Ideology:

a : a systematic body of concepts especially about human life or culture b : a manner or the content of thinking characteristic of an individual, group, or culture c : the integrated assertions, theories and aims that constitute a sociopolitical program

Ideologue:

an often blindly partisan advocate or adherent of a particular ideology.

Practical:

disposed to action as opposed to speculation or abstraction. not theoretical or ideal, capable of being put to use or account.

The recession of 2008, which actually started in Dec of 2007, has been called the Great Recession by some. It has had global impact creating unstable and volatile markets, pronounced unemployment, declining equity values, declining property values and severely restricted credit. It has also brought about an unprecedented amount of government intervention in the private financial markets to try to stave off the worst case scenario; a Depression.

The US government has been locked in a partisan battle since the inauguration of President Obama. It is hard to find a clearer example of the different ideologies of the two main political parties than what has taken place in the last 18 months. The President and the Democratic members of Congress (not all, but most) have followed a path of government intervention to stabilize the banking industry, help prevent GM from collapsing, extending unemployment benefits for those hardest hit by the Great Recession, and passed Health Care Reform and Financial Regulation Reform. The Republican party has basically opposed all of it and proposed in its place, a mixture of tax cuts and tax credits.

The coming battle to allow the Bush Tax Cuts, passed in 2001 and 2003, to expire will be an epic battle of pure ideology. On the one side, the Republicans who tend to be supply side economic theorists, will argue that allowing the tax cuts to expire will act as a tax increase and cause a slowdown in consumer spending and investment. The Democrats will argue that the tax cuts were most beneficial to the top 1% of wage earners in the US, who did not stimulate the economy or create jobs as evidenced by the Great Recession, and that allowing those cuts to expire will boost government revenues which are badly needed as the government is running massive budget deficits.

The point I want to make with this post is that there is a major difference between theory and practice. If you study tax policy, or most economic theories, you’ll find they are just that; theories. There are studies that support both sides of a given tax policy argument and people will gravitate toward one or the other based on their predilections. So when a problem of tax policy emerges, if you stick with your preferred economic theory, you may ignore the facts in favor of the theory.  As an example, in the 1980’s President Reagan slashed taxes which proponents argue ultimately produced a doubling in tax revenues as a result of economic growth. So the tax cuts actually increased government revenue eventually. What those same proponents ignore is that the national debt more than tripled during that same period and that tax receipts as a percentage of our GDP dropped, and did not recover to prior levels until the late 1990’s.

A practical person looking for solutions to our current massive budget deficits and the borrowing that accompanies it might address the problem mathematically. To bring the budget into balance, we need to increase inflows, decrease outflows or some combination of the two. As such, allowing the Tax Cuts to expire, which will increase the taxes paid by the top wage earners by increasing the marginal rate, will increase inflows. The ideologue, hearing this, will use their ideological position to make statements like “You can’t increase taxes during a recession” or “The tax cuts allow the wealthiest to invest, and those investments create jobs.” They may also use the trite “Giving the government the money is the worst thing you can do.” These statements do not need facts to back them, they are position statements.

On the spending side, a practical person might look at the exorbitant spending on the ongoing wars in the Middle East and conclude that these expenses are unsustainable and we should plan an orderly end to the exercise. The ideologue will respond with “We didn’t ask for this war, we were attacked” or “We have to complete the mission or our children’s children will have to fight it again” or the trite “Freedom isn’t free.” Again, these are position statements which don’t require any facts.

If the practical man tries to ask specific questions from the ideologue like “How do you propose we balance the budget and pay down the debt” or “What specific cuts in spending would you make to bring the budget in line” he will likely not get specific answers. The ideologue, as the definition at the top of the post shows, is a conceptual person. He has theories he believes in and will rely upon those theories to paint a picture with broad strokes. There will be little point in continuing the discussion from the practical man’s point of view, and so the conversation ends with no resolution.

Keep your eyes and ears open for the political battle soon to be fought on the Bush Tax Cuts. See if you can pick out the ideologues and see if any of our elected leaders tries to use logic and factual information to resolve problems. It should be lots of fun.