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View Diary: Bush Proves Trickle Down Doesn't Work As Advertised (194 comments)

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  •  Nah (0+ / 0-)

    The conservative think tanks were huge supporters of those cuts.  In retrospect, they've changed their tune simply because they didn't work.  

    Even with expected buget surpluses, the cuts were far too large.  I know I didn't expect the surpluses to last, and I said so at the time.  Greenspan made the final walk into hackdom with his support of those cuts, and I said so loudly to anyone who would listen.  

    Well about the .1%, I simply compared economic growth during the good times in the 70's, 80's, 90's, and 00's.  There doesn't seem to be much difference, what ever the tax level or structure.  You can look yourself.  If there were large differences due to tax policy, we would have seen large sustained growth without inflation of over 5% for several years now.  We simply haven't seen that at all.  We've seen normal top of the business cycle style GDP growth, with much weaker than average job creation and wage growth.  In other words, with all of the tax cutting, incentives and supply side mumbo-jumbo, we've seen a weak to medium recovery.  

    You might think that 9/11 was a big deal, but to the financial markets, it was an excuse, an excuse to do what everyone wanted to do anyway.  Look at any chart of the weeks before 9/11, all of the economic indicators, we were headed for tough times.  And, we had them.  

    Now about the supply side nature of the tax cuts.

    Supply side economics is based on the premise that taxes and their structure are a hugely important determiner of the success of our economy.  Quoting Bodie, Kane, Marcus (all 20 top MBA schools use this book, so it at the very least is an accurate description of Supply side economics):

    "The goal is to create an environment in which workers and owners of capital have the maximum incentive and ability to produce and develop goods."

    "Supply siders focus on incentives and marginal tax rates."

    I will argue that any tax cut where the richest in our economy, who are largely the owners of capital, get substantial tax breaks of any kind is a supply side cut.  It may not fit every fine print detail, but fits the general principle very well.

    Finally, I don't dispute the rich pay the most money  in taxes.  They should.  They get far more benefits from our system then the poor.  

    I am repeating myself, and thats ok.

    by mickslam on Wed Jun 28, 2006 at 05:32:08 PM PDT

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    •  Your own evidence makes you wrong... (1+ / 0-)
      Recommended by:
      mickslam

      Supply side economics is based on the premise that taxes and their structure are a hugely important determiner of the success of our economy.

      "The goal is to create an environment in which workers and owners of capital have the maximum incentive and ability to produce and develop goods."

      "Supply siders focus on incentives and marginal tax rates."

      Those quotes are absolutely right and are what I said. But then your conclusion is wrong!!!  Read those quotes again.  They are specific that the tax changes have to alter the incentives!!!  A rebate doesn't alter incentives!!!!  It gives you money back- 1 time.  Whereas changing the tax rates on Capital Gains and Dividends does change the incentives.  Notice a difference?  Yes, they both may benefit the ultra rich the most, but they are different!!!

      And finally, as to comparing data across times periods, you do need to make sure you are comparing apples to apples.  The 2000s so far have not seen a complete business cycle.  They basically started with a bust in 2000 and entered a recovery.  We are now in an expansion.  The other eras include complete business cycles from trough to trough or peak to peak and then some.  To have an accurate comparision, you'd need trough to trough data or peak to peak data.  I don't know what the differences would be then, but I imagine it would be slightly more than .1% - and it's very difficult to compare our current period as we don't know how long the expansion will last.  And even .1% compounded over time isn't that bad.  Consider our economy is about $11,000,000,000,000.  At 3.5% over 10 years that's 15,516,586,366,832.  At 3.6% over 10 years that's 15,667,158,578,415.  That's 100 billion dollars.  I don't find that to be very small.  And that would be a real rate too, adjusted for inflation.  If the comparison jumps to .2%, then that 10 trillion would be 300 billion more.  Our GDP in 10 years would be 15,819,044,547,249.  That .1% over times would make a big difference and that difference only grows over time...

      •  Nah again (0+ / 0-)

        They are specific that the tax changes have to alter the incentives!!!  A rebate doesn't alter incentives!!!!  It gives you money back- 1 time.  Whereas changing the tax rates on Capital Gains and Dividends does change the incentives.  Notice a difference?  Yes, they both may benefit the ultra rich the most, but they are different!!!

        I dont think you are seriously arguing they were one time rebates, as the tax rates from the 2001 tax cut are still in effect or even lower in some cases.  Those incentives are still in place, as they were in 2001, 2002, and 2003.  

        Additionally, Bush campaingned on tax cuts.  Modern economic theory says from the moment he was elected, a percentage of these cuts were already factored into peoples behavior and planning on the expectation that they would take place.  As the cuts came closer to being enacted, a higher and higher percentage was factored in.

        I am fully aware of the complete business cycle comparisons.  However, we have had at least 4 full positive years of this cycle.  I feel its pretty accurate to compare this cycle to the tops of other cycles.  Esp as we have had a flat yield curve in the last few months, which isn't a 100% predictor of a recession, but is a near 90% predictor of a significant slowdown.  We may infact have higher growth next year, despite a slowing housing market and even more importantly, a FED that is determined to see lower growth, but I highly doubt it.  We still have about 12 months of rate hikes that are going to percolate through our economy.  I am far from alone in this opinion, but I could be wrong.  I've been wrong before.  If we see this incredible growth, it would be fantastic.  I have a bet with my dad on the recession in Jan 07.  Its a bet I would be very, very happy to lose.  

        Also, I don't think .1% is anything to really write home about, in light of the gigantic budget deficts  we are running, which are around .3% of GDP this year.  In other words, we're getting about .1% of growth in exchange for .3% of debt.  Not a very good trade.  Remember, any conservative think tank will tell you this is a red hot economy.  So we should be running a large budge surplus to pay for the inevitable bad times ahead (after death and taxes, another certainty) or at least the bad times we've already had.  

        I am repeating myself, and thats ok.

        by mickslam on Wed Jun 28, 2006 at 06:57:55 PM PDT

        [ Parent ]

      •  Massivly appreciate the tone! thanks! (0+ / 0-)

        Its totally nice to talk with someone like this.

        :)

        I am repeating myself, and thats ok.

        by mickslam on Wed Jun 28, 2006 at 07:06:03 PM PDT

        [ Parent ]

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