[Polybius]

See me Post #60. Do you agree?

The American economy has been moving from a manufacturing economy to a service economy. The unskilled factory laborer in the Third World will always out-compete the unskilled American factory laborer. Higher taxes and the reduced profit margin they bring compounds the problem for American businesses.

A reduction in income taxes will not, by itself, increase the spending power of the poor as the poor pay little or no taxes right now.

An income tax cut, however, do create incentive for American small business owners. If you have high labor costs and the Government takes away a hefty chunk of the profit margin, there is little incentive to invest in small business which is the backbone of the American economy.

Europe has a dilemma right now because the high tax rates are driving people, including those who could be creating jobs with their small businesses, into early retirement.

Speech by José Manuel González-Páramo, Member of the Executive Board of the European Central Bank:........"In several European countries retirement systems still provide an incentive to retire early by penalising longer working lives through high effective tax rates. In many cases this reflects the attempt to push older workers into early retirement with a view to raising the demand for younger workers. But such policies raise the burden on social security and thus on labour taxation, reducing overall employment and thereby potential growth."

[liberallarry]

I don't think the tax cuts were designed to aid small business - first because no tax cut could offset the differential in wages, second, because there's no evidence of an increase in private sector jobs (if the article is correct), third because the bulk of the tax cuts benefitted very high income individuals.

I think the cuts were designed to allow this last group to invest as wisely as they could which will allow America to obtain as large a sector of world production of goods and services as possible. It seems that this strategy worked because tax receipts are up even though domestic private sector employment isn't.

I don't think there was any other way to stimulate the economy.

The down side is that the pressure on compensation for American workers (wages plus benefits) increases.