A conservative economist's conversion

Bruce Bartlett has impressive conservative credentials as an economic adviser. He started out in Washington working for Congressmen Ron Paul and Jack Kemp, then was Executive Director of the Congressional Joint Economic Committee promoting Reagan's economic policies. He has been a senior fellow at the Heritage Foundation and a senior policy analyst in the George H. W. Bush White House.

In 2006, he published Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy, which is critical of Bush's economic policies for departing from traditional conservative, supply-side economic policy.

However, in his most recent book, The New American Economy: The Failure of Reaganomics and a New Way Forward, he has come to embrace Keynesian ideas, explaining that supply-side policy was appropriate for the 70s and 80s, but it does not fit our present conditions.

Further, he has now stated that tax cuts for the wealthy and corporations did not stimulate the economy during the Bush administration, and there is no reason to believe they would now. He went a step further. Commenting on the conservative mantra that getting rid of regulations will lead to job growth, he said in an interview:

"It's just nonsense. It's just made up."

There you have it, from one of the insiders who found his way back to sanity when it comes to economic policy planning.

It is not lack of money that is causing corporations to increase production, which would create jobs. The problem, as the Democrats have been saying, is lack of consumer demand due to lack of purchasing power due to high unemployment and fear about the future.

This is backed up by some facts (those pesky things that Repubs refuse to acknowledge):
The research firm Birinyi Associates reports that the S&P 500 companies have about $800 billion in cash and cash equivalents on hand that could be invested. This is the most ever recorded.

So we have the very opposite situation in which supply-side economic policy makes even a bit of sense. Yet that's the drum the Republicans in Congress and on the campaign trail are beating and drilling into the voters. "Cut taxes on investors and on corporations. Cut regulations -- and all will be well."

It is Not True. As Obama has said: It makes no sense to give the car keys back to the people who ran the car in the ditch the last time they drove.

Ralph