So, Conservatives Are Better For Business, Right?

Well, that is the general theme, taken for granted by Americans ever since Saint Ronny the Gipper declared that democracy was the problem. But, like in earlier posts, the data tells a different story. For instance, this week, Marco Rubio (TP-Fla) was on the Charlie Rose Show speaking about “small business” and the crippling problems of regulations and ¬†taxes. But if the conservative point of view is so proper, shouldn’t businesses be less likely to fail when conservative values prevail?

(Chart packs courtesy American Bankruptcy Institute)

The chart above shows business bankruptcy filings by year, dating all the way back to Jimmy Carter’s final months in the White House. Business bankruptcy surged during the Reagan years, reaching their peak in 1986 and 1987. In fact, more businesses filed for bankruptcy in ’86 and ’87 (squarely in the middle of Morning in America), then in the years 2000-2009 combined. Even more oddly, more bankruptcies were filed by business in the 5 years after the first round of Bush tax cuts, then in the last 5 years of the Clinton Administration. So what does this chart tell us?

It tells us that reducing tax rates on (primarily) higher income business does nothing to make real small business more stable. It tells us that that supposedly punitive regulations of the Clinton years were less damaging than the more lightly-regulated Bush years. And it tells us that business bankruptcy, after the reform of 1994 (passed by a Democratic House and signed by Clinton) is not a major issue.

But can bankruptcy tell us a negative story about these past 30 years and their orgy of tax-cutting? Yes, but only when we look at personal bankruptcy and its cousin, household income growth. Personal bankruptcies have surged, reaching a peak before the Great Recession and after both rounds of Bush tax cuts. The first chart below shows the growth in bankruptcies by states, with the second showing the growth in household income by the various segments of U.S. society.

Draw your own conclusions. There is an important difference between correlation and causation. But it is impossible to credibly claim the superiority of conservative economic policy as it pertains to the businesses and households of regular Americans in the face of these facts. So why, I wonder, has the so-called liberal mainstream media not displayed these charts from one end of the news to the other? Supply side economics has had its trial, and failed miserably.


The Rational Middle is listening…