Voodoo Economics 101

Voodoo Economics 101
by
David Schlecht

Voodoo economics, also referred to as Supply Side Economics is one of the primary causes of our current financial disaster and many of the state governors are intent on using this same Voodoo to get us out. Nonsense!

In short, Supply Side Economics is built on the premise that “If you build it, they will come.” In other words, directing money at the wealthiest fraction of people and corporations will provide more jobs. Let’s see how this plays out.

Imagine that you’re a multi-billionaire and the US taxpayers give you an additional million dollars. You already have just the right number of employees in your corporation. What would you do with your extra million? Hire more employees? Of course not, you already have the right amount. Would you pay your employees more? Don’t make me laugh. Would you provide more benefits or a better work environment for your workers? Of course not. If they’re content to work under the existing conditions, you wouldn’t waste a million dollars changing it.

So, what would you do?

The same thing our ultra-rich have been doing with their increased revenue, speculating. Over speculation in technology sectors was the primary cause of the dot-com bubble and burst. Speculation is the cause of last year’s oil price spikes.

In conclusion, Voodoo Economics causes no benefit to the economy by way of citizens buying more things and stimulating the economy, but cause devastating bubbles and bursts.

Is this starting to sound familiar, yet? It should.

We all know that economies are driven by supply and demand. The supply must balance the demand. When there is more supply than demand, prices drop and businesses go broke, laying off workers. When there is more demand (from increased middle-class wages, unemployment benefits, higher minimum wage…) than there is supply, prices go up and new businesses open up to provide more product, thereby causing the supply-demand dichotomy to balance and prices to fall back to normal.

So, if you were a governor in a state where the economy was failing, what would you do? Reduce the spendable income of the average person or increase it? What are the governors doing in the US? Many are cutting wages and laying off people. What is this going to do to the states’ economies?

Simple.

Next post, let’s talk about demand-side economics and see if this will really save us from the next Republican Great Depression or is it too late? What’s in store with our economy?