Politics of Economics – February 2, 2026

Like many other areas of academia have already experienced, once politics with all of its motivations enters the space there is likely to be all sorts of colleterial damage. Not just to the academia itself as a purpose of study, but also how we look to academia to explain and make sense of things.

Economics is no exception.

The fundamental challenge, that we will explore with this conversation, is the benefit to politicians from exploiting economic principles.

As a result, there are various skepticisms that became mainstream.

When did economics, as a major academic discipline, become distrusted?

There is a short version that is also rather useless, a phrase that belongs on an image and circulated via social media along side climate change debate. Let us focus on the longer answer.

In some ways we need to include common criticism of both supply-side and demand-side arguments, considering also buzzwords like “Reaganomics” as well as “MMT,” perhaps concluding on the difference between classroom level conversation and theory against real world challenges in a complex economic model. Said another way, why economists turned commentators or working for politicians tend to apply simplistic theories to complex problems.

A statement on distrust using a bit of US history

Even what caused the Great Depression became subject to political spin, some of the structural faults in the economy at the time have similarity to what we see today with our consistent bubble and pop economic model.

Well before the Great Depression was prerequisite “Quite Depression,” that was largely in the agricultural space and based on a bubble coming out of World War I. Where farmers invested in land and machinery only to find in the early 1920s global demand for crops went down collapsing exports. The war-time boom of demand for US crops sunk and with it took thousands of land foreclosures with sinking farm land valuations well before the yearbook Stock Market Crash of 1929.

During the same timeframe wage growth became stagnant, divorcing wage growth from production and capacity growth. Just outside of a decade in the making, prior to the crash, there was a sudden collection of wealth at the top. By the time of the crash the top 1% held 40% of the nation’s total wealth. (For reference, today that number is somewhere in the 31% to 32% neighborhood.)

That created two economic faults at the exact same time. Wages was not keeping up with inflation in a manner as to purchase the very goods and services that was propelling the nation’s economy at the time. Cars, appliances, etc. The industries that needed more buyers were facing a public not keeping up, thus affordability became a problem leading up to the crash. The other fault is buying on credit started to uptick.

Buying on credit back then has little association to credit today. As of today it is largely institutionalized with banks and credit card systems driving the function back then it was the merchants themselves handling both the products being sold and the buying on credit function applied for the buyer. Completely unstandardized with the merchants working out the terms of payment, entirely distributed risk, with little to no government oversight.

To top it all off, not only was the nation buying products and services on credit they were also buying equities (stocks) on credit. Literally, at the time buying stocks with as little as 10% down and the “credit” coming from the stock broker. Another kill two birds with one stone moment. One, this created an artificial overbought condition for the stock market as it was in part debt-fueled buying. Two, speculation became more relaxed as credit buying was doing too much of the talking.

Often the Stock Market Crash of 1929 is referred to as the “downward leverage spiral” as finding the floor meant finding the point where valuation was not tied to stocks held via so much credit. Where equity price matched the valuation of those holding with their own skin in the game, so to speak.

Stock valuations dipping in the fall of 1929 was the indicator, “margin calls” telling investors to deposit more money that they did not have anyway to cover the loss in stock value became the trigger. “Bet it all” became too many were already all in, no one to turn to and the floor was found by a very vicious cycle of margin calls against massive volume stock dumping. So, a 13% loss in one day and literal “bet it all” wealth, on credit, was wiped out.

So why go through this history?

The resulting Great Depression, a leading indicator of investment sentiment and a resulting period of economic disaster for the nation, and by consequence the rise of the economic politicization.

That does not mean that politicians did not have economic opinions before all this nonsense, but it could be argued that why the Great Depression occurred and the lack of “self-correction” by the markets as taught by classical “laissez-faire” economics made way for someone like John Keynes to step in with alternate theory.

In that moment, in that time of severe economic crisis taking down the economy of the nation, both the “long-run” fallacy and the “supply creates its own demand” fallacy was debunked with structural understandings of why aggregate demand needed more attention.

