posted on Apr, 10 2012 @ 03:12 PM
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
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
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
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."
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
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
People need to know...this was an actual idea proposed by a Wall Street/Corporate figurehead, who ultimately ended being one of Ronald Reagans
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.
edit on 10-4-2012 by David9176 because: (no reason given)