The bankruptcy of supply-side economics

The following video, which, judging by the title, aims to “explain” economics to liberals, was posted by a friend of mine on Facebook, and while I know it was intended to be humorous and not a scholarly look at supply-side economics versus so-called “middle class economics,” the dismissive tone on liberal economic theory as naive or not well thought out is shortsighted at best:

That said, I felt compelled to offer a couple points to ponder.

First, the wealthy certainly have a role to play in any capitalistic economy, but the point that seems to be lost by the speaker in the video is that subsidies to bolster the lower and middle class, and the economic theory behind these policies, are intended to serve as a more direct route toward stimulating the economy, whereas supply-side economics hinges on the assumption, by the same strained logic that could have actually contributed to the economic depression of 1896 and other recessions in our nation’s history, not the least of which was the recession in 2008, that the wealthy will always be willing and able to invest in new industries.

supply side economics

While investments into new jobs and startups by the wealthy is definitely admirable, the fruits of that labor are contingent on several variables — demand, owner competency, etc. — before the lion’s share of those resources begin to make it to the lower and middle classes in the long term, aside from the initial pool of jobs, construction work, etc., to open the business.

Supply-side economics, although it may have some merit in some cases, is an indirect, wait and see approach, analogous to treating a patient with an experimental drug. Indeed, we have tried this experiment of limited regulations and tax breaks for the rich for the better part of 30 years now, and the gap between the rich and the poor is higher than it’s ever been.

Second, this report from The Wall Street Journal, which is unapologetically conservative, backs up the statement in the video above that a large number of rich people invest in startups — 35.8 percent of the super rich who make over $20 million — but more than 70 percent of these folks actually prefer to put their money into hedge funds, not startups.

In the middle bracket of rich people ($5-$10 million), only 9.3 percent invest in startups and 38 percent prefer hedge funds. A little more than 4 percent in the $500,000-$1 million income category invested in startups.

I don’t think anyone will argue against the fact that private investments by wealthy people are an important part of the economy, but to imply, as the video seems to do, that benevolent wealthy people spend all their time sawing away at ideas that might create jobs for the country is pure delusion.

Wealthy people will do what is best for wealthy people; sometimes that means investing in startups if they think it’s economically viable, but more often than not it seems, that means putting their oodles of money into hedge funds and private equity accounts, not startups.

‘Stunning reversal’ in South Carolina

In a historic vote, which the Associated Press called a “stunning reversal” the South Carolina House passed a bill early this morning, in concurrence with the Senate, to take down the flag from the State House lawn.

The South Carolina House approved a bill removing the Confederate flag from the Capitol grounds, a stunning reversal in a state that was the first to leave the Union in 1860 and raised the flag again at its Statehouse more than 50 years ago to protest the civil rights movement.

The move early Thursday came after more than 13 hours of passionate and contentious debate, and just weeks after the fatal shootings of nine black church members, including a state senator, at a Bible study in Charleston.

“South Carolina can remove the stain from our lives,” said 64-year-old Rep. Joe Neal, a black Democrat first elected in 1992. “I never thought in my lifetime I would see this.”

Gov. Nikki Haley signed the bill into law with pens representing the nine people who were killed in the recent Charleston shooting. Each pen will be given to the families of the victims.

When historians write about this moment in our nation’s history, they will surely remember Rep. Jenny Horne:

The flag is scheduled to be taken down at 10 a.m. tomorrow morning.

Palin ‘unleashed’

Unlike some progressive commentators, I think Sarah Palin was far from drunk in this video response to a speech by Elizabeth Warren that is available on her website. Apparently, it is completely unedited.

Although the arguments are strained throughout, she went off script at about the 2:30 minute mark and seemed to briefly divert from her prepared remarks a couple other times later in the video. For someone with Palin’s resources, this shouldn’t ever happen, especially on the Internet. In any case, she seems sober enough to me.

Indeed, anyone who remembers the 2008 election cycle will recall that, when trying to make candid remarks on the fly, a tangled web of words — a dictionary hodgepodge, if you will — is about what we should expect.

I particularly enjoyed the analogy in a New York Times article from 2008 about Palin’s disastrous interview with Katie Couric:

… Couric asked Ms. Palin, Senator John McCain’s running mate, what she meant when she cited Alaska’s proximity to Russia as foreign affairs experience. Ms. Palin could have anticipated the question — the topic of their interview, pegged to her visit to the United Nations, was foreign affairs. Yet Ms. Palin’s answer was surprisingly wobbly: her words tumbled out fast and choppily, like an outboard motor loosened from the stern (italics mine).

“That Alaska has a very narrow maritime border between a foreign country, Russia, and on our other side, the land — boundary that we have with — Canada,” she replied. She mentioned the jokes made at her expense and seemed for a moment at a loss for the word “caricature.” “It — it’s funny that a comment like that was — kind of made to — cari — I don’t know, you know? Reporters —”

Ms. Couric stepped in. “Mocked?” Ms. Palin looked relieved and even grateful for the help. “Yeah, mocked, I guess that’s the word, yeah.”

Here is a link to the full video on her website, and here is Cenk Uygur’s take on it.

This isn’t Palin drunk. This is just Palin “unleashed,” as Uyger said. Palin’s handlers should advise that she never go off script, or if she must, invest in a good video editor. But after seven years of this, that’s probably asking too much.