Voodoo Economics Squared

With Paul Ryan as Mitt Romney’s vice-presidential candidate the GOP is doubling down on the neoclassical dogma that was popularized by Ronald Reagan more than thirty years ago. It has since been tried, tested and thoroughly debunked. It’s central piece of argument, that tax cuts will, by some magic will of it’s own, pay for themselves by higher growth, is nothing but a lie. It has delivered massive regressive wealth distribution from the low and middle end of the economic strata to the upper end. The budget being seriously underfunded, cries for cutting expenditures is, of course, expected. And another cycle can begin anew. Which, of course, is the whole point.

How anyone, with a straight face, still can propose these preposterous policies is beyond me. But let me offer you a tentative explanation. It looks something like this:

You start with right wing loony Ayn Rand and mix with a heavy dose of Milton Friedman’s monetarism. Add both vested interest and carried interest. Deduct both truth and facts and multiply that with Fox News which will give you the crucial ingredient of blatant ignorance.  Then add equal parts religion and patriotism and finally multiply the Koch brother’s money with Grover Norquist’s pledge never to raise any taxes whatsoever. With that you have the fluffy cake of Voodoo Economics Squared, full of sound and fury, signifying nothing.

Even Martin Wolf is growing tired of the charade. He is of course too civilized and bespectacled to use profanity but you can feel the frustration and repressed anger steaming off the pink pages how the math of the horse-shit theory just doesn’t add up, and the sheer hypocrisy of it all: Paul Ryan’s plan for America is not credible

“Yet this story has one drawback: it is false. Do not take just my word for it. This is what David Stockman, director of the Office of Management and Budget under Ronald Reagan and a true conservative, wrote in The New York Times on August 13: “Mr Ryan’s plan is devoid of credible math or hard policy choices.” This is right, with one exception: Medicare. On that, Mr Ryan does offer a hard choice. But the maths are incredible.

Indeed, the “starve the beast” theory explicitly aims at cutting taxes, in order to increase deficits and so justify cuts in spending. From this point of view, the financial crisis has been a boon. The crisis, which occurred on George W. Bush’s watch, is far and away the most important explanation for today’s huge deficits. But it came after unfunded tax cuts, unfunded wars and the unfunded prescription drug benefit (Medicare D). The fiscal mess the Republicans bequeathed made it difficult – indeed, given Republican opposition, impossible – for the Obama administration to implement a stimulus plan on the scale needed, as Bruce Bartlett, a former official in the Reagan administration, notes in a blog post for Economix. Not that Republicans have anything against stimulus, provided it takes the form of unfunded tax cuts.”

Paul Krugman is just as scathing in his brake-down, or should I say take-down, of Paul Ryan’s fiscal propositions:

“So if we add up Mr. Ryan’s specific proposals, we have $4.3 trillion in tax cuts, partially offset by around $1.7 trillion in spending cuts — with the tax cuts, surprise, disproportionately benefiting the top 1 percent, while the spending cuts would primarily come at the expense of low-income families. Over all, the effect would be to increase the deficit by around two and a half trillion dollars.

Yet Mr. Ryan claims to be a deficit hawk. What’s the basis for that claim?”

Always prescient Barry Ritholtz provided this instructive chart from Visualizing Economics: