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It’s time to bury supply-side economics
Market Watch ^ | 6/8/2012 | Howard Gold

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 ...


TOPICS: Business/Economy; Government; News/Current Events; Philosophy
KEYWORDS: wisconsinshowdown
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To: BfloGuy

I’m still waiting for these leftards to explain how trickle-down doesn’t work but stimulus spending does.


41 posted on 06/09/2012 5:39:12 PM PDT by muir_redwoods (I like Obamacare because Granny signed the will and I need the cash)
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To: docbnj
Mr. Gold says that cutting marginal tax rates on the wealthy does not cause them to work “harder.”

Even if one ignores the psychological effects of tax rates, one should consider what rich people do with their money. Generally, they want to use it to make more money, which means that they invest it in things which will generate wealth. Any dollar the government steals from a rich person's pocket is a dollar the rich person won't have to invest in a wealth-generation enterprise.

While it's true that rich people don't feed all of their marginal income into investments and wealth generation, so stealing $1 from someone won't reduce the investment in wealth generation by a full dollar, the percentage of a rich person's marginal income which gets fed into wealth generation is apt to be much higher than the percentage of government money that funds wealth creation.

Taking money from people who would use it to generate more wealth, and giving it to people who will regard it as an encouragement to become more dependent upon government, could not possibly be a recipe for prosperity, even if it had no effect on wealth generators' work ethic. Can anyone offer a plausible explanation of how wealth is supposed to be created if capital is taken from those who would effectively use it to create wealth?

42 posted on 06/09/2012 5:39:54 PM PDT by supercat (Renounce Covetousness.)
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To: BfloGuy

Shouldn’t we put a silver bullet through the heart of Keynesian economics first? It sucks the blood out of the economy.


43 posted on 06/09/2012 5:54:15 PM PDT by depressed in 06 (6 November, 2012, the day our embarrassment is sent back to Kenya.)
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To: BfloGuy

If the libs want to give Clinton credit for the job boom in the nineties, they’ll also have to credit him for the Nasdaq fiasco which lost about 75% of its valuation. They don’t ever bring that up. Sure, Clinton raised taxes early on, but he apologized for it and under pressure from Republicans in control of Congress, cut cap gains taxes...which cut the deficit. So Clinton acted like a Republican at times, and the economy boomed. If raising taxes was the presciption for a booming economy, then raising tax rates by fifty percent would insure everyone would be a millionaire. Bogus theory.


44 posted on 06/09/2012 5:55:30 PM PDT by driftless2
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To: mjp

Mjp is on the right track but its a bit more complicated. The amount of revenue realized from income is primarily determined by the total number of workers paying taxes. The tax rate on income contributes to a workers perception of what their labor is worth. If they can’t take home enough money after taxes based on this perception they won’t accept the job and no tax revenue is generated. This is why we accept the Marxist notion of progressive tax rates. If you can make $250,000 a year you accept a higher rate as long as what you take home for your effort still meets your expectation of worth. At some point the work is “just not worth it” an you either find a way to avoid taxes (cash, barter, tax shelters, deferral) or you don’t do the work. Either way the tax revenue is lost to the government.
The governments main focus should be to create the optimum environment that results in the greatest number of people working for the highest wages based on their productivity. This is best done by minimizing regulation, red tape, and bureaucratic obstacles to business formation. Growing the pie is a win for everybody including the government. Tinkering with tax rates beyond the extremes just contributes to class warfare and envy.


45 posted on 06/09/2012 5:58:25 PM PDT by Dave Wright
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To: BfloGuy

I really like this guys stuff:

http://keithhennessey.com/2010/11/18/president-george-w-bushs-spending-record/

He makes a lot of sense

Its easy to spin economics anyway one wants to


46 posted on 06/09/2012 6:21:05 PM PDT by woofie (It takes three villages and a forest of woodland creatures to raise a child in Obamaville)
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To: 1rudeboy
One of the best videos found on You Tube. It should be required viewing (Part One and Part Two) for every high school senior and college freshman - along with a class in basic economics.
47 posted on 06/09/2012 6:34:00 PM PDT by Mase (Save me from the people who would save me from myself!)
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To: Bob

You mean the dot-com bubble. It created a huge unexpected revenue stream to the US government, and when the bubble burst, accumulated losses reduced revenue streams to the US government for years after Bill Clinton was long gone.


48 posted on 06/09/2012 7:12:12 PM PDT by winner3000 (ss)
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To: Bob

You mean the dot-com bubble. It created a huge unexpected revenue stream to the US government, and when the bubble burst, accumulated losses reduced revenue streams to the US government for years after Bill Clinton was long gone.


49 posted on 06/09/2012 7:12:12 PM PDT by winner3000 (ss)
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To: BfloGuy
You have left out several things.

Debt. In the overall view. Our prosperity has been in large part due to borrowing to pay later. But, later is here and we don't have the money.

So Reagan, grew the economy. He also grew Gov't. We haven't had a President or congress cut debt or spending in our lifetime. Gingrich and crew, did not cut Gov't.

So we have piled up over 15 Trillion in public debt. And this all we have to show for it. That does not even include social security and the other scams. Student loans, housing, the list goes on.

Cutting taxes if fine. But pay for it! One cannot cut taxes and then not cut Gov't! By not cutting Gov't certain individuals now end up with a better private gain, but the load of debt is now put on the backs of the citizen.

50 posted on 06/09/2012 7:14:13 PM PDT by Theoria (Rush Limbaugh: Ron Paul sounds like an Islamic terrorist)
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To: 1rudeboy

I was being sarcastic.


