The Democrats’ War on Economic Abundance

Ever since the Great Depression of the 1930s, Democrats have been disparaging government support for the supply side of the economy. The supply side is that part of the economy that creates all the economic goods and services we need and enjoy. Under the Biden Administration Democrats have redoubled their efforts to increase government control over the economy. This amounts to a war on the economy’s supply side. It is a war on economic abundance.

Demand Side Economics and Supply Side Economics

The nature of the Great Depression caused the British economist John Maynard Keynes to advocate large government spending to get us out of it. An agency of the U.S. federal government, the Federal Reserve, had adopted a policy called the real bills doctrine in 1928. This policy required the amount of money in circulation to be determined by the total amount of goods sold in the economy: the more sold, the more new money should be put into circulation. If the total amount sold decreased, the money supply would also contract.

This monetary policy introduced a serious instability that was triggered by the stock market crash of 1929. The large fall in stock prices caused wide-spread economic pessimism leading to a decline in economic activity. A fall in goods sold caused a decrease in the money supply under the real bills doctrine. According to the economists Milton Friedman and Anna Schwartz, the money supply dropped by about one-third between 1929 and 1933. This caused a banking crisis in 1933. Bank customers attempted to withdraw their assets in the banks, only to be rebuffed because the fall in the money supply left the banks incapable of complying. According to Friedman and Schwartz, this crisis was the true start of the Great Depression.

Looking at the causes of the Great Depression, the British economist Keynes noted the main problem was a huge decline in economic demand. Since the decline in demand was almost entirely from private companies and individuals, he suggested it could be cancelled by an equivalent increase in government demand. In particular, government expenditures on improving and increasing public infrastructure (roads, bridges, tunnels, public buildings, etc.) would be especially productive.

However, because economies are chaotic systems, governments are particularly unsuited to productively direct capital investments. See the post How Much Human Freedom Can We Find in the World? for empirical evidence.

Because the government during the Great Depression directed much of the assets of the country in unproductive ways, it lasted for a very long time. If one defines its end as the time when the real GDP surpassed its output in 1929, the Great Depression’s ending would be sometime in the neighborhood of 1940.

Yet, to this very day, progressive Democrats view the increase of government expenditures as the sovereign remedy for economic troubles. The contrary view that government should stimulate economic production by reducing taxes, economic regulations, and social spending is ridiculed by them as “trickle-down economics.” To the admirers of Ronald Reagan’s economic policies, the reduction of taxes and economic regulations are collectively known as supply side economics, aka Reaganomics.

During a recession, economic output and productivity both fall. Productivity is the amount of goods and services produced divided by the monetary value of all the inputs (labor, intermediate goods, and other required investments) needed to produce those goods and services. To a very great degree that decline of economic output and productivity is caused by a reduction in company expenditures for labor and investments. Anticipating that much production at past levels will go into unsold and expensive inventories, companies layoff employees and reduce both production and investments.

Supply side economics says the best way to get companies to increase production and investments again is to greatly lower their costs of production. Government can accomplish this by reducing taxes and economic regulations. Doing that also increases demand by other private companies and individuals for their products. As companies ramp production back up, their employees who otherwise would be unemployed get additional income to spend. All other factors being equal, the new increase in GDP is anti-inflationary. Since companies’ costs of production are reduced, their productivity is increased.

Here is a thought that makes all the preceding reasonable: Before goods and services can be consumed, they first must be produced. If we were to follow demand side economics and merely increase government’s demand for economic output, then the choice of goods produced mostly would not be optimal for use by the broad economy. This is because of the aforementioned chaotic nature of the economy. The choices optimal for all the other economic actors, consumers and companies, would be much more varied than the fewer choices the government would make.

How Democrats Are Warring on Economic Abundance

What most American voters want from the economy is more wealth, a greater growth rate for that wealth, and a greater opportunity to amass that wealth. In short, they want a greater economic abundance. However, most voters know for a fact that is not what they are getting under the Biden Administration.

According to an Echelon Insights survey of verified voters published in January 2023, we get the following breakdown of the electorate on what the most important problem facing the country is. The question asked was “If you had to choose just one, which would you say is the biggest issue facing the country today?“. Their answers are listed below in order of importance together with the percent of respondents giving that answer. The possible answers were given to the respondents in randomized order. Only the top ten responses are shown below.