A conversation, turned into a heated debate that we still have today using newer terminology, was born on what happens when the private sector cannot or will not spend therefor how the government can influence that.

And just like that, the political divide on supply-side economics and demand-side became so concrete that all modern economies today still debate fiscal, trade, and monetary policy for what governmental influence should exist. Perhaps more importantly, who should get more attention.

What is different from then to now?

In short, our monetary system was altered. When you get down to it that was the big change.

The US Dollar (and most other nations for that matter) at some point evolved off the metallic currency standards, or the “Gold Standard,” to a Fiat Money System. The movement away from currency being linked to a specific amount of Gold held by the issuing nation, to a currency system with no intrinsic value and entirely relying on public trust in the issuing nation’s authority to be stable. (You can have a quick laugh, I did.)

One consequence, of many, was the debate evolved as well into using different terminology but still retaining the core ideological differences of what drives an expanding economy. Those handling supply or those handling demand.

As for stability, we have had a conversation on that.

What does this mean for today’s political economic debate?

Quite a bit I am afraid.

The things that Keynes proposed way back then is still political talking points today. Ideas such as deficit government spending in place of reduced consumer spending because of economic fault, or infrastructure spending would influence future economic activity. But also what was birthed was an idea about active monetary policy that today is a function of the Federal Reserve (Fed.)

We had a conversation that too. Where we talked a bit about our consumer spending driven economic model.

A very long story cut short, Keynes produced a set of arguments, principles, as to why a focus on aggregate demand was paramount in understanding why we are at a particular point of the economic cycle. Could explain faults and more importantly what to do about those faults.

Politically speaking, the stagflation from the 1970s (a period of high inflation mixed with stagnant economic growth) was answered to by Republicans with so called “Reaganomics.” A resurgence of supply-side economic arguments with a focus on “unleashing the supply side” of the economy. Tax cuts, largely benefitting the most wealthy. Deregulation, as to get the government out of the way of business taking on risk. Reduced government spending, that did not really happen that way. And restricting monetary policy, lowering the money supply.

Did this work is up for debate… naturally, along political lines.

The same side of the political fence behind Trump’s fiscal and monetary demands today, are aligned to the 1980s that point to inflation falling from over 13% in 1980 to near 4% by 1988. Critics, that more align to today’s opposition to Trump, back then pointed out that during the same period national debt nearly tripled as Republicans went on a military spending spree never offset by tax revenues generated from increased economic expansion.

Arguably, at that point, what was set in motion was a concept of tax cuts that will eventually pay for itself that never materialized. If our national debt today is any indication of supply-side policy results, that myth is also debunked. Here we are today with over $38 Trillion in debt with no end in sight.

So what is this “MMT” thing?

Modern Monetary Theory (MMT) is more or less a set of economic principles stemming from an understanding of fiat money systems and monetary policy that also incudes a social justice set of ideals. So, it both explains far more than it does not and it is controversial as today’s supply-side economic thinkers are not much for anything that even appears to look like helping those that are less fortunate.

Using a bit more proper terminology, MMT is a macroeconomic framework that makes several arguments in the support of aggregate demand being key to an economy’s success. An effort to achieve full employment, throttle inflation with price stability, and stable growth.

One of the core principles of MMT is turning the relationship of the Federal Government taxation and spending on its head. Traditional economics, and arguably supply-side economics, suggests the Federal Government taxes in order to spend. MMT suggests the exact opposite, the Federal Government spends in order to influence aggregate demand and therefor taxes in order to deal with inflation and drive currency demand.

In short, taxation removes pooled wealth from the economy impacting both the velocity of money and the valuation of currency, and allows the government room to spend to influence aggregate demand without overheating the economy. It is worth consideration in the context of prior conversation on what is the primary driver of the US economy. Happens to be the consumer, the buyer.

The politics of this is where it gets dicey.

MMT also suggests that because the Federal Government has fiscal and monetary influence on its own currency, in a way no other entity in the economy does, then the Federal Government is not financially constrained by its ability to tax or borrow but rather constrained by real resources available. In an economy that is labor, materials, etc.

