Democrats were right all along! Keynesianism has triumphed! Conservative supply-side economic policies have failed repeatedly and tax cuts for the rich only contribute to income inequality and statistically insignificant economic growth, according to studies.
Republicans are wrong with regard to economics, like they are wrong with regard to so many social issues. In fact, conservatives have already successfully buried the study which revealed their signature economic policy as a failure.
According to an article in the Business Insider the former chief economist for the International Monetary Fund (IMF), Olivier Blanchard, admitted that the austerity policies imposed on European nations as a remedy for the Great Recession were a blunder.
In other words, the conservative economists were wrong and such policies, as have been observed, have led to declines in economic growth. Debt only becomes more of a burden than otherwise when a country's economy is retrenching.
As evidence, one can look at the effects of austerity measures in Greece. According to the Business Insider: "As Anand Gopal recently reported in The New Yorker, average family income has plunged to 2003 levels, and forty percent of Greek children now live below the poverty line."
Rarely do bureaucracies like the IMF admit error. In fact, the organization has long been criticized for pushing free-market oriented solutions which ignore local conditions and which advocate "cutting public spending and increasing taxes even when the economy is weak, to bring budgets closer to a balance." Such policies are the very definition of austerity and the IMF has proven inflexible in its application of this policy!
However, the debate between economists gets technical. It has centered around the Keynesian "multiplier, - the size of the stimulus to the economy that's generated by increasing government spending during flat or declining economic times," according to the Business Insider.
Commonsensically, when the government spends money, for example, paying construction workers to build a bridge, that money circulates in the economy as the workers buy groceries, perhaps make home repairs, or buy a new car. Such spending stimulates the economy resulting in more spending than otherwise and subsequent economic growth.
According to the Business Insider:
"Keynes said that the "multiplier" effect of increased government spending is sufficiently large to more-than-counteract the negative economic effect of adding to the government's debt during an economic downturn. Conservative economists assume instead that the multiplier is too small to counteract that negative effect."
"The new "IMF Working Paper," titled "Growth Forecast Errors and Fiscal Multipliers," prepared by Blanchard and Daniel Leigh of their Research Department, reports that whereas the IMF had been accepting conservative economists' estimates that the multiplier was "about 0.5" percent growth, the "actual multipliers were substantially above 1 early in the crisis," which was the period when the IMF was recommending and pursuing "fiscal consolidation," which is called in the United States "austerity.""
"In other words, the policy recommended by the Republican Party's economists, and which has actually been tried especially in Europe, has failed miserably."
Another similar study, focused on U. S. economic history, has confirmed the findings. The study was concerned with supply-side economics which combine budget cuts for programs that help the poor and middle class with tax cuts for the wealthy. According to the study by the Congressional Research Service:
"There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution."
Of course, Senate Republicans objected so the Congressional Research Service timidly withdrew the report. The conservative mindset sometimes collides with reality, outside of the Fox News echo chamber, and the result is denial, obstructionism, and misrepresentations!
Just as when the Center for Disease Control came out with study after study linking guns with increased violence, the Congressional Republicans de-funded the research. Just as when government scientists raised alarms about climate change during the Bush administration, they were censored. Conservatives have an inflexibility of mind that is typical of authoritarian personalities.
But tax cuts for the wealthy are really the only economic policy Republicans are selling and it is rhetorically packaged for the masses in terms of a rising tide lifting all boats. The only thing is the tide is only rising for the wealthy and the poor and middle class are left to tread water or drown. A better description of conservative economic policies is "a rising tide lifts all yachts."
The only certainty is that there is too much cognitive dissonance involved for conservatives to ever admit the truth. If they just admitted their economic policies were designed to make the wealthy even wealthier, it would at least be a novel approach for its audacious honesty. Instead, they couch their arguments in terms of economic populism saying the wealth somehow "trickles down" when instead it defies gravity and does not. Once again, reality has a well-known liberal bias!