. They rationalized that if they adopted the Hitlerian Big Lie principle and repeated a lie often enough it becomes an article of faith.
- Investopedia, Voodoo Economics
- https://www.theatlantic.com/magazine/archive/1981/12/the-education-of-david-stockman/305760/
Consequently, among republican business preachers and operatives, this con is an article of faith. kind of a 13th commandment.
Why the Con?
Most educated people know that GOP economics is a con, but they preach it anyway. Some actually believe parts of it. This is because all big lies mix truth with myth. They know trickle down is vile, fails, increases inequality, bankrupts the middle class and small business, yet they practice it anyway. They trot out the same lies over and over and over again. What Gives?
Whenever a new religion starts, it is founded on a mix of convenient lies and some truths. When I studied Buddhism I found complaints about then new versions of buddhism that they were cons, that their founders were con artists, and that they were pulling the wool over the eyes of people. 700 years later those religions are still around and the stories of the founders are buried under hagiography and myth. The stories have become articles of faith. Lies are stubborn thing. Given time they become myths! Given enough time they become articles of faith. Ordinary folks hold to religions because they answer questions and quiet fears. But the rich and powerful teach myths because they are useful.
Republicanism is a secular religion. So is Democratic Republicanism. The schism between the progressive movement and what is now "conservative republicanism" dates back to Teddy Roosevelt. Maybe further. I believe that its true basis is the "ideology of privateering" but that is for another post. See [Privateering, Smuggling, Piracy]
The stupidity of GOP Taxes
There are a set of principles that spell out good taxes. They have to be optimized because taxes are transfers. And all transfers impact both the person giving the resource and the person getting them. People need enough resources to eat, participate in markets. People who generate resources, earn income, need to benefit from their labor or it's no longer worth it for them to do any work. Taxes need to be fair to the person being taxed and to those the person being taxed exploits.
Some things should be taxed Some not.
| Should be Protected | Should be Taxed |
| Actual Capital Investments | Income from Speculative Investments |
| Proceeds of Innovation & Invention | Rents from Privilege |
| Operating Corporations | Excessive Corporate Privilege |
| Land Improvements | Unearned Rents on Land |
| Resource Extraction efforts | Excessive income from resources |
| Basic Needs | Billionaires |
| Labor Compensation | Excessive Inheritances |
| Retirement Income and savings | Unearned Incomes |
For more on this see:
Note, the rest of this post is a bit rambling. It was draft a long time.
Constitutional Considerations
There are other considerations too. We have a constitution that was written to protect the wealthy landowners who dominated politics in the 1780s. So not everything we want to do can be done without careful language in fashioning the taxes. There is a taboo on Federal direct taxation of property. Our Corrupt SCOTUS
Repeated Tax Scams
Republicans have been Putting taxes on the rich, promising tax cuts for the middle class and delivering tax increases for the middle class and cuts to basic social services, since the 1980s. They inevitably cite modest deficits and then deliver massive ones. They then ignore all of that and act like they are surprised when the economy stalls and sputters. This has become a pattern.
They get away with this because they buy economists, schools, pundits, books, Congress, media. That is how they get away with it.
A GOP politician can tell you with a straight face that he's a "deficit hawk" and cut taxes that he knows will blow up the deficit. The GOP socializes the consequences of business swindle and failure and then rails against socialism as society tries to aid working people and formerly working people being bilked by the consequences of decisions made far above their heads. They treat economics as an advertising issue.
Regulating Pirates
All this is incredibly stupid and insane. Taxes are necessary for 2 reasons, one is to raise the revenue needed to operate the government, the other is to regulate debt money issued by the government in order to accomplish public good, without all the treasure going to the hands of monied people along with the debt part of the money.
We get to be the Cleanup Crew
The Democrats run on the consequences of GOP tax cuts, which are usually either inflation or stagnation or both. The GOP always blames "entitlement spending," but the deficits are usually caused by insufficient revenues, economic stagnation or excessive inflationary spending on the military. The Democrats get into power and then the GOP runs on the consequences of Democrats raising those taxes and having to clean up the mess they made. The effects of GOP economic policies usually have a timed detonator, and they try to get us to be in charge when the bomb goes off. It doesn't always work, as demonstrated in 2008.