Applied this means the Federal Government has to keep watch on demand for its currency and its valuation as it competes against the international basket of currencies (that are also largely fiat money systems too.)

Just as demand for goods increasing sharper than supply causes inflation (demand-pull inflation) the same is true of too much money chasing too few goods and services (excessive money creation.)

Critics of MMT will incorrectly say that MMT says “a nation can create money endlessly” or “cannot run out of money.” Both are misleading, and as supply side loves to bring up the examples of Germany after WWI or Zimbabwe’s currency collapse of 2008 and 2009 while MMT points out both had real resource collapses. Germany’s loss of industrial capacity and Zimbabwe’s loss of agricultural production. Explainable and true, my advice is to go look these things up and from an economist and historian. Not so much someone with D or R behind their names.

In the end MMT explains more than it does not, and it speaks well to the going counter theories between Democrats and Republicans these days on who should get a tax break and who should get benefit from government spending. Either way both sides tend to focus on the political winners and losers leaving economists with a negative reviews for pointing out how the system actually works.

So, who is right on the economy?

To be brutal, neither Democrats or Republicans are all that honest about it and both have contribution to our bubble and pop economic model. Social influences from legislative and regulatory power, economic influences on adding to risk to the point of unnecessary as well as wealth pooling at the top.

Economists, though, tend to evaluate what is happening on different levels and looking at aggregate demand faults. Therefor they tend to have more accurate answers as well as better suggestions without the confines of a political sales pitch to voters. Example, it does not mean spend just cause, there is purpose behind the notion.

While both sides of the political space have been adamant about who is to blame for any and all economic and/or social faults a few things have been building that we should be taking note of. And for economic health reasons.

As mentioned above, today the top 1% holds 31.7% of the nation’s total wealth, that has grown from 26.9% in just the last 20 years, and grown from the 22% range about 40 years ago. Sound familiar?

While wages have not stagnated like they did leading up to The Great Depression what has happened is wages have not kept pace with the economy’s growth over the past 40 to 50 years. With periods of erratic inflation spikes that means purchasing power is less for the most vulnerable in our economy today.

Add to this that consumer debt has doubled, more or less, in just the past 20 years alone. Roughly $9.3 Trillion in late 2005 to $18.6 Trillion in late 2025. This gets real messy when looking at debt-to-income levels, the “burden” is lower but the impact of this against debt type makes it complicated. For instance, student debt has increased fivefold in just 20 years surpassing credit card debt as the solid #2 type of debt, but mortgage debt is still the largest type of debt by far.

Somewhat sure another conversation also mentioned the acceleration in farm business bankruptcies going up 2024 to 2025.

Does all this mean we are headed for another crash?

Not necessarily, but it does mean some of the supply-side thinking that got us into the mess of the Great Depression are forming up again. We already know the economy is slowing, growth is problematic, meaning we do not know yet what will be the trigger for the next… pop.

That is not an argument that Republicans are always wrong and Democrats are always right, more an argument that modern economic thinking on aggregate demand seems to be the most healthy of all principles offered. Besides, all modern political promises boils down to less contribution in taxation, greater treasury spending, or some terrible combination of the two.

When thinking between Democrats and Republicans who is the worst with fiscal responsibility the answer is mixed. Debate on that point is largely useless, goals for votes and goals for the economy being healthy do not always align.

An economist will look at why we spend and tax, a politician will look at what percentage of their voters are happy with what is spend on and what little tax they are liable for. An economist will look at all the numbers and point out where faults are happening, what is wrong with aggregate supply or aggregate demand, while an economist working for a President will talk about policy goals for their base of voters.

Two very different ideologies. And with that, we may have answered why economists get such a bad name.

Do you not agree?

Request is, as always, do some research and consider why the narrative on the economy is so different between not just Republicans and Democrats but also when compared to economists.

Perhaps give more weight to what an economist is saying, over how a politician tries to characterize what an economist is saying. Deemed for or adversarial to what the majority and minority party is saying at the time.

Also, and as always, follow the money.