How The Republican Party Has Conned America for Thirty Years: The Two Santa Claus Theory

Republicans, Jude Wanninski, and the Two Santa Claus Theory

In Hoover's world (and virtually all the Republicans since reconstruction with the exception of Teddy Roosevelt), market fundamentalism was a virtual religion. Economists from Ludwig von Mises to Friedrich Hayek to Milton Friedman had preached that government could only make a mess of things economic, and the world of finance should be left to the Big Boys – the Masters of the Universe, as they sometimes called themselves – who ruled Wall Street and international finance. Hoover enthusiastically followed the advice of his Treasury Secretary, multimillionaire Andrew Mellon, who said in 1931: "Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system. High costs of living and high living will come down... enterprising people will pick up the wrecks from less competent people."

Thus, the Republican mantra was: "Lower taxes, reduce the size of government, and balance the budget."

The only problem with this ideology from the Hooverite perspective was that the Democrats always seemed like the bestowers of gifts, while the Republicans were seen by the American people as the stingy Scrooges, bent on making the lives of working people harder all the while making richer the very richest.

This, Republican strategists since 1930 knew, was no way to win elections.

Which was why the most successful Republican of the 20th century up to that time, Dwight D. Eisenhower, had been quite happy with a top income tax rate on millionaires of 91 percent.

Republicans realized that it was incredibly difficult to win elections based on their small mantra "LOW TAXES, REDUCE GOVERNMENT, BALANCE THE BUDGET.

So they had to do something to change this.

Democrats held both the House and the Senate for 26 consecutives years....all the way to 1980.

By 1974, Jude Wanniski had had enough. The Democrats got to play Santa Claus when they passed out Social Security and Unemployment checks – both programs of the New Deal – as well as when their "big government" projects like roads, bridges, and highways were built giving a healthy union paycheck to construction workers.

They kept raising taxes on businesses and rich people to pay for things, which didn't seem to have much effect at all on working people (wages were steadily going up, in fact), and that made them seem like a party of Robin Hoods, taking from the rich to fund programs for the poor and the working class. Americans loved it. And every time Republicans railed against these programs, they lost elections. Everybody understood at the time that economies are driven by demand.

But Wanniski had been doing his homework on how to sell supply-side economics. In 1976, he rolled out to the hard-right insiders in the Republican Party his "Two Santa Clauses" theory, which would enable the Republicans to take power in America for the next thirty years.

Democrats, he said, had been able to be "Santa Clauses" by giving people things from the largesse of the federal government. Republicans could do that, too – spending could actually increase. Plus, Republicans could be double Santa Clauses by cutting people's taxes! For working people it would only be a small token – a few hundred dollars a year on average – but would be heavily marketed. And for the rich it would amount to hundreds of billions of dollars in tax cuts. The rich, in turn, would use that money to import or build more stuff to market, thus increasing supply and stimulating the economy. And that growth in the economy would mean that the people still paying taxes would pay more because they were earning more.

There was no way, Wanniski said, that the Democrats could ever win again. They'd have to be anti-Santas by raising taxes, or anti-Santas by cutting spending. Either one would lose them elections.

When Reagan rolled out Supply Side Economics in the early 80s, dramatically cutting taxes while exploding (mostly military) spending, there was a moment when it seemed to Wanniski and Laffer that all was lost. The budget deficit exploded and the country fell into a deep recession – the worst since the Great Depression – and Republicans nationwide held their collective breath. But David Stockman came up with a great new theory about what was going on – they were "starving the beast" of government by running up such huge deficits that Democrats would never, ever in the future be able to talk again about national health care or improving Social Security – and this so pleased Alan Greenspan, the Fed Chairman, that he opened the spigots of the Fed, dropping interest rates and buying government bonds, producing a nice, healthy goose to the economy.

Republicans have been doing this for the last 30 years. Running up huge deficits, spending lavishly on the military along with massive tax cuts....and as soon as they are out of power....they scream about the deficit and scream of calamity if it isn't changed...therefore handcuffing any new programs Democrats may want to propose.

This is EXACTLY what they did to Clinton...and it's EXACTLY what they are doing to OBAMA RIGHT NOW.

Looking at the wreckage of the Democratic Party all around Clinton by 1999, Winniski wrote a gloating memo that said, in part: "We of course should be indebted to Art Laffer for all time for his Curve... But as the primary political theoretician of the supply-side camp, I began arguing for the 'Two Santa Claus Theory' in 1974. If the Democrats are going to play Santa Claus by promoting more spending, the Republicans can never beat them by promoting less spending. They have to promise tax cuts..."

Ed Crane, president of the Libertarian CATO Institute, noted in a memo that year: "When Jack Kemp, Newt Gingich, Vin Weber, Connie Mack and the rest discovered Jude Wanniski and Art Laffer, they thought they'd died and gone to heaven. In supply-side economics they found a philosophy that gave them a free pass out of the debate over the proper role of government. Just cut taxes and grow the economy: government will shrink as a percentage of GDP, even if you don't cut spending. That's why you rarely, if ever, heard Kemp or Gingrich call for spending cuts, much less the elimination of programs and departments."

www.commondreams.org...

The Two Santa Claus Theory has been in effect for the last 30 years by the Republican party. All one has to do is look at our history to see this. The same thing that was railed against with Clinton is being done with Obama.

A bit of info on Jude Wanninski:

In 1965, Wanniski moved to Washington, D.C., to work as a columnist for the National Observer, published by Dow Jones.

