Why do voters fall for Romney's snake-oil economics?
A point-by-point analysis of why Romney's cures would make the economy much worse. And why Democrats, too timid to propose clear alternatives, share the blame.
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It should be surprising that Mitt Romney’s economic ideas get credence from so many people. Polls show that more people think the Republican presidential candidate has a better handle on the economy, and most of the reporting on the campaign treats the Romney-Ryan prescription with an amazing degree of respect.
Romney is criticized for a lack of specificity in his plans, but he's quite clear about what he wants to do: Cut federal spending and taxes, reduce regulation, rescind President Obama’s health care plan, and privatize Medicare. That seems pretty straightforward.
But what would those ideas do?
Let's start with his plans to cut federal spending: This undeniably would reduce overall demand in the economy and make it worse. Less federal spending means less direct federal employment, fewer contracts for private firms that sell to the government, less infrastructure investment, and less support for research and education. This means a smaller economy, more unemployment and another downward spiral.
Many agree that if Congress fails to reach a budget deal and the federal budget is automatically slashed next year, we’ll go back into recession. Why? Recessions are caused by mostly one thing: a drop in overall demand. Demand falls when people lose jobs and income. In the long run, economies do sort this out, but in the long run, we’re all dead. The past five years of recession and limping recovery are gone; you don’t get them back. So if you think people should live better lives, as Romney promised in his acceptance speech, then we ought to do something about the economy now.
Remember that it was only massive federal spending for World War II that ended the Great Depression. President Franklin Roosevelt spent most of his first two terms in office trying to balance the federal budget. His recovery programs were never very large and he chose to pay for them by doing things such as cutting federal workers’ salaries, blunting the impact of increased federal spending elsewhere. When FDR got Congress to cut spending in 1936 and 1937, the economy fell farther and faster than it had in 1929-30.
So we should understand that federal budget deficits are not the source of our current problems. We should also understand that nobody thinks we can run this kind of deficit forever. But in the short term, cutting spending will only make the economy worse. Ongoing cuts in state and local government spending have largely offset private sector job gains in recent years.
The usual Republican complaint about deficit spending is that borrowing money crowds out private investment. There is zero evidence that this ever happens. Then again, it’s only Democrat deficits that provoke this outcry; George W. Bush’s surplus-killing deficits, in the words of Dick Cheney, "didn’t matter."
Romnivores also claim that businesses aren’t investing because they’re afraid of what government will do. This is poppycock. Businesses invest because they see rising demand for their products and services. A dimwitted business person wouldn’t pause a minute to worry about government if he saw a chance to make a buck because his customers wanted more of his stuff.
When demand rises, because people have more jobs and more money, businesses respond by ordering more product and hiring more help. Existing workers get more overtime, or even raises to keep them from running off to another firm. This filters upward throughout the economy – more orders mean more sales for wholesalers and producers, who in turn have more money to spend, save or invest. This is not rocket science. It is the opposite effect of what happens in a recession, in every way.
So, as long as demand is slow, because people either don’t have jobs, don’t have good jobs, or are afraid that they will lose their jobs, the happy times will not return to Main Street.
Now, what about the nostrum of cutting taxes? Tax cuts have a fairly miserable record for stimulating economic growth, but remain the Republican panacea for all problems. It is the old Jack Kemp, supply-side argument, warmed over: If taxes are too high, economic growth will be curbed.
But how high is too high? The Kennedy tax cuts in the early ‘60s were followed by a modest bump. Both the Reagan and Bush tax cuts produced nothing more than larger deficits. Even tax credits for new hires don’t produce much boost in employment.
Meanwhile, the United States already has nearly the lowest taxes of any industrialized nation on earth, which includes corporate taxes. The top marginal rate is indeed 35 percent, but virtually no U.S. corporation pays that rate. Given the generous banquet of deductions offered, the effective rate is about 20 percent, which is in line with other nations. Mittens’ proposed cuts would take the effective rate to around 5 percent.
But if our economic growth is lagging behind that of other nations, most of whom have higher tax rates, how can our taxes be too high?
U.S. states with lower taxes and better “business climates” in fact have lower wages, lower standards of living, and more problems. The irony of the red state/blue state divide is that the anti-union, low-tax, low-regulation, anti-federal intrusion red states in fact take in more in federal aid than they pay back in federal taxes. The feed off the surplus of blue states' economies.
Next on the Romney prescription: deregulation. Same song, different verse. We already have less regulation than other industrialized nations, and our economy still sucks. End of story. And it was an utter lack of regulation that led to the banking crisis, which you may recall as the source of our current problems.
