Posted on 06/09/2012 4:07:54 PM PDT by BfloGuy
It’s been the prevailing economic philosophy of the Republican Party since Ronald Reagan was elected president in 1980.
Supply-side economics held that reducing marginal tax rates would spur economic growth, create jobs and even generate tax revenue for the government.
And it makes sense in theory: If people keep more of what they make, they would logically work harder, spend more and hire more people, right?
When you listen to supply-siders like Arthur Laffer, Stephen Moore and Larry Kudlow, they always extol the Kennedy-Johnson tax cut of the 1960s and especially President Reagan’s tax cuts of the 1980s.
But they rarely mention the 1990s or the 2000s.
Maybe that’s because those two decades were almost a perfect controlled experiment that shattered their pet theories: President Bill Clinton raised marginal tax rates and the economy boomed and jobs were plentiful. President George W. Bush cut them and we got only modest job growth.
In fact, there’s more and more evidence suggesting that lowering marginal tax rates doesn’t create many jobs at all.
(Excerpt) Read more at marketwatch.com ...
Bill “Projected Surplus” Clinton.
Thank you for saying that; it's too often forgotten. Giving Clinton credit for the GINGRICH boom is like giving the rooster credit for the dawn.
Gold intentionally left out the long term Capital Gains tax rate was cut to 20% in 1997 that led to a huge amount of cash freed up as investors sold and reinvested which created jobs and also tax revenues.
His article is fundamentally flawed leaving out such a huge part of the Clinton tax structure in the 90s that is has no credibility.
Next...
The author totally ignores the invention of the Internet and networking and the resulting revolution in productivity to drive economic growth. Tax policy in the 90’s had little to do with economic growth.
You know, on second thought it's even worse than that.
Clinton fought all the Gingrich reforms tooth and nail before taking credit for their success.
False. The GOPe hates supply side economics along with all the other big government politicians.
I didn't know that was the new definition of "trickle-down economics."
Who is this, anyway?
Is that you, Odumbo??
The Federal and State governments had no idea why the economy was doing well in the 1990’s. They were completely clueless.
The Fed, likewise, had zero idea of what was happening and why.
The government can’t fathom productivity, they actually believe that interest rates and money supply are the primary driving factors in an economy.
If you could pull out the economic impact of:
1) ERP software
2) the web
3) Y2K consulting
which caused the earnings of millions of Americans to skyrocket...
the economy would have been decidedly laggard. All consumer spending on cars, homes, clothes, travel, etc., etc., would have been miniscule compared to what it was.
ERP software firms very purposefully kept their software as proprietary as possible so as to make knowledgable and capable consultants as rare as possible, with the number of them lagging the demand for them.
They also very purposefully artificially made the implementation of their software by their customers to be very labor intensive and complex.
These strategies pushed up the price of consulting services dramatically.
This made the whole idea of implementing their software attractive for the employees of their customers, as the employees would be learning highly marketable skills during the implementation.
At the same time this is happening, every business suddenly needed a website and had no experience with doing that since it was a new field.
Y2K consulting became every more lucrative as companies saw 1/1/2000 approaching, realized that a lot of their current software would malfunction, and became desperate.
Licensing ERP software was a way to shift responsibility to the ERP software vendor and consultants, since the software vendors advertised Y2K compatibility and the software packages would include any last minute updates - if any - that were necessary to get through the changeover. In the latter half of the 90’s Y2K drove new ERP business dramatically.
It was precisely because the government had no idea what was happening that allowed the internet to be a profitable business without government legislating it into oblivion, taxing it to death and allowing big-business lobbyists to push legislation to monopolize it.
Now that the government as a whole has gotten up to speed a bit more in the past few years, they are foraying into internet regulation.
Since all that software work is done, and the initial learning has taken place and the systems are in maintenance mode, much less labor is involved. Since we have way more knowledgeable people than necessary in those fields, the number of people in those fields has dramatically dropped from February 2000 levels.
All three of those fields had a purpose, so there was something real to be gained by businesses spending on them.
Trouble is now, there is no new purpose that is necessary or useful that is no simply an incremental change to what we have now.
It will be quite some time, probably decades, possibly 100 years or more until we see a significant invention (one that requires significant new and different hardware and significant new consulting) that is actually entirely new and not a simple alteration or combination of existing technology, and the new invention is necessary and worth spending money on. Given today’s availability of mobile computers, the ubiquity of internet connectedness and the power and functionality of computers, there’s not much else needed to be able to rather easily write software to do most anything.
