Marketing dollars predict the economy.

Few economic barometers are more accurate than marketing expenditures. During every downturn, ad agencies and independent creative consultants suffer the most. That’s because marketing and advertising budgets are the first to get cut when profits are down.

And that, in the long-run, is the worst thing that any business can do. If your competition has pulled the plug on advertising, wouldn’t that be the best time to promote and establish your brand? You can’t get bigger bang for your buck than when the competition has left the field.

But back to the topic. Nothing is as sensitive to economic conditions as marketing dollars. As soon as there’s any kind of downturn, marketing budgets are cut. It happens so often because so many companies wrongly view marketing as an optional, rather than an on-going, business expense.

Politics undermine marketing dollars.

Marketing and advertising are the life-blood of a capitalist economy. They’re how companies survive and thrive. They’re how jobs are created and how we make money flow. But they stop when the economy stops the flow of money.

During various Republican administrations, dating back dozens of years, “trickle-down economics” was the big catch phrase. It never worked. Because the wealthy seemed to believe that it would mean watching their wealth trickling away. (So short-sighted.)

The second President Bush gutted the incredibly healthy economy he inherited from President Clinton and the economy still hasn’t recovered. (Don’t get pissy – it’s a historical fact. Biggest surplus in history turned into the biggest deficit … and, no, that surplus was not thanks to Republicans. Not.)

Ever since President Obama took office in 2008, Republicans have blocked everything they possibly could that might have turned things around … and then had the gall to blame Democrats for a sluggish economy. All one has to do is look at voting records and filibusters to see who’s helping and who’s obstructing. It’s right there.

Our current state of affairs can actually be traced to California’s first actor-turned-governor. According to the Congressional Budget Office, from the time Ronald Reagan became president through 2007, income at the top 1% (adjusted for inflation) increased by 281%. Compare that to the paltry 25% increase for the middle 20% of Americans during the same 26-year period.

As mentioned above, when President Bush took office in 2001, he was handed a huge surplus by President Clinton. Bush claimed he was giving that surplus back to the American people. But guess who it actually went to … that top 1%, not to the country as a whole. Bush (Texas’ gift to the world) added more than $3 trillion to the national debt over the last decade. The result? The wealthy continue to count their money while average Americans continue to hope for some. That’s politics.

How we got into this mess.

The Reagan administration (those wonderful folks who brought us “Reaganomics”) is most closely associated with “trickle-down economics” even though the concept was around for decades before. Paul Krugman,* the Nobel prize-winning economist, wrote in The New York Times (during the second Bush years) about the runaway inequality that began under Reagan and continued under George W. Bush: “When the structure of the U.S. economy had to compete worldwide without policies respecting workers is where one should look to understand what’s wrong with today’s economy. That began under Reagan and Reagan alone. And Bush has driven that point of view to the limit and mortgaged the future for the benefit of a few in the process.”

Since the election of Ronald Reagan in 1980, the U.S. tax system has never been the same. So-called “supply side economics” – the promise that if we drastically cut taxes for the wealthiest Americans they will create jobs – simply didn’t work. It may have looked good on paper, but it never made it into reality. Another Republican, the first President Bush, George H. W. Bush, perceptively called supply side economics “voodoo economics” and talked about its weaknesses.

Here’s what supply side economics ultimately achieved: the wealthy took their tax cuts, but instead of creating jobs in the U.S. they took advantage of weak trade policies and created jobs in other countries – China, India and Pakistan. Why? To make even more profits. For every union worker in the U.S. looking for $20 dollars per hour there were people in other countries willing to do the same work for $1.

Those Americans who owned stock in those off-shoring companies were thrilled. Profits were higher than ever before. They simply never looked down to see that they had shot themselves in both feet.

What Reagan’s own say.

David Stockman, director of the Office of Management and Budget under President Ronald Reagan, wrote in a 2010 article titled Four Deformations of the Apocalypse: “The day of national reckoning has arrived. We will not have a conventional business recovery now, but rather a long hangover of debt liquidation and downsizing. Under these circumstances, it’s a pity that the modern Republican Party offers the American people an irrelevant platform of recycled Keynesianism when the old approach – balanced budgets, sound money and financial discipline – is needed more than ever.”