So how about ending Obamacare? As Mittens is the man for all reasons, he is campaigning on ending the very same plan he campaigned for as governor of Massachusetts. What would this achieve? By taking people out of insurance pools, we would revert to the system where only healthy and wealthy people would buy insurance, leaving the uninsured to show up at emergency rooms, getting the most expensive care possible, in hospitals who then pass the cost on to their insured customers in the form of higher costs. Meanwhile, we would get lower productivity from workers who would be more sick more often because they lack basic health care.
Granted, the Obama plan was a terrible piece of legislation, albeit an improvement on the status quo. A much better idea would have been something like Germany’s system, where everyone gets basic health coverage from the government, and anybody who wants a higher level of care can buy private insurance on their own dime. But that was not politically possible.
Then we come to a favorite of Paul Ryan: privatizing Medicare. Turning the system into vouchers would clearly mean less coverage for more senior citizens. This makes us all better off? If Medicare is failing, it’s because it, like Social Security, is supported by an insufficient tax system. Scrap the cap on taxable earnings and those problems largely disappear.
All of this raises two questions: 1. Why do the Republicans persist in pushing a plan that makes so little economic sense? 2. Why do people still believe this stuff? Human beings can convince themselves that nearly any behavior is justified. The Republicans are job creationists, with an unwavering faith in the power of markets to profitably be rigged by the rich and powerful for their own benefit. They are, without fail, true to their creed: The rich need to be richer so they can create more jobs.
Politically, the obvious upshot of Mittens’ economic menu is that the rich will indeed get richer, allowing them to further dominate the political system and further impoverish the rest of the country.
That might benefit a political party, but will the people continue to swallow this? Do you think you still live in the land of opportunity? We now rank 56th out of 200 countries for income inequality, and 93rd for income mobility. We are behind Argentina and Guatemala. A poor person is more likely to become rich in most parts of Europe than he is in the United States. And the average American is now in fact poorer than the average Canadian, who thrives in a land of high taxes, high regulation, government-run health care and gay marriage.
So why do people persist in believing that Romnenomics would make the economy better?
Most of the voters are perfectly intelligent people, but we do have a subset for whom “keep the government out of my Medicare” can become a rallying cry. Don’t confuse them with facts.
We shouldn’t really blame the Republicans for apparently being willing to say anything, over and over again, regardless of the truth, in order to get elected. This is the history of political campaigns, and always will be. Franklin Roosevelt, who put Romney to shame for general vagueness, railed against “irresponsible Republican budget deficits” in the 1932 campaign, without having a clue about what he was saying.
No, the real culprits here are the Democrats, from top to bottom the most inept political party of the last 40 years. Beginning with Ronald Reagan’s election in 1980, Democrats typically have been scared to make a case for their view of government. Rather than arguing for the valuable role a strong government can play in the economy, they run, they hide, they apologize, they whimper. They cede the field to Republicans, who despite having become little more than the Greedy Old Party, at least say something coherent, as nonsensical as it is.
President Obama still makes a good stump speech, but it’s not good enough. He will probably point to health care reform as the crowning achievement of his administration, but it could be regarded as his greatest folly. As many in Congress urged him, had he spent his precious political capital on economic recovery, by way of a big enough stimulus package, the Democrats might not have lost control of the House of Representatives in 2010 and the 2012 election would be a very different story.
Meanwhile, Democratic gubernatorial candidate Jay Inslee is continuing the tradition established by Christine Gregoire of not making a particularly compelling case for being governor. Inslee is flouncing around the state talking about renewable energy and green jobs. This would probably work amid an economic boom, but that’s not where we’re at, is it?
Inslee used this approach in a speech to a gathering of heavy industry representatives earlier this year. How much sense does it take to tailor your pitch to a group from the smokestack industries? What's the wisdom in walking into a group like that and blindly repeating “We need more green jobs”?
If Democrats actually want to win this election, they need to be hammering home two things: What the Republicans want won’t help. That dog don’t hunt; that pony don’t run. What we want will work better, and here’s why. Cutting spending will simply hurt the economy even more. Now is the time to invest, not to shrink. Investing in the economy – public works, support for basic research, and more education and training for more people – is what will keep us from turning into a third-world country.
