Posted on 01/13/2004 1:38:02 PM PST by quidnunc
Yeah, that's a nice theory. But it's only a theory. When was that last time the US ran a surplus or even a balanced budget? I can tell you it was before I was born. And right now we are heading for record deficits - it has nothing to do with taxes. It has everything to do with spending.
To clarify my earlier argument, your assertion is fundamentally flawed. A more proper statement would be:
"Lowering taxes can lead to higher receipts.
Since our tax system is based on output, there is no guarantee that lowering taxes will lead to more receipts (Laffer Curve) if output does not grow at a high enough rate to make up for the lowering of the marginal rate.
Saying that deficits are reduced by lowering taxes is not correct because the basic formula for determining the size of deficit is such:
Govt Receipts - Outlays = Surplus / (Deficit)
Notice that outlays are independent of receipts. The real problem here is the outlays, and Dubya has done nothing but increase those outlays. As I said before, "it's the spending, stupid".
Don't feel bad, Tex, I know economics in Texas comes in 3 forms: Home, cattle futures and oil futures. The rest of the world is a little more complex though...
Sigh.... Perhaps we need to go back and define "tax". An economist would argue that anytime the govt takes "value" from the economy, it is levying a tax. It need not come in the form of traditional withholding from the paycheck or having a person file a return. So if the govt starts increasing the money supply to jack up the inflation rate, it is taking "value" away from people's cash and govt security holdings. If they lease land, then they are taking value away from the general public by assigning the land to a specific person or entity. If they sell assets, they take "public" assets and convert them to private ones, thereby removing the public interest in that land. If they default, all the holders of govt securities get stuck by having value removed from their savings, in addition to having the economy suffer through a banking crisis. All of these things take value from the general public. They are all taxes. The form does not matter, the substance does.
What value(s) have the Iraqi people "lost" due to defaulting on $115 Billion in European and Russian debt?
Just as stocks can go to zero net worth, so too can bonds and various loan notes. Thus, all debt is not always paid; hence, not all debt ends up being a future burden to the debtor(s).
Well, the Iraqi people did not loose anything on defaulting on the debt, but then again the US does not do that kind of financing. When the US sells securities, it is done on an open market auction where virtually anyone can buy the bonds/notes. If the bonds/notes are defaulted on, the holders could (and would) include US citizens, US banks, US companies, etc.
Beg to differ. It looks like most posters around here don't know exactly what a deficit is or how it is created.
It is hard for me to believe that Bush would be so bold and stupid as to deal out one big social program after another without coming out with a big piece of red meat for the base before the election. My prediction was that he was going to announce a bold plan to privatize SS. He is either keeping his cards close to his chest or he really is the stupid socialist I have been making him out to be. We will know for sure in about 7 months.
It looks like you got most of your information on my homeland from watching "Duddly Do-Right" cartoons. I am not sure you understand exactly what a rare bird it is to be a libertarian hailing from Canada.
Gross recipts is a function of economic growth which is a function of fiscal policy, in this instance, tax cuts.
Deficit spending can be a good thing or a bad thing but to deny that tax cuts effect deficts is economically unsound thinking.
If you are a Keynesian, then you would believe such hogwash. Most contemporary economic thought is more along the lines of the monetarists. Money supply is the key and fiscal policy is useless. Now, that is not to say that low taxes are not good, because they are. But fiscal policy (using the federal budget to moderate economic activity) is a dead issue. Low taxes attract capital. Constant growth of money supply keeps everyone confident in making investments.
LOL, you must be kidding? There is a significant difference between the Keynesians and the supply siders and I leave that as an exercise for you to figure out.
You'll have to explain "supply siders". This may go along the lines of a "neo-classicalist" but I am not sure as I often here this in the popular media, but having not encountered it in an economic text, I am not sure what it means exactly. You seem to be describing the typical Keynesian formula for success where govt runs deficit during slow grown / recession, backs off in good times, etc.
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