McCain decided to attack Obama’s tax plan with the catchy phrase “America did not become the greatest country on earth by spreading the wealth around.” Unfortunately for Mr. McCain , that’s exactly the way America became the “greatest country on earth”, whatever that means.
You see, there is nothing new in the economic proposals of either candidate. McCain supports the trickle down theory, which fed the roaring 20s and finished with the great depression, and Obama supports Keynesian economics, which took the country out of it.
McCain, however, is running a disingenuous campaign, telling some of his supporters he wants to create institutions like those created during the great depression (Keynesian economics), but despising similar Obama’s policies as “government handouts”. I guess it is pretty hard to win popular votes during a downturn by supporting the trickle down theory.
From a historical point of view, the trickle down theory rears its head during periods of immense social wealth. During those periods it is easy to dream that “we all” can, and are, going to be rich, and the identification with the extremely wealthy plays well among those that have statistical low chances of achieving the same level of wealth.
The truth of the matter is that, since the mid 70s, Americans have lost the wealth they created during the previous 30 years with economic policies similar to those of Obama’s. At the core of Obama’s policies seem to be the belief that the trickle down theory failed (once again) and that we need a return to Keynesian policies.
One of the lines of attack of McCain’s is to go against the idea of “wealth redistribution”. Well, unless you belong to the upper 5% of the society, what’s wrong with a little bit of that? After all, it seems to have worked pretty well the last time we used it.
McCain, several times, compared Mr. Obama’s to President Hoover, who presided over the beginning of the great depression. Oh the irony! Mr. Hoover was a Republican president who believed that the fundamentals of the economy were sound (thus, he raised taxes), and who was an ardent proponent of the trickle down theory. Furthermore, when the country needed government intervention to stop the depression he was against government regulation, and, above all, government handouts.
If you plan on voting for McCain based on his portrayal of Obama’s, and his own, economic policies. You need to ask yourself the following questions:
How did the post war middle class get created?
The answer is, with the GI bill, that gave access to free college education to every veteran. This is similar to what Obama wants to do, and McCain is opposed to, calling it a “government handout”.
If the tax cuts to the wealthy are the way to solve economic crises, why are we suffering one?
Weren’t Bush’s tax cuts supposed to solve the previous recession? However, those tax cuts were given to companies that do not create new wealth. Furthermore, any tax cut to dividend gains only promotes investment in old companies that pay dividends, not in new companies that create jobs.
Furthermore, as American economy is driven by consumer spending, giving tax cuts and tax rebates to those unable to save (i.e., those who need to spend all the money they receive in food and other essentials) will provide a large economic boost to the rest of the economy. On the other hand, providing tax cuts to those who do not need to invest or to spend, does not provide any guarantee that those moneys will show up again on the economic cycle.
As was the case the last time America embraced the trickle down theory, we now have ended up in a deep crisis after a general bubble burst. As it was after the great depression, the answer today is, yet again, some redistribution of wealth. Once we are all out of this crisis, and we can start dreaming again about being rich, let’s embrace again the trickle down theory.
This article is part of the series "Redefining Riches"
Franklin @ October 18, 2008