Democrats also need to say: We’re not anti-business. We don’t want to put anybody out of business. We want to continue to help create the conditions that help businesses thrive. And that means a government that keeps the playing field level, that provides the human and physical infrastructure that makes profit possible, that balances the need for regulation with the need for flexibility and fairness. You need a strong private sector to keep the power of the state in check. And you need a strong state to keep the power of the private sector in check. A blind and total faith in markets makes no more sense than a complete rejection of them.
The Democrats are counting on the other party’s standard-bearer to keep hitting his own head on his backswing. That isn’t a lock-down campaign strategy. At some point, you have to be for something.
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Comments:
Posted Mon, Sep 3, 8:26 a.m. Inappropriate
Does Professor Sell teach his Highline College Course using terms like "Romnivore","Mittens" and "Greedy Old Party"? What a pathetic attempt to try and get Steve Clifford's gig at Crosscut. Either that or this individual has no business being anywhere near a classroom.
Posted Tue, Sep 4, 12:55 p.m. Inappropriate
I agree, the author's inability to refrain from degradations brands himself as dbreneman points out below.
Sell does have something to say of great value: "We shouldn’t really blame the Republicans for apparently being willing to say anything, over and over again, regardless of the truth, in order to get elected. This is the history of political campaigns, and always will be. Franklin Roosevelt, who put Romney [and Obama] to shame for general vagueness, railed against “irresponsible Republican budget deficits” in the 1932 campaign, without having a clue about what he was saying."
Does not Sell or anyone else think that if we knew what to do to regain the economy we had where we left it, we would not be doing it? As more serious thinkers point out, we have never been in these waters before, let alone charted them.
As for charts, T.B. Edsall's 2012 "The Age of Austertiy, How Scarcity Will Remake American Politics" diagrams a telling one. Using projections from the Congressional Budget Office, Edsall charts, one atop the other the following five factors for the years '09 to '19: economic downturn, TARP/Fannie/Freddie, recovery measures, Bush-era tax cuts, and the Wars in Irag and Afghanistan. The additive, sum total deficit resulting from all five factors varies from -1.5 trillion dollars in 2010 to ~-1 trillion in 2013-14 to -1.2 trillion in 2019. The variation for the economic downturn, the first factor at the bottom, is -.6 trillion in 2011, -.3 trillion in 2015, and .4 trillion in 2019. This time we fought depression-saving War first!
As for uncharted waters, Roger Scruton's 2012 "How to Think Seriously About the Planet, the Case for an Environmental Conservatism" initiates the needed distinctions: two competing conceptions of politics— one seeing politics as mobilizing society toward a goal, the other seeing politics as a procedure for resolving conflicts and reconciling interests, with the society conscripted for a shared purpose only in emergencies and temporarily; one approaching action as agenda-driven movements towards top-down impositions, and the other approaching action as people joining together to establish collective liability, share problems and co-operating in solving them; one seeing and reacting to a linear set of problems, the other seeing and reacting as members of a world's worth of homeostatic systems.
Scroton points out that on the other hand "others have lived in conditions of scarcity without the awareness that they are using up the finite resources on which their successors would depend." History matters.
Posted Mon, Sep 3, 1:40 p.m. Inappropriate
On the notion that cutting government spending will make the economy worse, it should be noted that currently, government's share of GDP is close to 25%. It usually averages between 18-20% Government is sucking otherwise productive money out of the free economy and depriving the people of using this money for their own pursuits. Government is spending too much. Free that money up and watch it work.
On the notion that government spending on WWII ended the great depression. While it didn't hurt, it was really the end of the New Deal that kickstarted the economy. The government was just the primary customer. That kind of economic growth could not have taken place with the economy shacked by such burdensome regulation. Faced with a genuine crisis, FDR said we no longer needed "Doctor New Deal", we needed "Doctor Win the War." The world leader that ended the Great Depression? Adolph Hitler.
Now, the author says that businesses are afraid to invest because there are no customers. But he implies that things will be fine once the economy improves and more people have jobs. OK, as an economist, he can assume a recovery, just like in the old joke, the economist adrift in a lifeboat full of canned rations assumes a can opener. But the recovery will not come until businesses feel they can freely hire new workers, and that will not happen until the government gets out of the regulation-of-the-week business. Businesses need to be able to compete with each other, and not always have to keep their eyes on their backs to see what the next attack from government is going to be. The government can't cause a recovery, it can only permit it. Under Obama, it refuses to.
