Robert Reich: Neither stimulus nor supply-side will work

Image by Cain and Todd Benson, flickr

We find ourselves in the midst of an election that at some level is about the classic dispute between Keynesian stimulus and supply-side voodoo economics.  Keynes is generally thought to have been proven right time and time again.  As such, liberals including myself and many who are much more knowledgeable, informed, and articulate, have argued that were Obama able to wrest larger amounts of stimulus dollars from Congress, our economy would be kick started and on the mend.  Hold your horses, says Robert Reich in a piece aired on Marketplace this evening:

Who’s got the right plan to boost growth? by Robert Reich for Marketplace, Sep. 12, 2012

Keynesian pump-priming assumes that at some point consumers will take over. Once the government has spent enough, consumer spending will then keep the economy going. But the middle class doesn’t have enough money to take over where the government leaves off because its share of total income keeps shrinking.

For their part, supply-siders assume business leaders and entrepreneurs will create more jobs if they’re adequately rewarded with tax cuts. But they won’t create more jobs without more customers. And as real wages continue to drop, most people can’t and won’t buy more.

I don’t agree with Reich’s “oh, both sides don’t get it” approach as it seems to create a false equivalency.  However, his point that in order to ensure a return to economic health our nation needs to address its vast wealth divide is one we need to hear.

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2 Comments on “Robert Reich: Neither stimulus nor supply-side will work”

  1. It’s become hard to believe that giving tax breaks for the rich will create jobs. How has the Bush Tax Cuts helped out in the way of jobs for the past 11 years? Not. Worth. A. Damn.


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