Government Shutdown: Supply Side Economics Can Turn This Around

By Douglas V. Gibbs

In the mid-nineties there was a partial shutdown of the federal government, and the Republicans were blamed for it (as if the government unable to act upon its unconstitutional spending habit is a bad thing). The "hate the GOP" campaign back then worked as well as the Left's "hate Bush" campaign worked a decade later. By the end of the attack by Democrats, President Bill Clinton was recast as a competent president, and the Republicans were painted as stubborn partisans.

Now, as the budget is once again a volatile issue, and government shutdown looms, the Democrats are positioning themselves once again to try to point the blame at the GOP. This time, the people are wise to the leftists, and understand that what it will take to save this economy in the long term is to slash spending, and apply the concept of supply side economics.

Simply put, people realize that a lot of federal debt is not a good thing. The government must reduce the debt if the United States is to avoid becoming the next Greece. In terms of priority, it is imperative we reduce our debt, because during an economic downturn, the worst thing to do is increase spending, and increase taxes. The Great Depression proved the damage such policies can cause, and Presidents Harding and Coolidge during the 20s showed us how successful reducing spending, cutting taxes, and deregulating federal rules against businesses can be on a struggling economy.

The problem with the economy is a lack of confidence, and if government was to back off of its regulations against the producers of this country, while ensuring the cost of producing goods drops through a reduction in taxes and spending programs that interfere with the ability to do business, we would experience an increase in the production of goods and services, which would then create its own demand.

In short, our economic growth can expand exponentially if the federal government were to reduce its restrictive policies toward entrepreneurship. Such a change in policy would also encourage more companies to remain in the States, rather than flee to a less restrictive foreign location.

Keeping taxes low, regulations light, and trade open while encouraging private investment, which in turn is an investment in supply, turns economies around.

One of the glaring problems facing the Republicans, however, is the fact that President Obama and the Democrats are demand-side economic theorists. They believe that paying off failing businesses with bail-outs, stimulus programs that remind us of the old British mercantilism system of favoritism (and reeks of fascism), and tax credits for people who aren’t paying taxes, somehow fixes an ailing economy. But the Keynesian theory of economics has a serious problem. It works on trying to create demand by shoving money into people's pockets who would much more desire to use that money to pay down credit and stuff in their mattresses, while taking the production of goods and services for granted. This is not even taking into account that with all of that spending, the government winds up spending more than it takes in - a strategy that is unsustainable in the long run.

Simply put, supply side economics is the only way out of the deficit nightmare.

Americans are beginning to understand this. And truthfully, it is just a matter of common sense. The way to get out of financial trouble as an individual is not to apply for more credit cards and max them out. The strategy must be to increase income, and reduce spending.

At the federal level it has been proven time and time again that reducing spending, and lowering taxes, increases revenue, and creates an environment more business friendly to the private sector. When given the opportunity, the free market self adjusts, and economies become robust as a result. Doing as Obama is doing simply makes the government act hostile toward the private sector, and pushes businesses into a position of bailing out of America, or reducing operations into survival mode.

There is one more reason to reduce spending. . . like the nations of Europe are quickly understanding, socialism is expensive, liberalism breaks the bank, and we just don't have the money anymore.

-- Political Pistachio Conservative News and Commentary

Only Supply Side Can Fix $1.4 Trillion Deficit - Forbes