The author is correct that big corporations have a low effective tax rate because of exemptions, loopholes, incentives, etc. However, only corporations large and diversified enough to take advantage of those loopholes do. So, GE pays less than 1% tax, and the guy who owns the corner gas station gets hosed for close to the full 35%. This is insane. Yet all of this president's tax proposals have been to make the tax code more complicated. This compounds the insanity. Businesses do not exist as revenue streams for government. They have more important things to worry about, yet the current tax code consumes a great deal of their time and efforts. Radical tax code simplification will help businesses be more productive and will increase revenue to the government while letting businesses get back to doing business, not tax accounting.
That's enough for now, and I've only covered the first half of the article. But since the author loves surname-based jests, I can close with the warning to be cautious of those who Sell (ha, ha, ha... get it?) you big government snake oil as the solution to your economic ills.
Posted Mon, Sep 3, 4:49 p.m. Inappropriate
dbreneman, every single point you raise exposes your elitist beginnings. It is your ilk that has frozen Congress during Obama's entire term, preventing the very solutions that you now decry. Just shut up and get out of our way. Or in Dylan's words, "Don't criticize what you can't understand."
Posted Mon, Sep 3, 8:19 p.m. Inappropriate
Yeah, well, wake me up after the revolution, comrade.
Posted Mon, Sep 3, 10:59 p.m. Inappropriate
This is a political screed, no better than (actually, not as good as) what Chris Vance might offer, and I would urge Crosscut to exercise more discriminating editorial quality control.
Some of the points Dr. Sell makes are good ones, but his style is tiresome and uninspiring. If I were an Obama speech-writer or strategist, I wouldn't find much new or invigorating in his suggestions.
AND he badly misreads the Affordable Care Act, which is a huge step forward in assuring access to care and eliminating the worst methods used by insurers to avoid risk. In this respect, Prof. Sell's attitude seems to be that only the perfect is acceptable, and the good is contemptible. This is typical of the "single-payer" idealists. Welcome to American incremental policymaking, Dr. Sell!
In the manner of Olympic diving or similar contests, I award him middling marks for technical difficulty, but almost nothing for style.
Posted Tue, Sep 4, 8:12 a.m. Inappropriate
From the Society of Professional Journalists Code of Ethics:
"A journalist should distinguish between advocacy and news reporting. Analysis and commentary should be labeled and not misrepresent fact or context."
Fourth Estate Fail.
Posted Tue, Sep 4, 4:44 p.m. Inappropriate
From dbreneman: "On the notion that government spending on WWII ended the great depression. While it didn't hurt, it was really the end of the New Deal that kickstarted the economy."
That is the single dumbest sentence I have ever read from anyone on the history of the Great Depression and the New Deal. I'm almost speechless, but I will just weigh in with one piece of history.
In 1937, FDR decided, prompted by deficit hawks of the day, to indeed, "end the New Deal." He cut back on government spending sharply. Result? The economy promptly fell over dead. Unemployment went back up, businesses went bust, and other typical symptoms of economic contraction took place. Charts on this page show the results of that policy. http://www.economicpopulist.org/content/great-depression-part-2.
Let's at least retain a small connection to reality.
Posted Tue, Sep 4, 7:31 p.m. Inappropriate
Dummy, un-dummify thyself. We're talking regulation here, not spending. Of course, when government crowds out all other participants, government spending can drive an economy. Happens all the time under communism and fascism. The goal in a free society is to deny government the power to command an economy in that way. Are you getting less dumb yet?
Posted Wed, Sep 5, 11:36 a.m. Inappropriate
Let me comment on your comment dbreneman:
"On the notion that cutting government spending will make the economy worse, it should be noted that currently, government's share of GDP is close to 25%. It usually averages between 18-20% Government is sucking otherwise productive money out of the free economy and depriving the people of using this money for their own pursuits. Government is spending too much. Free that money up and watch it work."
None of this makes any sense. So 20% for government is good but 25% is bad? Who christened 20% as the magical size for government spending? Secondly, government doesn't 'suck' money out of anywhere. Let me give you a specific example. Take a government employee like an air traffic controller who makes $75,000 a year. How is that person 'sucking' money out of the economy? Is your assumption that making that air traffic person a privately-employeed employee making $75,000 a year is a better deal?
The economy still needs air traffic controllers, right? (Hopefully we can at least agree on that?) Explain how transferring the same job to the private sector 'frees up that money'?
