History Sides with Demand (and Dems)

This article, in the Christian Science Monitor, echoes an historical observation recently in circulation: that the economy fares better under Democrats, who tend to raise taxes on the wealthy, than Republicans, who reduce taxes most for the wealthy in hopes that their consumption will spread the wealth around, which notionally trickles down.

Using Vu's potato chip analogy: Potato chips are a low-cost snack, but not a staple food. You buy chips if you already have enough to eat, but just want a little something extra to nosh on. If you don't have enough to eat, you skip the chips and get white bread and peanut butter instead.

Ezra Hogg, the golden-parachuted CEO of FATCORP, doesn't buy chips when he wants a little something extra. He buys a Bentley or a Rolex, both manufacturers that employ far fewer workers than FATCORP. So if, facing higher taxes, Hogg buys fewer high-priced luxury goods, the economic impact is far less than if large numbers of low-income consumers have to give up their low-priced luxuries.

Ronald Reagan raised taxes in his second administration. George Bush I raised taxes after promising not to. Bill Clinton raised taxes in the early 1990s. For a time in the late-1990s, a balanced budget seemed thinkable. Now ten years later, the U. S. Government is mortgaged like an insolvent homeowner, by the supposedly business-friendly policies of the GOP. Like insolvent homeowners, the voting public is realizing the need for a little discipline, and some thought about how to pay for purchases.