Voodoo Economics Once Again
by Michael Parenti
During the Reagan-Bush
years (1981-92) we were the victims of voodoo economics. In the years since,
we have been the victims of Clintonomics, a slightly milder variation of
the same. "Voodoo economics" is a term that George Bush invented
during the primary campaign of 1980 when he was running against Ronald Reagan
for the Republican presidential nomination. The phrase dogged him when he
served as vice-president under Reagan. Determined to put it to rest, he
contacted cooperative elements at the various TV networks to see if a tape
of him saying "voodoo economics" existed. He was told it did not.
So in Houston on February 9, 1982, Vice President Bush publicly asserted,
"I didn't say it. Every network has searched for it, and none can find
it. So I never said it." As it turned out, Bush was caught lying through
his teeth. After his Houston speech, NBC-TV found a copy of him referring
to Reagan's tax and budgetary agenda as "voodoo economics." The
network played it alongside Bush's denialone of those rare instances when
the media actually did their job and exposed the shameful dissembling that
is regularly practiced in high places.
Voodoo economics is really supply-side economics, a trickle-down ideology
that goes some thing like this: If left to its own devices, the free market
will provide prosperity for all who are willing to work. Liberated from
the irksome and artificial constraints of government regulations and heavy
taxes, private investment will grow, bringing greater productivity, more
jobs and income for everyone and less government. A better life awaits us
as citizens and taxpayers when an overgrown federal bureaucracy shrinks
dramatically and huge budget deficits disappear.
The supply-side theory assumes that as the corporations accumulate wealth,
much of it will trickle-down to the general public. (This process is known
as "feeding the sparrows through the horses," referring to the
way sparrows peck undigested grain bits out of horse droppings.) In addi
tion, there presumably will be an expansion of individual freedom as people
enjoy greater discretion in how they spend their money, more of it as private
consumers and less as taxpayers.
In keeping with supply-side basics, during his administration President
Clinton repeatedly pointed to the private sector as the great source of
future jobs and prosperity. He differed from Reagan and Bush in that he
called for a more active role for government in "jump-starting"
a lagging economy, but he did almost nothing of substance in that direction.
Conservative Double Standards
Conservatives are for weak or strong government depending on what class
interests are being served. In recent years they have cut federal assistance
programs thatbenefit the have-nots and eliminated or weakened numerous government
regulations, making corporate institutions less accountable to public authority.
The deregulation of banking, for instance, resulted in the savings-and-loan
disaster. Underwritten by a federal government that was pledged to pick
up the losses, private financiers invested wildly for quick profits. When
their ventures collapsed, the taxpayer was left holding the bag. The bankers
skimmed the cream and the public will be swallowing the multibillion dollar
losses for decades to come.
While insisting that they want to get government "off our backs,"
conservative supply-siders do not hesitate to use government to intrude
upon our lives and our most intimate moral choices, be it school prayer,
flag worshipping, library censorship, or compulsory pregnancy.
Such "cultural" issues are used to recruit middle Americans around
the conservative banner. The right-wing fundraiser Richard Viguerie noted
that "the abortion issue was the door through which many people come
into conservative politicsThen we lead them to concern about sexual ethics
and the purportedly decadent morality" fostered by "secular humanism,"
which is represented to them as "the royal road to socialism and communism."
This in turn "points the way to commitments to minimally regulated
free enterprise at home and to aggressive foreign and military policies"
(Chi cago Tribune, January 25, 1987).
More recently, on a PBS special (September 11, 1994), William Buckley and
a group of other conservative pundits openly discussed the need to use cultural
and moral issues to activate people
and direct them toward a conservative free-market ideology. Rightist leaders
have a conscious and quite rational agenda designed to enlist people in
the cause of capitalism.
For conservatives, the keystone of all individual rights is the enjoyment
of market rights, the right to make a profit off other people's labor, the
right to enjoy the privileged conditions of a fa vored class. By this view,
government is an intrusion when it offers school lunch programs, not when
it imposes school prayers; an intrusion when it expands its environmental
protections, not when it expands the police and military powers of the state;
an intrusion when it tries to redistribute income downward, not when it
promotes upward redistribution.
Welfare for the Rich
Conservatives denounce liberals in Congress
for their "tax, tax, spend, spend" proclivities,
for their allegedly profligate habits of deficit
spending. In fact, the wildest deficit spenders
in our history have been conservative Republicans. The Nixon and Ford administrations
produced record peacetime deficits, only to be surpassed many times over
by the Reagan and Bush administrations. In the first five years of the Reagan
administration, Congress actually appropriated a total of about $12 billion
less in discretionary spending than Reagan requested in his budgets.
Big business is always ready to pocket all the profits and socialize the
costs. Thus the toxins that industry creates are called our toxic
waste problem, not DuPont's or Exxon's. The big corporations just reap the
profits from the production process that creates such poisons, while the
taxpayers pick up the disposal costs.
If there is too much federal welfare spending, it is the welfare that goes
to the rich not the poor. In 1994, the amount of money allocated for Aid
to Families with Dependent Children (AFDC), the program that is popularly
known as welfare, was about $23 billion, or less than 2 percent of the entire
budget. An additional $50 billion was spent on low-income assistance such
as school lunches and food stamps, programs that often do not reach all
of the needy or those most in need.
In contrast, in any given year the federal government hands out more than
$100 billion to big business in price supports, payments in kind, export
subsidies and export promotions, subsidized insurance rates, new plants
and equipment, marketing services, and irrigation and reclamation programs.