Posted Wed, Sep 5, 2:30 p.m. Inappropriate
Hey, finally a response without name calling. Cool. There's nothing magical about 20%, any more than there's nothing magical about the income tax rates in 1999. However, the government has always abstained from taking (or the people have never tolerated giving the government) more than 1/5 of what the economy produces in the past, and now government is taking 1/4. That's less money for people to invest as they see fit. With the government taking over a larger percentage of our economy, the amount of money available for investment (and I'm talking real investment, not the politicians' "investment") goes down. That slows the economy as a whole. And, if people are compelled to depend more and more one government for their survival, the percentage that government takes must grow as the economy declines. It's a vicious cycle. Spending 20% of every dollar on government is not mandatory, but it's a nice, round, traditional value to keep government's share at. And since it has never risen beyond that in the past, there ought to be a really good reason for exceeding that limit now.
Posted Wed, Sep 5, 12:53 p.m. Inappropriate
Adding to Richard B's comment above, whoever employs that air traffic controller -- a private corporation or the government -- that pay is going back into the economy, because just as every other worker, air traffic controllers buy food, housing, clothes, cars, gasoline, etc.
The real sucking sound you hear from the economy is due to people like Romney, who makes an insanely huge amount of income, pays less tax than that air traffic controller (and me), keeps his money in offshore accounts, and likely spends a lot less proportionate to income than that air traffic controller (or me).
Posted Wed, Sep 5, 4:15 p.m. Inappropriate
Government spending as a percentage of GDP has steadily climbed in the last 100 years.
This is not due to corruption or inefficiency- in fact, our government is LESS corrupt and inefficient than it has ever been.
Instead, its because we want more stuff from government, and it costs money.
Obviously, government spending was lower before we had SS and Medicare, before we had interstate highways, air traffic controllers and airports, before we had a functioning public health system, and so on.
Its unrealistic to think we could go back to the GDP to Spending percentages of, say, 1940. A year when Malaria, Polio, and Cholera still killed a lot of americans, when huge amounts of americans didnt finish high school, when we had no interstates or community colleges.
Much more telling is to compare our spending as a percentage of GDP to other, civilized countries today- because most of the economy is globalized, and everybody pays the same for gas or oil, for computers or software, for chemicals or drugs.
If we decide on 20% as our target, that puts us firmly in the company of Ghana, the Maldives, and Uzbekistan. Now, admittedly, we have a more transparent and efficient government than any of these, with less friction in the form of bribes and corruption, so we really are more like Turkey or Vietnam or Albania.
But if we expect to live as well as Europe or Japan, with the trappings of a civilized society, then we simply have to pay for it- and it costs more than 20%.
http://en.wikipedia.org/wiki/Government_spending
Posted Wed, Sep 5, 4:28 p.m. Inappropriate
Only if you accept the premise that the trappings of civilized society must flow from government.
Posted Wed, Sep 5, 6:08 p.m. Inappropriate
This discussion has deteriorated. The issue is we have dug an entirely new type of hole and are still arguing about how we stopped digging and got out of it the last time a hole looked something like this one, which we can not even agree as to what each of us is seeing, i.e. "in fact" our government is LESS corrupt and inefficient than it has ever been." Now what "facts" those might be is something to really scratch one's head about.
Posted Wed, Sep 5, 6:25 p.m. Inappropriate
When was the last time you bribed a policeman?
When was the last time a whorehouse in your town paid off the mayor to stay in business?
Simple measures of corruption like these are easy to measure- there were whorehouses in Sedro Wooley, with the cops and local government being paid to look the other way, as recently as the late 1950's.
Sedro Wooley is demonstratably LESS corrupt now than it was then.
I could come up with endless examples- LBJ made his bones exposing the incredible amount of outright fraud and theft in military contracting during WW2- and that kind of thing simply doesnt happen any more. We may buy expensive weapons systems we dont need, but we dont get boots with cardboard soles or horsemeat in our MRE's anymore.
If you have ever travelled to countries that are actually corrupt, where bribes must routinely paid to obtain the simplest government services, you would realize how silly it is to call the US government "corrupt".
As for "the trappings of civilized society"- please show me a functioning private industry example of public health care. Show me how private industry could have financed and built the Grand Coulee or Hoover Dams, the BPA, the Nuclear power industry, the space program, the laser, the interstate highway system, the air traffic control and radar system, dredged and built the nations ports, bridges, and rivers. Show me a railroad industry that could exist without the US government giving them, gratis, TEN PERCENT of the land area of the USA. And on and on.
Its a complete fantasy to think that any civilized country could function at less than 20% of GDP in government spending.
Please, point to the countries where private industry does it all, and the government spends less- The Congo only spends 5%- should we be like that? A heaven on earth for private industry, no doubt...
