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To: businessprofessor
That is not evidence that the tax rate reductions were not a factor in tax revenue increases.

Allow me to repeat. Tax revenue increased because economic activity increased. Economic activity increased because there was the combined stimulus of more disposable income and more government spending. But the USG borrowed against the future to finance the increased spending. Our debt keeps growing larger. Supply siders argue that the new dynamic will ignite a frenzy of productive activity that will grow the real economy (and thus tax receipts) to such an extent that any debt incurred in the process will be wiped out. It hasn't happened and never will. IMHO "supply side" economics is akin to perpetual motion theories in physics.

106 posted on 05/15/2008 12:00:13 PM PDT by trane250
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To: trane250
Supply siders argue that the new dynamic will ignite a frenzy of productive activity that will grow the real economy (and thus tax receipts) to such an extent that any debt incurred in the process will be wiped out. It hasn't happened and never will. IMHO "supply side" economics is akin to perpetual motion theories in physics.

You are misrepresenting supply side economics. Supply side econonics only indicates that tax rate reductions may stimulate economic activity leading to more tax revenues rather than less tax revenues. Behavioral economics supports this assertion. There is debate about the relationship between tax revenues and rate deductions. Dynamic budget modeling attempts to account for the sensitivity of rate reductions and tax revenues.

Your analogy to perpetual motion is incorrect. Critics misrepresent supply side economics to force this analogy. No responsible economist has ever claimed that unrestricted tax rate reductions will lead to increased tax revenues.

I think that we agree that spending is out of control on all government levels. The problem is not the Bush tax cuts but the spending increases. Governments are collecting huge sums in tax revenues. The Bush tax cuts were prudent policy with the intended effect of providing more economic freedom, some increased tax revenue, and more economic activity.

107 posted on 05/15/2008 12:46:43 PM PDT by businessprofessor
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