Currently, while U.S. companies continue to pay criminally low wages in third-world countries, seeking obscene profits by avoiding paying American workers, bonuses at those companies for C-level staff are reaching record highs. It’s so obvious what would happen if those jobs were brought back to the U.S.: workers would invest their pay back into our economy. Those short-sighted, profit-centric companies not only benefit from cheap labor while hurting the U.S. economy, they also use Republican-written tax codes to add even more profits. And they actually receive tax cuts for creating jobs in other countries. (See comment above re: shooting oneself in both feet.)

Too bad it’s turned into “us” vs. “them.”

President Obama has stated he wants to end tax cuts for companies that ship jobs overseas and instead give those tax breaks to companies that create jobs in America. (The Republicans are howling. Can you hear it?)

After President Bush took office in 2001 and handed more than $3 trillion in tax cuts to his buddies, he also took us to war in two countries, Afghanistan and Iraq. The U.S. spent trillions of dollars in Iraq (which, of course, had nothing to do with 9/11) while private companies such as Halliburton reaped profits. In addition to thousands of American and Iraqi lives lost, the U.S. taxpayer had to pay the cost of both wars. That’s you and me. While jobs were scarce, the economy sucked and marketing dollars were scarcer and scarcer.

President Obama is on-track with his campaign promises to bring home troops. But if a Republican takes over the White House in the near future, they’ve made it clear that they will happily go to war with Iran. As of now, the majority of American people have spoken and made it clear that we don’t want to start another war, because the cost in both dollars and human life is just too great.

Tax breaks for the wealthy made us broke.

During the Reagan administration, the wealthy saw their tax rates drop from 70% to 28% within eight years and union workers found themselves without jobs. When the ill-advised Depository Institutions Deregulation and Monetary Control Act of 1980 was signed into law, banks found it far easier to do business … and hurt the American people in the process. Allowing big banks to merge and set their own interest rates was a rare gift. The banks and Wall Street found it far easier to make money while we, the American people, struggled.

With tax cuts and deregulation on the move, Reagan tripled the national debt, raiding the Social Security trust fund in an attempt to cover up the massive loses. As the years went on, Wall Street reform was never seriously on the table. When the economy started to pick up again in the 1990s, President Clinton raised taxes on the most wealthy, bringing in the revenue needed for the government to function. Then, in November of 1999, with a Republican-controlled House and Senate, President Clinton buckled and agreed to repeal the Glass-Steagall act that had helped keep big banks from overtaking the markets.

Less than a decade later the economy collapsed. Too much power had been left in the hands of too few. In 2010, President Obama signed the ”Wall Street Reform and Consumer Protection Act” into law. It helped consumers and began putting financial responsibility back on the big banks. The bank bail-out of 2008 angered the American people. The Wall Street reform bill put an end to future tax-payer bailouts of big banks. The passage of that bill was a start, but we need to do much more to get back to where we need to be.

Me, me, me? Or, us, us, us?

Do you like well-maintained roads kept in drivable condition? How about being able to dial 9-1-1 for police and fire protection, or an ambulance? Good public schools? Decent hospitals? Rapid emergency services? A postal service? Those are just some of the services supported by taxes. There’s a reason we pay them – taxes keep society running. Taxes keep us safe and on an even keel. (In more enlightened societies, taxes also mean no worrying about healthcare of any kind, or education, or retirement … wish I spoke Danish.)

If the Republicans have their way, they’ll cut all taxes and then blame the bankrupt government for not providing basic services … even though they know full well that it’s their greed and selfishness that’s the root cause. All those southern states crying for secession? Guess what would happen to them when they suddenly have no federal funds of any kind for any of the basic services they now take for granted.

Getting an economic balance back is the only way the economy can get back on track. Making everything about taxes is about as wrong-headed as one could be. The issue isn’t taxes, it’s people. It’s about the country. It’s about our ability to function and do the things we’re good at. It’s about having marketing dollars to spend again so that capitalism can do what it does best: provide healthy competition among competitive offerings and let the best product or service win.

(*Krugman also won the Prince of Asturias Awards, the John Bates Clark Medal, and the H. C. Recktenwald Prize in Economics.)