The artificial pump up is over, and government did not take advantage of the tax windfall to pay down debt, so they missed their one-shot chance at doing that with very little pain.
Therefore, Congress and Clinton were baboons in the 90’s. Not only did they not create the good situation, or even know what created it, they missed out on using the windfall that was clearly due to peak in February 2000 as a stepping stone to making government sustainable.
How is it that the majority of us here are eons smarter than the wizards of smart that get printed in popular media. Or maybe people like Howard Gold are just disingenuous, and know they are lying.
Mr Gold ignores the capital gains and dividend rate cuts that just coincidentally occurred just before the boom of the late 90s. He also ignores that in the immediate aftermath of the Clinton tax increases, we were seeing modest at best growth. I remember specifically we were sitting around 2.3% GDP growth immediately before his reelection. The boom came after that as the Internet took off, Real Estate started going into its bubble, and Y2K drove IT spending....and after the Congress forced a balanced budget plan and lower investment taxes. I am sure none of those had any impact. It was the higher taxes on personal rates.
Also, under Bush, we had a sustained period of strong growth and extremely low unemployment in the years following his tax cut. I am sure that is a coincidence, too. It is also a coincidence that our economy has slowed to a dull murmur with a death rattle since the moment Obama was to become President and was hanging a variety of higher tax rates over our heads. All coincidences to this jackass, Howard Gold.
which congress sandbagged Reagan on.
You forgot the barf alert....
The article conveniently ignores that the boom of the 1990’s was caused by the explosion of e commerce with its wave of worldwide innovation centered here. No one in government caused the boom. It occured completely independently of govnernment actions. But Clinton and Algore repeatedly tried to take credit for it though they had nothing whatsoever to do with it.
Mr. Gold says that cutting marginal tax rates on the wealthy does not cause them to work “harder.” But how does he measure this? Most upper-income people are already working full time (or overtime), so of course they cannot work longer hours. However, they can start new enterprises, and they have more to invest, when their tax load is reduced.
Investment by individuals is done through the market process, and is thus more efficient that government “investment” or the results of “targeted tax cuts.”
It is efficient investment which improves the economy. Heavier taxation merely destroys potential capital, or misapplies it (which amounts to the same thing).
Always remember the fundamentals: capital is tools. People with tools multiply the results of their efforts. People with labor alone (bare hands!) can barely survive. Indeed, in most places, and at most times in history, people without tools starve and die out; or they may be enslaved by their neighbors.
One thing which distinguishes humans from animals is that humans have and use capital. Taxes limit and destroy capital. Income taxes, corporate taxes, and inheritance taxes are systematic handicaps to an economy.
A half truth is often way more effective than an outright lie.
There was supposed to be a three dollar reduction in spending for every $1 increase in taxes. That was the deal the Democratic congress agreed to with the president.
Never happened.
Reagan went to his grave waiting for the integrity of the 'Rats to emerge.
Notice the recycling of Unconstitutional smoke and mirrors? The Obamacare Monster law promises benefits 3 years down the road, but increased taxes and existing health care premiums skyrocketed immediately.
Why did the GOP fall for that old trick ------ again?
More to the point perhaps, why did the informed, employed, working non-governmental taxpayer?
Don’t forget the Internet.
In totally unrelated news 2 + 2 is no longer = 4.
They really are. They counsel against buying gold when balance sheets have tripled. Now they think that high taxes promote economic growth. Wow. They might as well say that going to prison builds character. These guys just want us all to put all our money in stupid stocks like Facebook, so that the insiders can short us.
Mr. Herbert Gold is a sophomore in the original sense of the word: a wise fool. He can make tables and graphs, but is unable really to demonstrate causality in his arguments. It is because he seems not to understand economic theory.
He quotes several studies which could not fund that marginal tax rates make any difference to the economy. This is pure idiocy. If marginal tax rates make no difference, why don’t we raise them all to 100%? Obviously they make a difference.
Here is one way: high marginal rates drive a certain proportion of the people from being tax-payers, to being dependents and beneficiaries of state spending. Such people are now no longer in the tax-payer category, so their misfortune is no longer detected by such dumb studies as those cited by Mr. Gold.
It is incredible that misinformed people like Mr. Gold actually have the public ear on things which he so little understands. I find it difficult to keep a polite tone when contemplating such ignoramuses.
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