The Return of Voodoo Economics

"Voodoo Economics" was the term coined by George H. Bush when he was running in the Republican primary against Ronald Reagan. The term captured the idea that big tax reductions, deregulation, increased defense spending, and run away deficits makes no sense. If we didn't believe it then, we certainly have the proof now. We saw the resurgence of these policies over the last eight years under Geroge W. Bush. Rather than shift to sounder economic policies, John McCain wants to continue more of the same. What is his prescription for America's economic ills? Continuing the Bush tax cuts which are mostly for the wealthy; supposedly cut spending, but not defense spending; and a bizarre proposal to buy mortgages in default at face value only to turn around and lower the balance and interest rate for selected homeowners. None of these policies will have the intended effect.

First, continuing the Bush tax cuts simply rewards the most affluent while increasing the deficits. Without this revenue, we will simply need to continue to borrow money from China, Japan, and the Middle East to finance our debt. The first George Bush was right: this voodoo economics! We can no longer afford to borrow from abroad to finance our government operations. Common sense would tell you that you need to pay it back at some point. We will either pass this massive debt along to the next generation, or devalue the dollar more by printing money in the basement of the Treasury to pay it back. Neither is good choice for America, and frankly passing the buck to the next generation is immoral.

Second, he says that he will cut spending, but not defense spending. If you are going to cut the budget in any meaningful way, you need to cut defense. You will also need to deal with entitlement payments like Social Security, but more importantly Medicare. Neither candidate talks about this in any meaningful way. They simply make general assertions about cutting programs that don't work. What programs? How much? Perhaps we can get some answers in the next debate, but I wouldn't bet on it. The sad truth is that every spending category has its own special interests and congressional sponsors. It would be great if either of these candidates could deliver on spending cuts if elected, but not likely. Moreover, we need to make more investments in infrastructure, education, and energy. Where will they get the money for these imperatives? (I have an answer, but that's for tomorrow's post. Be sure to check it out.)

Third, the proposal to buy up and renegotiate mortgages from homes in foreclosure simply makes no sense. Why should taxpayers bail out irresponsible banks and people who entered into contractual arrangements that they all knew they shouldn't make? What about the vast majority of all homeowners who are making their payments or who saved the money and paid it off? Do they get a windfall bonus check from the government for being responsible citizens?

I have been hard on the McCain-Palin team over the last week, especially for their unrepentant negative personal attacks on Barack Obama. Even if you disagree with me that this was an orchestrated campaign exceeding the bounds of decency, I hope you take a real good look at the policies that John McCain is offering. Not only doesn't his economic policy make sense, but neither does his proposal on health care or his foreign policy. The idea that the Republican candidate will be a proponent for change away from the Republican policies of the last quarter century or more is simply preposterous on its face. To borrow the concept from George H. Bush, it is more than just voodoo economics, it is just voodoo (do I dare say doodoo?). Don't be taken under the spell, think about America First.