POLL: Do you believe that supply-side economics is legitimate economic theory?
- Thread starter Thunderdog
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Let me put it this way:
Supply side is just a government issue (politics).
Govt is too big. By reducing taxes as it was done back in the 1980's, the govt ensures that this money in public's hand will have a much higher rate of consumption than in the govt hands......therefore generating a temporary higher demand. It is temporary because govt did not reduce spending, it will just run a higher deficit financed by debt which in the long run will have to be paid with interest.
So?? this is just a tax maneuver which backfires with higher future taxes.
ON THE OTHER HAND.
Govt can help industries to develop new technologies and other projects. Many European and Asian countries have engaged in "Government guided Capitalism" which nothing more than supply side economics and have proven to be extremely successful.
Supply side is just a government issue (politics).
Govt is too big. By reducing taxes as it was done back in the 1980's, the govt ensures that this money in public's hand will have a much higher rate of consumption than in the govt hands......therefore generating a temporary higher demand. It is temporary because govt did not reduce spending, it will just run a higher deficit financed by debt which in the long run will have to be paid with interest.
So?? this is just a tax maneuver which backfires with higher future taxes.
ON THE OTHER HAND.
Govt can help industries to develop new technologies and other projects. Many European and Asian countries have engaged in "Government guided Capitalism" which nothing more than supply side economics and have proven to be extremely successful.
bullshit!! and that's not free market supply side
http://money.cnn.com/2008/12/17/news/economy/car_czar.fortune/index.htm
Yes, really.
All supply side says is that taxation and regulation policies can be used as a point tool to stimulate specific kinds economic activities. I have yet to hear a coherent argument suggesting otherwise.
Trickle-down is a completely different theory regarding the effects of marginal tax rates on highly taxed sectors of the economy.
One is a general theory.
The other is a specific application.
So what is it you want to talk about - supply-side, or trickle-down?
For practical purposes, kindly differentiate between the two as it relates to actual (Republican) usage in the US.
Supply-side is any government adjusting of tax and regulatory code for the purpose of stimulating a specific economic activity. This can be anything from CAFE standards to corn subsidies to quotes on DRAM imports to whatever.
Trickle-down is the specific notion that cutting the top marginal income tax rate will have a "rising tide lifts all boats" outcome on the rest of the tax paying population.
This cannot be put in the partisan/Republican terms you requested as both parties have clearly demonstrated through their actions that they accept supply-side as a fundamental priniciple.
It seems, Random.Capital, that a lot of people associate the two, and that there may well be a partisan basis. In addition to the sources already mentioned:
âThe supply-side argument these days really applies to upper-income people,â said Robert M. Solow, a Nobel laureate in economics who served in the Kennedy administration. âThey are portrayed as the golden geese, and you donât want to discourage them from laying their eggs.â
By contrast, Mr. Solow says, âthe Democrats are convinced theyâll lay their eggs anyway, without tax cuts as an incentive.â
...Not since Mr. Reagan ran in 1980 have supply-side tax cuts been so central a campaign issue. George H. W. Bush and Bill Clinton each ended up raising taxes, ignoring the supply-side thesis, which the elder Mr. Bush once called âvoodoo economics.â
...The Democrats, and many economists who describe themselves as nonpartisan, have a different perspective. Tax incentives might indeed increase labor supply and output, they acknowledge, but what good is that if there is insufficient demand for the additional labor and for the goods and services that are produced?
...Gene Sperling, an economic adviser to Bill Clinton during his administration and now to Mrs. Clinton as a candidate, said that supply-siders vastly exaggerate the incentive effect of relatively small changes in tax rates while ignoring the benefits of bringing government revenue more closely in line with spending.
âThe supply-siders predicted in the 1990s that raising rates, even for deficit reduction, would lead us to recession,â Mr. Sperling said. âWhat followed instead was the longest recovery in history, and the people whose tax rates went up had exceptional income gains.â
http://www.nytimes.com/2008/03/26/business/26supply.html?pagewanted=1&_r=1
âThe supply-side argument these days really applies to upper-income people,â said Robert M. Solow, a Nobel laureate in economics who served in the Kennedy administration. âThey are portrayed as the golden geese, and you donât want to discourage them from laying their eggs.â
By contrast, Mr. Solow says, âthe Democrats are convinced theyâll lay their eggs anyway, without tax cuts as an incentive.â
...Not since Mr. Reagan ran in 1980 have supply-side tax cuts been so central a campaign issue. George H. W. Bush and Bill Clinton each ended up raising taxes, ignoring the supply-side thesis, which the elder Mr. Bush once called âvoodoo economics.â
...The Democrats, and many economists who describe themselves as nonpartisan, have a different perspective. Tax incentives might indeed increase labor supply and output, they acknowledge, but what good is that if there is insufficient demand for the additional labor and for the goods and services that are produced?
...Gene Sperling, an economic adviser to Bill Clinton during his administration and now to Mrs. Clinton as a candidate, said that supply-siders vastly exaggerate the incentive effect of relatively small changes in tax rates while ignoring the benefits of bringing government revenue more closely in line with spending.
âThe supply-siders predicted in the 1990s that raising rates, even for deficit reduction, would lead us to recession,â Mr. Sperling said. âWhat followed instead was the longest recovery in history, and the people whose tax rates went up had exceptional income gains.â
http://www.nytimes.com/2008/03/26/business/26supply.html?pagewanted=1&_r=1
Supply side economics is a scam. Let's see its effects illustrated by dividing it into 2 distinct parts: Rich people investing and rich people consumption.
If you give rich people more money through tax cuts, the first thing you do is create deficits. Now those rich people can conceivably try to invest it in some enterprise but who is going to be buying from them? Let's say I opened a maybach dealership in bithlo florida (a hell hole) I would have no customers because there is no demand. This is not "build it they will come" kind of a deal.For rich people to open up businesses there has to be existing demand(mostly from non rich people who don't get any tax cuts...).
Rich people consumption is not going to rise (inversely) proportionately to decrease in tax rates and even if it did, the burden of proof is on people who say money in the hands of the rich is better spent than in the hands of the government.
I am sorry, buying yachts, or private jets, or spending money in las vegas is not better than spending on infrastructure or education. In essence, spending in the private sector is not inherently superior to public sector. It depends on what money is spent on.
Reagan era provides decisive proof of failures of supply side economics. Tax rates went from 70s to 28% yet national debt only skyrocketed. It continues to sky rocket to this day.
And btw, even with 90+% tax rates in the 60s people still wanted to be rich...
If you give rich people more money through tax cuts, the first thing you do is create deficits. Now those rich people can conceivably try to invest it in some enterprise but who is going to be buying from them? Let's say I opened a maybach dealership in bithlo florida (a hell hole) I would have no customers because there is no demand. This is not "build it they will come" kind of a deal.For rich people to open up businesses there has to be existing demand(mostly from non rich people who don't get any tax cuts...).
Rich people consumption is not going to rise (inversely) proportionately to decrease in tax rates and even if it did, the burden of proof is on people who say money in the hands of the rich is better spent than in the hands of the government.
I am sorry, buying yachts, or private jets, or spending money in las vegas is not better than spending on infrastructure or education. In essence, spending in the private sector is not inherently superior to public sector. It depends on what money is spent on.
Reagan era provides decisive proof of failures of supply side economics. Tax rates went from 70s to 28% yet national debt only skyrocketed. It continues to sky rocket to this day.
And btw, even with 90+% tax rates in the 60s people still wanted to be rich...