Let’s hear it for the Little Guy.
You remember the Little Guy, don’t you? He’s the one the Progressives insist they are trying to protect from the rapacious rich. That same Little Guy who is abused and beaten by the evil of Supply Side Economics: a nefarious theory that taking the tax burden off businesses will create a boom that benefits all levels of society. That poor sod drowning under the absurd Ronald Reagan insistence that “a rising tide lifts all boats”.
We are told by effete leftist Keynesian economists --- and therefore by the effete leftist politicians who regurgitate their pontifications for the less-effete voters who can’t tell a tax reg from a turnip –- that Supply Side Economics never works.
Keynesians posit the opposite theory from Supply Side: that “income tax breaks” should be given to the lowest socioeconomic levels of society, funded by tax hikes on Business and The Rich and then borrowing a whole chunk more. This, they explain, will let government and that lowest socioeconomic level of society spend more at the Dollar Store, which will make businesses successful as they get some of their money back, which will make them hire people, who will get raises, who will spend even more at the Dollar Store, and … you get the drift. The focus is on giving people money to create demand for goods and services: the "demand side" of economics.
One might have noticed that the phrase“Income tax breaks” has been put in quotation marks.
This is because the bottom 50% of Americans don’t pay any income taxes anyway. Objectively, one can’t enjoy a “break” from a burden one doesn’t have, but Progressives seldom let objective reality interfere with a nice symbolic poster slogan. Instead, they call getting a check from the government for a rebate of money never paid in the first place a “Negative Tax Rate”.
And getting an even bigger check for a rebate of money never paid in the first place is an “income tax break from a Negative Tax Rate”.
And in the same sly way that a fatter entitlement freebie is now an “income tax break from a negative tax rate”, the corresponding taxation of small business is a well-deserved punishment upon The Rich. Why? Because anyone in the top 20% of earners is clearly “rich”. And since almost 90% of income taxes are paid by the top 20% of earners, bumping taxes on ‘rich’ people means bumping taxes on everybody who, well… pays taxes. But that’s okay, because: rich. Get it?
If this is making your head spin, you’re doing fine. That’s the entire point of Progressive semantics. If you can follow the logic, they’ve failed.
In a sleight of mind that warms the cockles of every Progressive heart, this granting of income tax breaks to those who don’t pay income taxes ---- sorry: those who pay Negative Income Taxes --- is a triple win-win-win:
1. They get to punish evil capitalists.
2. They get to waste a bunch of what they confiscate on their government union sycophants in the bureaucracy.
3. Then they get to pay off their reliable voting constituents with a freebie.
What’s not to like?
It was this pleasurable and cozy little arrangement that Barack Obama turbo-charged in his vaunted Stimulus of the economy in 2009. Not only did Mr. Obama smack the bejeezus out of American business --- sorry, The Rich --- and redistribute it to the lowest income levels to spend at Dollar Store, but he supplemented that tax haul with a massive, unprecedented borrowing spree that socked the American taxpayer with a whopping $ 5.6 TRILLION dollars in additional national debt over just his first four years in office alone.
The result of Obama’s Keynesian bacchanal: the weakest recession recovery in American history and the weakest economic expansion since World War II.
Instead of the unemployment rate of under 5% promised by Mr. Obama and his magic money mobius strip, unemployment skyrocketed to 8.2%... in fact, had the ‘recovery’ not been so horrific that record numbers of depressed Americans gave up and stopped seeking any work at all, the real rate of unemployment would more accurately be 11%.
And the Little Guys took it in the neck. African American employment tanked, with an unemployment rate over 14%. Wages, even in the best Obama years, crept up by less than 2.5% a year, below inflation; effectively, workers lost income every single year. By the end of his second depressing term, blue collar jobs had decreased precipitously, to only 17% of the jobs market. Midwestern manufacturing lost 30% of its jobs in the 2000’s, a loss that Mr. Obama treated cavalierly, saying these jobs were simply “never coming back”. Blue collar in America was dead.
