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July 06, 2002

Our Imaginary Economy

The nation's economy is like a train, you don't change directions all at once. 

Here's the timeline. Carter took office while the economy was rising. Two years into his administration it slowed and reversed. Reagan took office a few years after Carter's recession. Two years into Reagan's administration the economy again reversed itself and began climbing. It continued to climb into Bush1's administration. Toward the end of Bush1's term, while the economy was going great, the media began dragging crackpot economists out of obscure places who would predict gloom and doom. Our economy is based in large part on the public's perception. If people think wages will go down, and unemployment will rise, they will stop spending as much in order to save. The lowered spending then becomes an economic indicator which spurs more consumers to shift from buying to saving, increasing the problem. In spite of the media's efforts Bush1 was able to arrest the slight downturn several months before the election. Of course this wasn't reported until several months after the election.

Then came Clinton, inheriting a thriving economy due to Reagan and Bush1's work. The media had multiple public orgasms over the bright and rosy future America had, now that Liberal was once again in the White House thus providing plenty of public confidence. In spite of this Clinton managed to screw things up. As the economy began to crumble Clinton and Rubin would watch the international markets closely. If there appeared signs of any faltering in the economy, they would use Federal money to boost Japan's market temporarily, by buying various stocks in Japan's stock exchange, thus creating a slight boom to be reported before America's stock exchanges opened. This temporarily offset the effects of their overall economic mismanagement. But then the dot coms fell, immediately blamed on the Republicans. By the time it was apparent that Clinton's economic programs were a shaky house of cards, Bush2 was in the White House and getting blamed for it.

So we have Carter raising taxes, and the economy going down. Then we have Reagan lowering taxes and the economy going up. Then we have Clinton raising taxes again, and the economy pumped up like a tight balloon, ready to pop as soon as someone bothered to take a real look at it, which happened after Bush2 took office. 

Bush2 had 9/11 dumped in his lap, along with all the economic chaos that that brought, and of course he not only gets blamed for the economy, but 9/11, and the failure of several business who'd adopted Clinton style accounting methods and any thing else Liberals could think of (and trust me their imaginations have been working overtime). 

The telling thing is that while the Media and the Democrats scream doom and gloom, consumers don't seem to be completely buying it. Investment is down somewhat, but consumption is up (Investment would be the money people spend buying stock in companies. Consumption would be the money people spend on the every day things they need or want, like food, clothing, housing, entertainment, etc.). Businesses are trying to make sense of this, because historically when the Media starts in on how bad things are gonna get, consumers tighten their belts, but that's not happening. Part of the reason is that the Media's simply whined too much and people don't trust them like they used to. Part of the reason is that people can see that they have money, and are making money and know that the after affects of 9/11 are only temporary. Part of the reason is that since taxes have been lowered, people have more to spend, which means retailers make more, which means wholesalers make more which means employees earn more. All that extra income gets taxed, which means more revenues for the government.

Have you ever seen that Monte Python skit about a Hypnotist who would build houses through the power of hypnosis? He built large expensive houses that he'd sell really cheap, the trouble is that since they were built via hypnosis the new owner had to believe that the house existed, otherwise it would vanish. Our economy is, and has always been like that. The trouble is very few people know or would even be capable of understanding this. 

The more people spend, the better the economy. People spend for two reason's, they have money or they think they'll have money soon. The first is accomplished by lowering taxes the latter by what they see and hear around them. But they'll only believe the media for so long before becoming skeptical.  The best way to improve the economy is through lowering taxes. The best way to slow the economy is through raising taxes.


Posted by Jack Lewis at July 6, 2002 01:39 PM