By now I hope that we can all agree that to solve the debt crisis, we are going to need to cut spending dramatically. Hiking taxes on the rich just isn’t going to be enough to put a dent in our current and long term fiscal imbalances. However, it is also imperative that we raise revenues as much as we can without impeding economic growth. In fact, not harming the economy is not nearly enough. We must actually grow it. We need a recovery, damn it!
As we discussed when we examined the Laffer Curve, it is essential that our nation finds the magic elixir of the perfect economic policy that we can feed the goose so she will lay as many golden eggs as possible consistent with providing for the maximum possible tax revenue so that we can afford to pay for the baby boom retirement. For years economists and politicians have argued about how to do this. In fact, the debate has been going on for so long and that many Americans like my buddy “Fred” don’t believe anyone anymore. When I attempted to explain how it was possible that supply side economics could grow the economy in a way that would help to fix our structural deficit problem, he wrote back dismissively:
It’s why everybody keeps rehashing the same arguments about the New Deal for 80 years. It’s why Republicans keep pushing the “trickle-down” theory. Have any of these philosphies worked yet? Does anybody know for sure? Whose statistics can you believe? On and on. It will never end.
My response to “Fred’s” statement was to shrug my head in sadness and lament that the level of economic ignorance in this country is not to be underestimated. Even the so called “experts” say things that boggle the mind. As Ronald Reagan once said: “An economist is someone who sees something that works in practice and wonders if it would work in theory”. However, it is one thing to be a learned but deluded ivory tower theoretician. It is another to display the type of utter cluelessness evident in some of our most prominent political leaders. After regaling us with her keen insight when she said that we had to pass Obamacare in order to find out what was in it, Speaker of the House Nancy Pelosi let go with this whopper:
That’s an actual quote and in her own voice. Here is one of the most powerful politicians in the country, who was instrumental in writing and passing a Keynesian stimulus plan through congress, and in one simple statement reveals that she has absolutely zero clue about basic economics whatsoever. When you think about it, this is without a doubt one of the most ridiculous and ignorant statements on economics ever uttered. And they say Sarah Palin is stupid.
If this is the level of economic literacy among the leaders of our country, you can imagine what it is for those stuck in the Matrix. My buddy’s statement about “trickle-down” shows that he is as absolutely ill informed about basic economics as Madame Speaker. But, at least, “Fred” isn’t alone. Unfortunately, the stupidity and downright ignorance of most people about economics is legion.