Additional billions are spent on loan guarantees and debt-forgiveness, including
the recent erasure of most of the megabillion-dollar debt owed by the nuclear
industry for uranium enrichment services provided by the government.
Welfare for the rich is the name of the game. Over the years, the federal
government has sold or leased to private firms, at fees of 1 to 10 percent
of true market value, billions of dollars worth of gold, coal, oil, and
mineral reserves, along with grazing and timber landsall of which are the
property of the people of the United States. The government has provided
billions of dollars to rescue giant corporations like Chrysler, Lockheed,
Continental Illinois, and over $500 billion to bail out savings-and-loan
institutions. The government distributes billions in research and development
grants, mostly to corporations that are then permitted to keep the patents
and market the products for profit. The government develops whole new industries,
takes all the risks, absorbs all the costs, then hands the industries over
to private companies for private gainas has been done with aerospace, nuclear
energy, electronics, synthetics, space communications, mineral exploration,
and computer systems.
The government permits billions in public monies to remain on deposit in
banks without collect ing interest. It tolerates overcharging by firms with
which it does business. It awards highly favor able contracts to large companies
along with long-term credits and lowered tax assessments amount ing to additional
billions each year. And through nonenforcement, it has turned the antitrust
laws into a dead letter.
In regard to all this corporate largess, no mainstream commentator asks,
"Where are we going to get the money to pay for all these things?"an
inevitable question when social programs are pro posed. Nor do they seem
concerned that the corporate recipients of this largess will run the risk
of having their moral fiber weakened by dependency on government handouts.
In sum, the myth of a self-reliant free market, trickle-down economy is
just that, a myth. In almost every enterprise, gov ernment provides business
with supports, protections, and opportunities for private gain at public
expense.
The Tax Game
Under corporate state capitalism, which is what I have been describing,
the ordinary citizen pays twice for most things. First, as a taxpayer who
provides all these subsidies and supports, and then as a consumer who buys
the high-priced commodities and services. Taxation, like public spending,
is used to redistribute wealth in an upward direction. Rulers use the coercive
power of government to take substantial sums out of our paychecks and give
it to the super-rich and the giant cartels. If we take into account all
local, state and federal taxes as well as Social Security, we find that
low- and middle -income people fork over a higher percentage of their earnings
than do those in the highest bracket. Even the establishment Washington
Post (April 14, 1985) admitted: "Taxes on the working poor have
skyrocketed while taxes on the well-to-do and profitable corporations have
declined dramatically." The Wall Street Journal added: "One
of the ironies of the federal tax system is its bias against the poor."
Far from being an irony, it is a consciously pursued policy of supply-side
economics.
Regressive taxeswhen the rich pay a smaller amount or smaller percentage
than the poor have been increased, such as user fees and Social Security
taxes. For all his talk about having the rich pay a fairer share of taxes,
President Clinton merely lifted the top-bracket tax a few percentage points,
kept almost all the privileged write-offs, and proposed a number of regressive
excise taxes.
The heavily regressive nature of the Social Security tax has recently made
Social Security popu lar among conservative leaders. When Reagan first came
into office, he held to the right-wing belief that Social Security should
be eliminated. Conservatives circulated the false claim that the fund was
going bankrupt. Then they realized it actually ran a surplus that was shifted
over to general funds and used to pay for FBI agents, nuclear missiles,
White House limousines, and other regular budget items. They also realized
that the poor pay proportionately more into it than the rich; indeed, most
low-income people pay more in Social Security taxes than they do in income
tax. So conservatives stopped attacking Social Security and even resisted
efforts by some liberals to reduce the tax. This is not to say that Social
Security should be eliminated. But we should reduce the Social Security
payroll tax so there is no surplus to be misapplied by the government to
purposes other than for what the money was intended. As it now stands, people
mistakenly believe their retirement payments are going into a fund that
will be waiting for them in their old age. Actually, the retirement system
is predicated on the assumption that the government's power to tax future
wage earners will produce sufficient amounts to finance the pensions of
those who are paying exorbitantly high Social Security taxes today.
It has been argued repeatedly by conservatives that if the wealthy were
taxed more heavily, it would not bring an appreciable increase in revenues
because there are so few of them. Aside from ignoring the injustice of having
the rich pay less, this contention is simply untrue. If corporations and
rich individuals were paying taxes today at the 1979 rate, when we still
had a 70 percent income tax, the government would be collecting at least
$130 billion more per year, and there would be far smaller deficits. In
1945, corporations paid 50 percent of all federal tax revenues. Today they
pay 7 percent. The government is borrowing money from the people it should
be taxinga major reason for the huge deficits.
Generous tax breaks are supposed to spur new investments and create new
jobs. In fact, firms
that are now paying less taxes are also downsizing their workforces. A big
tax break is more likely to be turned into a windfall, higher dividend payments
to stockholders and bigger salaries for the top managers. More money is
not an inherent incentive to invest if there is insufficient demand for
new goods and services, that is, insufficient buying power.
In sum, we have spending and taxing policies that benefit the rich and powerful
at the expense of the ordinary populace. If this is democratic government,
then who needs tyranny? What we need is not only the political forms of
democracy but the economic substance, that is, government policies that
benefit the needs of the many rather than the greed of the few.
Michael Parenti's books include Land of Idols: Political Mythology
in America, Against Empire , and the forthcoming Dirty Truths.
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