1. Cost of living 25 percent
2. Jobs and the Economy. 19 percent
3. Immigration 9 percent
4. Political corruption 8 percent
5. The environment and climate change. 7 percent
6. Gun rights 4 percent
7. Healthcare 4 percent
8. Crime 4 percent
9. National security 3 percent
10. The coronavirus pandemic 3 percent

These top ten answers account for 83 percent of the electorate. The top two, which are about the economy, are for 44 percent of the electorate.

When asked “Which would you say is the second biggest issue facing the country today?“, the poll received the following top ten responses.

1. Cost of living 17 percent
2. Jobs and the economy 12 percent
3. Immigration. 11 percent
4. Crime. 10 percent
5. Political corruption 8 percent
6. The environment and climate change. 6 percent
7. Healthcare. 6 percent
8. Abortion. 5 percent
9. National security 4 percent
10. Taxes 4 percent

Note that 42 percent of the electorate thinks the cost of living is either the country’s biggest or second biggest problem. Similarly, 31 percent consider jobs and the economy as either the country’s biggest or second biggest problem. Almost three-quarters of the electorate take these two economic problems as most important or of second importance.

Similarly, asked for how attainable owning a home in a safe neighborhood with good schools was, 41 percent said it was within reach, 47 percent answered it was out of reach, and 12 percent were unsure.

Next, when asked “Do you think the current economic situation in the United States is improving, getting worse, or staying about the same?“, 63 percent answered the economy was getting either a lot worse (32 percent) or a little worse (31 percent). Those who said the economy was improving either a little or a lot were 16 percent of respondents with 2 percent saying it was improving a lot and 14 percent claiming it was improving a little.

Finally, when asked “Thinking about your personal finances, do you feel more secure or less secure than you were one year ago?“, we get the following breakdown. A total of 58 percent said their finances were either much less secure (29 percent) or somewhat less secure (29 percent). A total of 14 percent said their finances were much more secure (2 percent) or somewhat more secure (12 percent).

Clearly, the bulk of the American public has decided the Biden Administration is gaslighting them when it claims the economy is doing so much better under the Democrats. The public’s own personal experiences tell them that is a lie.

In fact, the sum total of the Biden Administration’s economic policies can be seen as a war on the supply side of the economy, and therefore a war on abundance. I have already written about this war extensively, so I will content myself with giving you links to the relevant posts below.

• Biden’s Administration Should Take a Course in Economics 101
• How Progressive Democrats Try to Violate the Classical Laws of Economics
• What Can We Believe in the Debate on Inflation?
• The Inflation Reduction Act Is an Economic Disaster
• How to Fix What the Democrats Have Broken

The Democratic strategist and left wing political philosopher Ruy Teixeira has written of three ways in which Democrats must seriously reform if they wish to have future political success. One is they “must promote an abundance agenda.” Writing about the Democrats’ abundance problem, Teixeira cites many of the results of the Echelon Insights poll about which I have written here. Concerning the economic conditions they reveal, Teixeira writes,

Whatever that is, it ain’t abundance. Of course, some of this has to do with the baleful effects of high inflation. Over the last two years, workers’ wages have actually lost ground relative to inflation. This is particularly true for workers in the middle of the income distribution. Compared to a year ago, prices are up 28 percent for fuel oil, 27 percent for utility gas, 15 percent for transportation, 12 percent for electricity and 11 percent for groceries. While overall inflation has abated relative to the middle of last year, it clearly remains a large presence in workers’ lives.

In light of all this it is unsurprising that voters’ views on the economy and the effects of Biden administration policies are distinctly negative. In a recent CBS News poll 53 percent said Biden’s policies have made the economy worse, compared to 27 percent who say his policies have made it better. The analogous figures on “your own family’s finances” are 49 percent vs. 18 percent; on inflation, 57 percent vs. 22 percent; and on gas prices, 55 percent vs. 21 percent.

Ruy Teixeira in The Democrats’ Abundance Problem

After summarizing how the current Democratic administration is approaching economic problems, Teixeira gloomily concludes about the Democrats’ war on abundance,

Again, none of this is a recipe for abundance. Democrats seriously need to rethink their approach and not assume that simply spending more money in their favorite areas (like climate change) is going to do the job.

Ruy Teixeira in The Democrats’ Abundance Problem

Remember all this when you next go to the polls.

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