And here’s the kicker: Gross Domestic Product growth averaged an anemic, pathetic 1.6% during the Obama presidency, a number Obama declared to be “the new normal” for the US. Not only was blue collar dead, but so was white collar, and it was never going to get better. The New Normal was here to stay.
So, is Supply Side any better?
The idea behind Supply Side economics is that you can't artificially create 'demand' for products --- our Dollar Store buyers --- by the government handing out goodies. Demand, it says, comes when business booms and jobs swell and people have money and feel good about spending it. The economy, it insists, runs from the private sector engine, not government largess. And it's been tested now, twice in my lifetime.
First, Ronald Reagan did it, again coming out of a recession (a horrific one coupled with an energy crisis, both of which had been triggered by the last great Keynesian genius, Jimmy Carter). Reagan cut regulation, slashed income taxes at all levels, slashed government spending, and slashed business taxes. All of that was aimed at starving the government maw and feeding the private business sector to produce again.
“Reaganomics” --- a derogatory term bandied about by sneering Keynesians for years --- brought about a twenty five year boom in the US economy, marred only by two very shallow cyclical recessions that barely warranted the name. Our economy grew by over a third in that time: an unprecedented expansion that was the equivalent of adding the entire economy of China to our own. Reagan’s Supply Side approach, in fact, created “the greatest period of wealth creation in the history of the planet”. Inflation, which was rampant under Carter, disappeared. 50 million new jobs were created. Average household wealth grew by 65%.
Stop for a moment.
Average household wealth in America grew by 65% during the Reagan boom.
See that word: “average”? That, my friends, means the Little Guy.
Which brings us to that Richest of the Evil Rich: Donald Trump. Trump took office less than two years ago, and he began immediately to apply Reaganomics to an utterly stagnant US economy. He and the Republican Congress slashed regulations, like Reagan. They slashed income taxes and they slashed business taxes, like Reagan. They cut spending, like Reagan, at least as far as the Democrat obstruction in the Senate would permit. In short: Trump is a Supply Side guy, like Reagan.
And what happened?
Well, Gross Domestic Product is increasing by 4.2% a year. Wages are increasing by nearly 4% a year. Tax revenues to the federal government are at an all time high. Unemployment is at an all time low of 3.9%: “Full Employment”. Layoffs are at a 50 year low. 6.9 million jobs are jostling for employees to fill. Small business optimism is at the highest point in U S history. Even minority employment is the highest in history. There just aren't any dark sides to the current US economy left to kvetch at.
But... what about that Little Guy? Don't tax cuts to people who are actually paying taxes favor the top 20%? How about the Little Guy who works for him? Don't Supply Siders care about the Little Guy?
The depends on how you show caring. If caring is spouting vapid dogma at the Little Guy while you sign him up for food stamps, go with the Progressives. If caring is priming American business so he gets a job and then a raise, go with the Supply Siders.
Because, just as under Reagan, under Trump the Blue Collar jobs in American are hitting the roof. The construction industry is adding 30,000 jobs every month. Manufacturing is adding 25,000 jobs a month. In fact, for construction and manufacturing --- the main ‘blue collar’ job categories --- this year alone a staggering 607,000 jobs have been added, with another 1.7 million blue collar jobs in the service industry. And those dying small towns? Not so fast: rural employment is rocketing up at 5.6% per year.
And so, we are indeed full circle, back to the Little Guy. As it turns out, cute Progressive sloganeering and class warfare pandering, favorites of Mr. Obama and his economists, fail miserably to put food on the table. After all was said and done, that Little Guy didn’t need redistribution of his employer’s profits through “income tax breaks from negative tax rates”.
He needed a freaking job.
And just as Ronald Reagan’s economics gave him one in 1983, Donald Trump’s policies gave him one in 2018. Yay for the Little Guy; he waited 35 years for this.