There are two major approaches to the economy that are embraced by the major American political parties. The Democrats advocate for more government involvement via regulation and taxation for the purpose of redistributing wealthy. Republicans prefer less government and believe that such a policy achieves greater economic prosperity for all. In a time of economic crisis, both parties tout their system as the path to recovery.
Beginning with Roosevelt, the Democrats turned to British economist John Maynard Keynes who believed in a mixed economy--some private & some government enterprise. He recommended that an economic slump could be combated most effectively by dumping tons of money into the system. To accomplish this task, the government should take out loans and hopefully make good investments that stimulate the economy and make enough profit to payoff the debt later. When taken to the extreme this seemed to work and save America from the Great Depression. Conservatives will say, "no, FDR's spending did not save us; World War II saved us!" I agree. And who paid for the massive industrialization of WWII? It was the federal government. "But Obama's stimulus failed!" Yes it did, and I can give you two reasons for that. First, he did not spend enough to make a difference. He got no where near the adjusted spending of WWII (and we can blame both parties for that). Second, he invested it in stupid things. You can't dump money into tax relief and unemployment benefits. That is what people want, but it is not a good investment. You've got to invest in things like infrastructure, new industries, and education in order to make enough money later to pay off the debt. It is not worth taking out a loan to pay for day-to-day expenses because you'll never get out from under it, but it is worth taking out a loan to get more education and increase your earning capacity.
Conversely, Republicans believe in "trickle down economics," an economic theory that says if you deregulate and cut taxes for big business and rich people, they will invest it and hire more employees and the money will all trickle down to everyone. The entire economy and population will benefit. If you ask me, this is a thinly veiled effort to screw the poor and enrich the wealthy, and many Americans who don't know any better jump on board because the conservative propaganda media tells them it works. There is no historical evidence of success--none. America in the 1870s-1890s is the best example of what happens when you deregulate and don't tax the wealthy. The result is a high GNP and strong economy where the rich get richer and the poor get poorer. On paper the nation looks wealthy, but you have millions living in squalor--families packed into unsanitary studios pooling their money from low wage labor just to survive. Republicans typically turn to Pres. Ronald Reagan's administration for their positive example. Well, that is a cute thought but there are several problems with that which they ignore. First off, it was under Reagan that the economy slumped first, before rising. When it did rise (and it certainly did), more jobs were created and GNP rose. It was great for the wealthy and even middle classes. But the jobs that were created, termed "McJobs" by one historian, were minimum paying low wage jobs like McDonalds--not the sort of income needed to raise a family. Real wages dropped across the nation. Yes, national production and wealth grew, but it did not trickle down.
So what does our country need today? I think we needed a massive stimulus package that went to new industries, infrastructure, and education. We did not get that, and now the nation is poisoned against any new stimulus and I'm not sure the economy could survive another one anyhow. We now have no choice but to go the other way--screw the poor with conservative trickle-down economics that will not actually trickle down, but it will save the economy as it polarizes wealth into the hands of a few. That is the only way to rake up enough cash to save the economy. It is unfortunate, but I don't see another route at the moment. Once the economy is stable, we can get back to a more balanced system that taxes the wealthy to re-distribute the labor and wealthy that they extract from the poor. After all, a person who puts in 40+ hours, works hard, and generates wealth for the company deserves enough to rent a cheap apartment and eat food, don't you think? But that is a discussion for another day.
