The SPD and the Greens criticize the tax plans announced by the Union and FDP during the election campaign as a “voodoo economy”. The term has a long history and was used by George Bush Sr. embossed to etch towards Ronald Reagan. But what does it mean?
Union and FDP claim the economic competence for themselves – and have to listen to an accusation from Social Democrats and Greens in the election campaign that sounds like black magic. Green Chancellor candidate Annalena Baerbock calls the Union’s election manifesto “financial voodoo”, while SPD Vice Kevin Kühnert is linking the FDP’s tax concept with voodoo. The SPD bosses Saskia Esken and Norbert Walter-Borjans distribute the same term to the CDU and CSU: “Voodoo economy”.
Here the question arises: what is actually meant by this? The term comes – like so many things – from the USA. He was coined by George Bush sen. 1980, when he was fighting Ronald Reagan for the Republican presidential nomination. The core is the assertion – advocated by Reagan among others – that tax cuts are more or less self-financing, as they ensure additional economic growth.
Linked to this is the argument known as “trickle down”: Deregulation and tax cuts for the wealthy and for companies result in more investments and thus more jobs. And that leads to more consumption, growth and prosperity for everyone.
Reagan not only prevailed against Bush, but also won the 1980 presidential election. He cut taxes massively and then discovered that the concept did not work. The budget deficit increased from 2.7 to 5.7 percent in just two years – which, however, also had to do with the significant increase in military spending in the Cold War against the Soviet Union. Economic growth picked up during the Reagan presidency and millions of new jobs were created. This was due to an expansive fiscal policy with huge tax cuts and arms purchases and led to the fact that the national debt climbed from almost 21 percent to almost 50 percent of the gross domestic product during Reagan’s tenure.
Researchers calculate suggestions
This is the direction in which the SPD and the Greens reproach: The promised tax cuts would lead to tax losses running into billions – and neither the Union nor the FDP would say whether and how these billions should be financed.
The Center for European Economic Research (ZEW), which examined the tax proposals in the parties’ programs for the Bundestag election, offers arguments. Accordingly, the proposals of the FDP would lead to 87.6 billion euros less tax revenue, the Union to 32.6 billion less revenue. In the case of the SPD and the Greens, there would be more income on balance – regardless of how economically sensible the tax increases they announced are.
Ironically, George Bush became Vice President of Reagan and defended Reaganomics bravely. At first he claimed that he never called this policy “voodoo”. When recordings surfaced, Bush said he was just joking.
But that doesn’t change anything about it: Bush coined a catchy name that has long since gone beyond “Reaganomics”. With the accusation of “voodoo economy” one accuses the other side of the fact that their economic ideas are based on wishful thinking and ideology – and not on reality.
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