Supply-Side economics. Why?

[CyJackX]

Many popular against-the-grain theories are often wrong as well, I'm sure we could both cite research at each other endlessly. This one has some stats, but if you were to put it into your own words, what is your argument for it?

http://democracyjournal.org/magazine/29/burying-supply-side-once-and-for-all/

 

[volente_00]

Why ?

Because your are wealthy and want a tax cut.

The fatal flaw in SSE is if you are already wealthy and have an over supply of money, any additional amount usually gets saved/invested instead of spent. Only an idiot business person would ramp supply on the acquisition of more capital without an uptick in demand to justify hiring more employees. In the end it's really just common sense. Who is more likely to spend the tax cut and stimulate the economy versus save it ?
The family making 200k a year whose monthly nut is 8k?
Or the family making 60k a year whose nut is 5k?

 

[java]

Why not just import consumers and give them money? What is the difference between investing money and spending money?

 

[cdcaveman]

Saving is posposing current consumption for future consumption... speculating on more utility of the money in the future... Importing consumers sounds just like all the rest of this ridiculous stuff.. it's all the state manipulating the market at the expense of one group in favor of another... It's destructionism because the whole thing nets out negative... Beruocractic overhead just grows..... There is no substitute for the free unhampered market

 

[CyJackX]

Why not just import consumers and give them money? What is the difference between investing money and spending money?

Facetious or not, that is precisely what immigration is, no? Loosening immigration policy is something that the deflating and aging Japan has considered.

As far as spending and investing, I think it concerns the most efficient use of capital.

An investor can make bad investments and make value simply disappear, because valuations get increasingly more speculative the more risk is involved.

A common spender, however, is likely spending on highly competitive retail products whose fair market value has trimmed mostly all of the risk.

So, I'd say spending and investing are equal in idea, yes, but when you spend on a razor or a box of cereal, it is a very efficient transfer of utility and labor. You're not likely to spend double on something you know isn't worth that much. The amount of utility you get from a a razor is more than the cash you spend, and so it's a positive sum game for you and the producer. Investing, however, is not that clear, and can be wasteful, so it behooves a society to spend its capital as efficiently as possible. It just comes down to the risk involved. Risk management, always there...

 

[java]

Facetious or not, that is precisely what immigration is, no? Loosening immigration policy is something that the deflating and aging Japan has considered.

As far as spending and investing, I think it concerns the most efficient use of capital.

An investor can make bad investments and make value simply disappear, because valuations get increasingly more speculative the more risk is involved.

A common spender, however, is likely spending on highly competitive retail products whose fair market value has trimmed mostly all of the risk.

So, I'd say spending and investing are equal in idea, yes, but when you spend on a razor or a box of cereal, it is a very efficient transfer of utility and labor. You're not likely to spend double on something you know isn't worth that much. The amount of utility you get from a a razor is more than the cash you spend, and so it's a positive sum game for you and the producer. Investing, however, is not that clear, and can be wasteful, so it behooves a society to spend its capital as efficiently as possible. It just comes down to the risk involved. Risk management, always there...

I invest in the companies that invented razor blades.

 

[CyJackX]

I invest in the companies that invented razor blades.

Survivorship bias. How much capital was wasted in aggregate by others investing in the competitors?

Also, how much did your investment improve due to corporate tax cuts vs increased sales? No amount of cuts is useful without demand fueled by purchasing power.

 

[java]

Survivorship bias. How much capital was wasted in aggregate by others investing in the competitors?

Also, how much did your investment improve due to corporate tax cuts vs increased sales? No amount of cuts is useful without demand fueled by purchasing power.

Not wasted, spent. If it works out it is an investment. If it doesn't it is an expense. Isn't that what you want? More expenses? Or as you call it "spending." The broker made out just fine and bought his kids new shoes.

Tax cuts not stimulating enough for you? Try tax hikes.

 

[CyJackX]

Well, to split hairs about semantics, "investments" and "expenses" are both spending, but one has a ROI in the form of utility or capital and the other doesn't. Everybody wants to reduce expenses, so why not lean towards policy that, in aggregate, produces more efficient spending? This would reward the most efficient companies, a tenet of capitalism, right? Wasteful spending rewards wasteful companies.

And to split more hairs, we know that it's not purely hikes vs. cuts, it's about who gets the hikes and cuts. My assumption is that there is a diminishing return the higher you go, which seems wholly consistent with reality, thus the most efficient tax policies are progressive policies. I haven't seen data showing that tax cuts on the rich benefit anybody but the rich, whereas cuts on the middle and lower have been positive.

 

[jem]

supply side says lowering taxes creates demand. Supply side would typically like to see taxes cut for the consumers and tax payers as well as the elite.

Trickle down seems to imply giving breaks to the elite and letting their consumption and investment decisions do all the heavy lifting for the economy.

They both might work but I would argue broad based well targeted tax cuts would do the most good in most situations. Especially when the elite now make world wide decisions and spend a lot of money buying politicians for an advantage rather than improving products and competing.