Monday, July 10, 2017
Perry (& Other Republicans) Have Economic Theory Wrong
“Here’s a little economics lesson: supply and demand. You put the supply out there and the demand will follow.”
That quote is from Energy Secretary Rick Perry as he toured a coal plant recently. He is wrong, of course -- both about the coal industry, and about economic theory.
He seems to be saying that the way to save the coal industry is just to open more coal mines and to produce more coal for the marketplace. But he is ignoring the fact that coal production is a dying industry, and just producing more coal will not save it.
Coal is dying because it is the dirtiest of all the fossil fuels -- dirtier than oil and far dirtier than natural gas. It produces more greenhouse gases when burned, and more other pollutants also.
I know that the coal industry is now trying to say we could have "clean coal" (a process of burning coal without dirtying our atmosphere). That is just a myth. "Clean coal" procedures do not exist. A "clean coal" plant was being constructed in Mississippi that was supposed to be the model for future "clean coal" plants -- but after years of trying and over $7 billion in expenses, they have given up and the plant will now burn natural gas instead.
The American public wants adequate energy to be produced for the country, but a growing majority wants that energy to come from clean and renewable sources (wind, solar, tides, etc.), and a larger share of energy produced in the U.S. every year is from those sources (and that will continue in the future). That is why the coal industry is dying.
But Perry's statement is wrong on a deeper level. It is a reflection of the Republican Party's belief in "supply-side" economic theory (also called "trickle-down"). It basically says that if corporations (and other businesses) are given more money, they will use that money to produce more goods/services and create more jobs -- and the public will flock to buy those goods and services. More succinctly, if you build it, they will buy it.
This is backwards to rational economic theory. It ignores two things:
1. People will only buy what they need or want (regardless of what is produced).
2. People will only buy what they can afford to buy.
Would people flock to buy buggy whips if a massive amount was produced? Of course not. They don't need or want that product. Would people flock to buy a Rolls-Royce auto if a massive amount was produced? Of course not. Most people couldn't afford to buy one (and enough are already being produced for those that can afford them).
In a free enterprise economy such as ours, supply-side economics is wrong. It is demand-side economics that works. When the masses want or need a product and have the money to buy that product, businesses will meet that demand by producing and selling the product (and hiring more workers to produce if they they need to). No sane business man/woman would produce a product or provide a service that there was no demand for.
So, why do the Republicans continue to champion an economic theory that is backwards to reality? They do it because it is an excuse to give their true constituency (the rich and the corporations) more and more tax cuts. And they preach a failed economic theory so they can fool the American people into letting them do that.
And sadly, they have fooled a substantial portion of the public into believing their "supply-side, trickle-down" lies. And sadder still that these economic lies will only produce short-term good for the corporations, while going to a rational demand-side economic theory would work for the benefit of both workers and businesses.
It is imperative to vote the GOP out of power in 2018. That is the only way to put a sensible economic policy back in place -- a policy that would grow the economy and be good for all Americans far into the future.