CG asks for help in responding to this, but I think he is probably looking in the wrong place by coming here:
Conservatives have no clue about business. They think that business can sell MORE AND MORE to people who have jobs paying less money, with a collapsing middle class. Who is going to buy stuff after we get through gutting the system and eliminating the buying power of workers in this country? What fuels consumption now that the borrowing binge we’ve been on for thirty years is over. Can consumers borrow their way to prosperity, along with our economy. How do you pay for the $10s of trillions in private debt that has masked a collapsing real economy which used to be fueled by savings and investment?
40 years ago we had a third of the private work force unionized, tariffs to protect domestic industry, 70% marginal rates on income over about 3 million, and were the most prosperous country on earth, the exporter and lender to the world. Now that Reaganomics has worked it’s magic for 30 years, China owns us.
Not sure how you think us running 30-40 billion per month trade and current account deficits will work out long term. Love to hear the theory of how we import our way to prosperity, trading jobs that produce wealth, transform raw materials into valuable to valuable goods, for “service” jobs that add no wealth and don’t sustain any economy that I’ve known of in all of recorded history. How long can we keep sending the rest of the world paper, and they send us oil and TVs and cars, and clothes and electronics, etc. Seem unsustainable to me, but I don’t understand how business works.
This demonstrates why the Democrat/Republican, liberal/conservative poles simply don’t apply to the present economic situation very well. CG’s liberal interlocutor is correct in diagnosing the problem as debt and “free trade”, but he is incorrect in thinking that Reaganomics is to blame for either of them and he is deeply mistaken to think that high marginal tax rates helped produce societal wealth. One doesn’t increase savings and investment through taxation, after all, and while it is absolutely true that consumers can’t borrow their way to prosperity, governments can’t tax-and-spend their way there either, Keynesian arguments to the contrary notwithstanding.
The reason we were the most prosperous country on Earth 40 years ago was very simple and easily proved. The USA was about the only major economy on Earth that had not had its industrial infrastructure completely destroyed by World War II and American industry made an absurd amount of money selling both consumer and capital goods into European and Asian markets that had to rebuild their industrial base. This was the source of our post-1940s economic growth and concomitant wealth. Now that all of our former competitors have rebuilt their economies and numerous other countries have succeeded in developing theirs, it has naturally become much more difficult to maintain our economic primacy vis-a-vis the rest of the world. As I have previously stated, but have yet to conclusively prove, the Ricardian concept of comparative advantage has turned out to be incorrect and therefore American wealth should be expected to decline in both a relative and absolute sense as other countries grow at the expense of American industry and workers in a free trade environment.
It’s not that conservatives have no clue about business, they have no clue about economics. But neither do liberals; the fact that one party is incorrect does not automatically make the other right. The fact that conservative Republicans and liberal Democrats alike supported TARP, the banking bailouts, and the automotive bailouts demonstrates that the intrinsic problem is superpolitical and therefore will not be solved regardless of which political faction ends up temporarily on top.