Regulating Unearned Income and Privilege
Taxes need to fall on incomes from unearned privilege, such as from arms manufactures, vital industries or government contracts. Some of that income is earned. But when money floats in the economy much of it becomes somebodies property and someone elses debt. The reason that taxes should fall on unearned money from privilege, is that unless it is taxed, it gets loaned to people and becomes someone's debt. That wouldn't be a problem but debt money tends to lead to people losing the property that guarantees the debt simply due to the vagaries of economic cycles and weather. Inequality tends to grow.
Unregulated Debt Money == Instability and Inequity
With time unearned income buys 400 foot yachts and puts a few people to work. Taxes need to spare "actual capital" as defined by Henry George and they need to spare labor compensation. But unearned income also buys government employees and protects the 400 foot yachts. It doesn't work and that is why it is privilege and that is why it has to be taxed. Idle money leads to mischief. For more on fair taxation:
Essentially the GOP "tax reform" is anti reform, and pretty much ignores all the principles of just taxation.
Responsible Taxation And "Gresham's Law"
A considerable body of theory has developed over time that demonstrates fallacies in how the money supply is created and used. Ignoring any part of that body of experience leads to disaster. Let me summarize some of that body:
- Commodity Money is unstable and leads to treasure accumulation and hoarding, because there is never enough "good money" and so debt gets used as money. Gresham's law states that "bad money" drives out good money." It means that portable wealth with exchange value tends to get hoarded while hollow promises get traded. Gresham law mostly applies to money as a commodity with some intrinsic value. People naturally seek to save treasure for use in hard times. When they can they'll hoard "good money." Money as Treasure tends to wind up in treasure chests and looted and buried by pirates. Gold and Silver Standards fail to stabilize for that reason.
- Money as Private Debt not only is equally unstable but when accompanied with interest it drives wealth into the hands of those who are owed and increases inequality. Private note money started as banknotes backed by gold or silver coin. The bankers would usually print more notes than the Gold or Silver they had in their vaults. The result was periodic "panics" followed by depressions as folks didn't have any money.
- Printing money without some sort of backing leads to inflation. Horrid examples like the Weimar Republic show what happens when one tries to inflate ones way out of private debt.
- Money as Public debt can work, but only if it is regulated well.
Privateering on Money
One reason for the requirement for apportionment of direct taxes was to preserve the economic viability of the States. Even so the failure of proper collaboration between State and Federal power over money is a root of economic inequality. The reason this occurred was that the majority of the founders, including Alexander Hamilton, dumped Benjamin Franklin's suggestions and privatized the money power. [See Franklin on Money] It is easier to fight about resources than to share them fairly. Franklin was actually mostly spot on on the importance of paper money as public debt
Ceding the Money Power to the Fed & Others
Despite the fact that our founders understood the importance of a just and fair economic system and the fact that a republic that cannot control its money supply lacks supreme power over its own fate, our system very early ceded the power to print and issue money to privateering actors. Alexander Hamilton sought to create a Reserve Bank, modeled mostly on the Bank of England. Thomas Jefferson fought the reserve bank idea largely because he saw a plot to centralize power in New York City. The forces of private centralized banking and decentralized private banking duked it out for most of our countries history. The present situation is less than optimal due to that legacy.
European Privateering Colonialism on Money
Worse, the European Powers never even considered a money power founded on just and equitable principles. The European powers imposed a privateering money at home, in their colonies, and client states. They based their economic system on private power, usually funded on who had the gold. This system of privateering bankrupted people in those colonies. Our own USA was founded fighting such privateering. When European powers from those colonies they left inequality and ownership in a minority.
Often the rebels who took over when the Colonial powers left, took that land for themselves. Colonial tyranny thus gave itself over to neo-colonial tyranny.
Our current world system witholds supreme power over local money supply from local and many central governments alike, and puts it in the hands of private persons, bankers. Even countries that have full sovereignty over their money supply do this. This international power is corrupting and corrupt. A nation can have the illusion of full independence until they cross the wrong bankers. Then the economy fails, other countries collect on debts, and invasion happens.
This started as a long draft that was a grab-bag for unfinished ideas and stuff I was reading. Cleaning it up meant deleting half of it. So there is more to come.
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