Posted Wed, Sep 5, 7:09 p.m. Inappropriate
But beyond that, you're stacking the deck with your examples (despite the counter-factual examples of the BPA and the nuclear power industry). Nobody wants the insurance companies to own the fire department, or the meat packers to run the FDA. What people on the left always forget in these discussions is that there are objectively legitimate roles for government. And frequently, people on the right forget that, too.
But still... all of the examples you cite could be financed by far less that 20% of the GDP.
Posted Wed, Sep 5, 7:56 p.m. Inappropriate
Concerning Ries pairing corruption and efficiency, Grifftopia (Matt Taibbi 2011) presents pretty much a match for anything in Railroaded, The Transcontinentals and the Making of Modern America (Richard White 2011) And I'd say that's a conservative statement considering Matt, himself calls the present hole: "A Story of Bankers, Politicians, and" THE MOST Audacious Power Grab in American History."
As for US War graft, see: http://www.beachblogger.net/bwtm/index.php?title=Scandals%2C_Military%2C_Iraq_War%2C_Graft_and_Fraud
Your statement, Ries, would not include either Sedro Wooley or the government of other countries. Furthermore, the US government has long considered itself the leader of the pack, true or not.
Furthermore, attacks on civil liberities trump graft, unless they go hand-in-hand. On that score Glen Greenwald just wrote:
"More remarkable is that a Democratic presidential candidate is sticking his chest out and proudly touting that he has tried to imprison more whistleblowers on espionage charges than all previous presidents in history combined: more than the secrecy-loving Bush/Cheney White House, more than the paranoid, leak-hating Nixon administration, more than anyone in American history"
http://www.guardian.co.uk/commentisfree/2012/sep/05/obama-campaign-brags-about-whistleblower-persecutions
I'll grant you that things are better here for minorities, women, American lifespans overall, and in several respects the environment. Howard Zinn and a growing list of others have made much more accessible the long, often sad history of our melting pot's "as little as necessary" approach to these accomplishments worthy of some pride especially when one becomes aware of the struggle.
Posted Thu, Sep 6, 6:53 a.m. Inappropriate
"When was the last time a whorehouse in your town paid off the mayor to stay in business?"
Well if you lived in Wallace, Idaho it was the 90's. If you frequented Ric's in Lake City, the Seattle City Council took bribes/ contributions for the expansion of a Parking Lot in the early 2000's...does that count?
There is 90 Billion dollars a year in Waste, Fraud and Abuse in the Medicare/Medicaid System and we are massively expanding the system.
We insist on paying 15-30% more for labor on every prevailing wage public project. In Washington we charge Sales Tax on Public infrastucture projects ( 280 Million on the 520 Bridge project alone), charging underwriting and financing charges to the taxpayers in addition to the actual tax.
Posted Thu, Sep 6, 6:58 a.m. Inappropriate
Here is a link to the prevailing wages. Now in today's economy, would it make more sense to employ more people at standard union wages and get more projects in the pipeline and completed or fewer people at higher costs with less projects?
https://fortress.wa.gov/lni/wagelookup/prvWagelookup.aspx
Posted Fri, Sep 7, 9:42 a.m. Inappropriate
This article has a number of flaws but let me just address one: demand.
The author talks about demand as if it either exists or does not exist. Is demand a function of the number of human beings? In other words is one person equal to one unit of demand? Or 10 units of demand? If so, then China and India would be the wealthiest countries on earth because of all their demand. This is certainly not the case.
The concept of demand is meaningless without price. Demand and price go hand-in-hand. The demand for a flatscreen television costing $3000 is much less than the demand for a television costing $650. It is pointless to talk about demand without price.
Where does demand come from? Demand comes from an entrepreneur inventing and producing a new product. There was no demand for the iPhone before Apple invented it. There was no demand for the iPod before Apple invented it. So the chain of events is that Apple invented the iPod, invest capital in its manufacture, invest capital in its marketing and sales, and then it finally sells the first iPod. Demand is the last thing that happens in this chain of events. The first thing is the invention and the investment. So entrepreneurs and investment are what drive an economy. Demand is a result of entrepreneurs and investment.
One more thing. How could the government possibly be the driver of the economy when it accounts for 24% of GDP and the private economy accounts for 76% of GDP? Simple math makes the point that the private economy is more important than government spending.
Posted Mon, Sep 10, 7:06 a.m. Inappropriate
"Why do voters fall for Romney's snake-oil economics?"
Because the current brand of snake-oil economics coming out of the White House is an abysmal failure and people are grasping at straws for something better?
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