Skip to main content

View Diary: The Bush Tax cuts CAUSED the economic crisis (149 comments)

Comment Preferences

  •  Do you have any noted economists (1+ / 0-)
    Recommended by:
    George

    who will back this up?  I seriously doubt you will find this.

    The obvious answer HAS to be the Bush tax cuts for the wealthy. This huge influx of cash at the top of the economic system coincides exactly with the out-of-control demand for derivatives that ruined our economy.  The rich took their tax $ giveaways, sunk it into derivatives, and in turn ruined our economy.

    There is no evidence that the US wealthy took their additional money from their tax cuts to invest in derivatives.  Many of the major US derivatives players were actually from around the world, especially Europe.  The far greater source of funds has been the US trade deficit - as the trade deficit becomes dollars needing to have securities to be invested in and amounts to $500 to 700 billion per year in the years prior to the financial crisis.

    I hope Democrats don't run with your message, as it will show those who adopt it as being ignorant about economics, finance, international trade and they are not a good addition to solving our country's problems.

    The most important way to protect the environment is not to have more than one child.

    by nextstep on Thu Sep 16, 2010 at 11:06:33 AM PDT

    [ Parent ]

    •  Actually, yeah, economists will back this up (2+ / 0-)
      Recommended by:
      Bluefin, Noamjunior

      look up the literature on the relationship between low tax rates on capital and speculative bubbles.

      The low tax rates on the rich, and specifically on investment income, caused the speculative bubble, and Brad DeLong has given a set of references in his blog (some months ago) to the evidence for it.

      Of course, the derivatives disaster was due to Phil Gramm's deregulation (the criminal Commodities Futures Modernization Act) -- but the fuel for it was, indeed, the money sloshing around in the pockets of the superrich looking for something to invest in.

      Much of that money-chasing-returns was invested in money market funds, and other parts were invested in supposedly high-grade bond funds.  These funds were short on things to invest in, so new AAA securities needed to be invented to supply that demand.  Those were invented by the creation of collateralized debt obligations (CDOs) on subprime mortgages and the rest is history.

      -5.63, -8.10. Learn about Duverger's Law.

      by neroden on Thu Sep 16, 2010 at 12:13:27 PM PDT

      [ Parent ]

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site