From 1972 to 1978, Wanniski was the associate editor of The Wall Street Journal, the part of his career for which he is perhaps best known. He left after being discovered at a New Jersey train station distributing leaflets supporting a Republican senatorial candidate, an act considered an ethics violation.

In 1978 Wanniski started Polyconomics, an economics forecasting firm, where he and his analysts advised corporations, investment banks and others.

He also began directly advising politicians on economic policy, first candidate Ronald Reagan and later presidential hopefuls Jack Kemp and Steve Forbes.

en.wikipedia.org...

People need to know...this was an actual idea proposed by a Wall Street/Corporate figurehead, who ultimately ended being one of Ronald Reagans economic advisors.

He is the brain child for all that ills us today. This explains why Republicans run up massive deficits and hand out tax breaks like candy.....then scream bloody murder when they are out of power.

Doing this, they can, in theory, stop the creation of a new program that could help Democrats get elected. Clinton gave in when he was in office...balanced teh budget...only to see HUGE deficits increased with Bush.

Obama walks in...RINSE/REPEAT.

The Two Santa Claus Theory

The Two Santa Claus Theory is a political theory and strategy published by Wanniski in 1976, which he promoted within the United States Republican Party.

According to Wanniski, the theory is simple.

In 1976, he wrote that the Two-Santa Claus Theory suggests that "the Republicans should concentrate on tax-rate reduction.

As they succeed in expanding incentives to produce, they will move the economy back to full employment and thereby reduce social pressures for public spending. Just as an increase in Government spending inevitably means taxes must be raised, a cut in tax rates—by expanding the private sector—will diminish the relative size of the public sector"].

Wanniski suggested this position.....so that the Democrats would "have to be anti-Santas by raising taxes, or anti-Santas by cutting spending. Either one would lose them elections".

The theory states that, in democratic elections, if one party appeals to voters by proposing more spending, then a competing party cannot gain broader appeal by proposing less spending.

The first "Santa Claus" of the theory title refers to the political party that promises spending. Instead, "Two Santa Claus Theory" recommends that the competing party must assume the role of a second Santa Claus by not arguing to cut spending but rather offering the more appealing and publicly sellable option of cutting taxes.

This theory is a response to the belief of monetarists, and especially Milton Friedman[citation needed], that the government must be starved of revenue in order to control the growth of spending (since, in the view of the monetarists, spending cannot be reduced by elected bodies as the political pressure to spend is too great). See also Starve the beast.

The "Two Santa Claus Theory" does not argue against this belief but holds that such arguments cannot be espoused to try to win democratic elections.

In Wanniski's view, the Laffer curve and supply-side economics provide an attractive alternative rationale for revenue reduction: that under reduced taxation the economy will grow, not merely that the beast of the government will be starved of revenue, and that that growth is an attractive option to present to the voters. Wanniski argued that Republicans must become the tax-cutting Santa Claus to the Democrats' spending Santa Claus.

en.wikipedia.org...


I urge everyone to read more about Jude Wanninski and what his role played in Supply Side economics and the "Laffer Curve."

It's a political ploy to retain power....and once they lose it....automatically have their talking point in the waiting by using debts and deficits...even if they helped create it in the first place.

This is an article written by Jude Wanninski in 1976 in the National Observer:

The only thing wrong with the U.S. economy is the failure of the Republican Party to play Santa Claus. The only thing wrong with President Ford is that he is still too much a Hoover Republican when what the country needs is a Coolidge Republican. These statements, seemingly absurd, follow naturally from the Two-Santa Claus Theory of the political economy. Simply stated, the Two Santa Claus Theory is this: For the U.S. economy to be healthy and growing, there must be a division of labor between Democrats and Republicans; each must be a different kind of Santa Claus.

It isn’t that Republicans don’t enjoy cutting taxes. They love it. But there is something in the Republican chemistry that causes the GOP to become hypnotized by the prospect of an imbalanced budget. Static analysis tells them taxes can’t be cut or inflation will result. They either argue for a tax hike to dampen inflation when the economy is in a boom or demand spending cuts to balance the budget when the economy is in recession.

Either way, of course, they embrace the role of Scrooge, playing into the hands of the Democrats, who know the first rule of successful politics is Never Shoot Santa Claus. The political tension in the market place of ideas must be between tax reduction and spending increases, and as long as Republicans have insisted on balanced budgets, their influence as a party has shriveled, and budgets have been imbalanced.

This is a very long article...you can read the rest here:

capitalgainsandgames.com...

For those of you who wonder why Republicans can't seem to stop spending and increasing deficits.....but then scream and yell when not in power about Both when not in power....this is your answer. This is how it started.

Republicans have really been in control of this economy for the last 30 plus years...even when not in power...as they starve the government so much that no real progress can be made by their opposition.

Also, here is a video explaining the Two Santa Claus theory...this is from 2010:

And now comes the 2012 elections.

Romney is being heavily funded by the wealthy and wall street...almost exclusively.

If they actually implement what they are now campaigning on....huge huge cuts to spending programs that help the middle class and poor along with more tax breaks for the wealthy......it would actually end implementation of this theory....and bring massive unpopularity to the Republican party.

Its just one santa claus, the federal reserve. The only false mantra s "vote the lesser of the two evils" because they are the same evil and there is just one of it.

No comments at all on this? Wanninski was the father of Supply Side Economics...he simply made it up. This pretty much explains Republican politics the last 30 plus years....why the spend spend spend and cut taxes without paying for it every single time a republican President has been in office since Reagan.....yet no replies???????