Heroes of Demand-Side Economics


History Speaks to the Facts

Supply-side economic voodoo spin doctors would have you believe that the New Deal failed, and it was WWII that turned the American economy around. That’s counterfactual. The New Deal and its initiatives, including the WPA, did more than just stimulate the economy, they saved actual lives. And even to the extent that war production contributed to the economic recovery, that is further evidence that demand drives the economy. According to Daily Finance:

During the New Deal’s initial phase, U.S. GDP increased from $635 billion in 1933 to $911 billion in 1937.

In late 1937, FDR felt pressured from Republicans to balance the budget for fiscal 1938, so he attempted to do so — reducing fiscal stimulus elements and making other changes to the New Deal. And guess what happened in 1938? That’s correct: the economy contracted, with GDP falling to $879 billion in 1938.

Enter Supply Side

Supply side economics is nothing new. It’s simply the same mumbo jumbo  policies Hoover undertook during his term that didn’t work. They caused the Depression that was the worst economic period in the United States in the modern era, including an unemployment rate reaching a staggering 23.5% by the end of 1932.

America forgot the lessons of history since Reagan’s “supply-side economics” began a new and well-documented decline of the middle class, the introduction of structural deficits and the stripping away of labor and middle-class- driven consumer demand.

The public has begun to understand these facts, and, while corporate-sponsored voices become more shrill, the changing demographics and increased voter independence will continue the trend of turning red states blue.

Today’s Empowered Consumer

But politics is just one of the tools that the middle class (ie. labor) has in its favor. The revival of unions and giving labor a place at the table is another important element that is vital to renewing economic growth.  A less polarized and more educated public dialogue is also needed. The backlash of polarization and extremist rhetoric shows that this is already an accelerating trend.

While this post is short on the supporting details for the verifiable economic facts enumerated herein, there is an abundant and historical record that clearly emerges when one gets past the partisan and rhetorical nonsense that is so ubiquitous in the media today.  However, an emerging marketing trend today is the empowerment of the consumer. It is too late to put the genie back in the bottle.