51 posted on 06/09/2012 8:26:55 PM PDT by Huskrrrr ( the will)
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To: publius911

I was being sarcastic. It was like a joke (although, I guess not much like one). :0)


52 posted on 06/09/2012 8:29:27 PM PDT by Huskrrrr ( the will)
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To: BfloGuy; oldbrowser

They also ignore the fact that Clinton benefited from the dotcom boom while GW got hit with the one-two punch of the bubble bursting and then 9/11. Nobody would have been surprised if GW’s entire first term was a depression, but his tax cuts created a booming recovery from those early economic setbacks.


53 posted on 06/10/2012 12:41:18 AM PDT by Kellis91789 (The ultimate result of shielding men from the effects of folly is to fill the world with fools.)
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To: PieterCasparzen

Great post.

I was an IT manager and my company was one of those spending millions to migrate to a new Y2K ERP package. We doubled staff internally and doubled again with consultants.

People, travel, and equipment budgets went through the roof. All of those industries benefited from our spending.


54 posted on 06/10/2012 1:24:27 AM PDT by Kellis91789 (The ultimate result of shielding men from the effects of folly is to fill the world with fools.)
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To: Theoria
Cutting taxes if fine. But pay for it! One cannot cut taxes and then not cut Gov't! By not cutting Gov't certain individuals now end up with a better private gain, but the load of debt is now put on the backs of the citizen.

Excellent post.

A word to the wise for all Americans...

If you'll notice, even on the most so-called conservative shows, that routinely immediately switch gears and refer to "those entitlements" when talking of cutting spending.

They'll say something like "discretionary spending cuts can't be large enough to make that much of a difference in the deficit", or, "the real problem is those entitlements".

By constantly repeating this on TV they hope to deceive taxpayers.

Of course, this is all aimed at protecting Federal borrowing and then spending that borrowed money on Federal employees and businesses that contract with the Federal government.

The Social Security/Medicare deductions on everyone's paychecks was to fund those programs. All along there were excess withholdings - Congress forced the trust funds to buy Treasury debt as their only investment - THEN SPENT THE CASH THEY RECEIVED. Everyone knew that the baby-boom generation would make too few workers to pay for the retirees starting about now. So at this point the trust funds should be able to get their Treasury bonds redeemed for cash by the Treasury - but since Congress spends 50% to 100% more than it takes in and issues more debt to pay for the difference, they want to weasel out on redeeming the trust fund Treasury bond "investments" and only a) keep paying interest on the trust funds bonds and b) pay any shortfall out of the general account. This completely intermixes the trust funds and general spending, of course.

Buyers for Treasury debt will become much more scarce very soon (they already are), as they realize the government is only rolling over the debt, which will one day (sooner than we think) result in a Ponzi-style collapse when there is no longer enough tax revenue to pay the interest on outstanding Treasury bonds.

This is where so-called conservative media has it's difficulty: they are in bed with their customers (advertisers), the primary dealers (banks) of Treasury debt who profit from and facilitate the sale of the debt, and publicly-held and very large corporations and large investment funds, including pensions. The coming collapse will primarily hit those institutions and be a very nasty situation, so all of them are all hoping to reduce the Federal annual deficit any way they politically can, and limp through until the economy starts to improve somehow on it's own and then inflation catches up with the size of the Federal debt so it is relatively smaller as a percent of GDP. This is what they've always done in the past, however there are some very fundamental differences today which make that scenario extremely unlikely this time around.

And this is why the Federal Reserve must cooperate and keep interest rates ridiculously low. No matter how much blabbering they do about what the Fed is doing and why, ultimately, the $16 trillion Federal debt would explode out of control if interest rates are not kept close to zero.
55 posted on 06/10/2012 4:19:46 AM PDT by PieterCasparzen (We have to fix things ourselves.)
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To: dalereed
Reagans “Tax Simplification Act” in 1986 was the biggest tax increase in our history!!!

No it wasn't.

Tax rates don't mean anything when you wipe out all the hundreds of ways not to pay taxes, and that is what the 86 bill did!!!!

It's true, lots of loopholes were eliminated.

It effectually shut down.....

Yup, sucked to be you.

56 posted on 06/10/2012 7:11:51 AM PDT by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: Theoria
Cutting taxes if fine. But pay for it!

I don't disagree with the point of your statement, but I don't like saying that we should "pay for" tax cuts. Yes, spending cuts should accompany the tax reductions, but paying for tax cuts implies that the revenue belongs to the government and not us.

Just picking a nit.

57 posted on 06/10/2012 2:10:29 PM PDT by BfloGuy (The final outcome of the credit expansion is general impoverishment.)
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To: woofie
I really like this guys stuff:

Yes, Hennessey's good. I'm glad you mentioned him -- he'd fallen off my favorites list.

58 posted on 06/10/2012 2:12:39 PM PDT by BfloGuy (The final outcome of the credit expansion is general impoverishment.)
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To: depressed in 06
Shouldn’t we put a silver bullet through the heart of Keynesian economics first?

Yes, of course. The article's title is tongue-in-cheek.

59 posted on 06/10/2012 2:43:08 PM PDT by BfloGuy (The final outcome of the credit expansion is general impoverishment.)
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To: awelliott
You forgot the barf alert....

You're right. I thought the title was so ridiculous that the "barf alert" was implied. But I should have included it.

60 posted on 06/10/2012 2:45:32 PM PDT by BfloGuy (The final outcome of the credit expansion is general impoverishment.)
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