Phil Gramm’s Economics BY GEOFF RIPS Austin IT IS A MEASURE of our times that Phil Gramm is regarded as a credible candidate for the U.S. Senate seat in the upcoming election. Only in the age of Reagan could a supply-side theoretician, ranked the most conservative of the 435 House members, campaign as a mainstream Texan. Only with a virtually unlimited campaign fund could such a candidate mount a viable campaign based on buzzwords homosexual, right-to-work, capital punishment \(and have the money to produce a obscure the real meaning of his political philosophy. For if anything sets Phil Gramm apart from most other candidates it is the fact that he hews to a political philosophy to which he admits little compromise. It is a philosophy that, in its application, creates widespread human suffering and hardship. It is a philosophy that provides great freedom to those at the top of the economic ladder at the expense of the mobility and resources of those on the middle and lower rungs. On top of that, the application of supply-side economics is necessarily accompanied by the increased militarization of society and a widening gap between the affluent and everyone else. In assessing the candidacy of Phil Gramm, it is important to assess the supplyside economics he espouses. Whom does it benefit? At what price? Is supply-side economics the salvation Gramm promises? Is Phil Gramm’s apparent insensitivity to the plight of the poor, the marginal wageearner, the elderly, the mortgaged, a logical by-product of supply-side theory? IN HIS RECENT The New Politics of Inequality, Thomas Byrne Edsall defines supply-side economics in its pure The Texas Observer requested a chance to interview Phil Gramm to discuss the U.S. Senate race and supply-side economics. Despite the fact that we said we would run our questions and Gramm’s answers as recorded on tape, our request for an interview was denied by Gramm press secretary Larry Neal. \(“Phil Gramm’s Economics” was the lead editorial in the September 28, 1984 issue of the Observer. In November, Gramm defeated his DemoPhil Gramm at the 1988 Republican form as a policy “highly beneficial to the rich, penalizing the poor and leaving most of the working and middle classes with increased tax burdens.” “The trickle-down effect,” John Kenneth Galbraith explains in his introduction to his new edition of The Affluent Society, “or the horse-and-sparrow metaphor, holding that if the horse is fed enough oats some will pass through to the road for the sparrows, has always been greeted with mild derision.” It contains a basic contradiction, explains Galbraith, wherein free enterprise, monetarism, and taxation favoring the affluent require massive state intervention to prevent inflation, recession, and depression. Without this intervention, inflation is only controlled by recession and depression with their attendant social calamities. What Gramm advocates is a state socialism for the rich with wholesale reductions in corporate income taxes and personal income taxes in the upper brackets. His economics includes all sorts of inducements and incentives for corporate expansion at the expense of small business. With the tax LOUIS DUBOSE National Convention in New Orleans burden shifted to the middle and lower income brackets, accompanied by a reduction in services for those brackets, lateral and upward mobility for those brackets is greatly restricted. With policies encouraging the expansion of corporations into areas providing the cheapest labor, including foreign sources, the power of U.S. labor diminishes. Robert S. McIntyre and Dean C. Tipps of the Center on Budget and Policy Priorities have analyzed the effects of the supply-side program instituted in 1981. Rather than spurring business investment, corporate tax cuts in 1981 led to a decline of 7 percent in investments in plants and equipment in 1982. A great deal of the money saved by corporations was used instead to finance and thereby diminish the so-called free market. Top executive salaries and dividend payments rose dramatically in 1981. The tax cuts did not stimulate more investment, say McIntyre and Tipps, because they brought with them a growing federal deficit, which drives up interest rates 26 DECEMBER 29, 1989
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