The conversation regarding the "philosophy" behind tax-cuts=economic stimulus, is quite interesting. I am not an economist, my understanding is based on the fact that I had few good Professors way back then. They always reminded me that to "understand the discipline" was all but a neverending task. They too were very aware of John Kenneth Galbraith's opinion:
"The only function of economic forecasting is to make astrology look respectable."
That is why I consider it to be an imperative for all involved (the ones living in this country) to try and understand the problems and go beyond talking points and propaganda about "stimulus packages."
More below the fold...
I am reminded of some other Galbraith's quotes:
"The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness."
"Economics is extremely useful as a form of employment for economists."
All of this s somewhat connected with the GOP invented myth of the "benefits that result of adopting a policy founded in massive tax-cuts."
That is false. recent opinions have come to light and they dismiss such talking points:
"When it comes to reviving the economy, tax cuts do not work as well as smart public spending. That is economic common sense proven true by the past two attempts at tax-cut stimulus, in 2008 and in 2003-04. And yet, incredibly, we are starting to hear the same old tried-and-failed policies from conservatives and the GOP.
The latest flare-up was prompted by a CBO report released Friday that claimed only about two-thirds of any money set aside now for public investment projects—such as mass transit and water systems—would be spent in the first two years.
Here at the Economic Policy Institute, we disagree with that assessment, which is based on old modeling. The public spending package being considered now is directed at shovel-ready projects and has a ‘use-it-or-lose-it’ caveat, requiring work to be done within two years.
However, even if the CBO projection held, public investment would still be superior to tax rebates in stimulating the economy. Less than half the personal tax cuts, or rebates, are likely to be spent in the first two years."
Link:
http://www.epi.org/...
Tax-cuts are also a rather nonsensical approach to economic stimulus because their effects are...imaginary:
"...advocates of a free-market economy argue that (tax-cuts) improves economic welfare, since people are more accurate than the government in spending money on commodities that they actually want.
Government maintains its expenditure (thus incurring debt), and taxpayers increase theirs, spending the money on commodities sourced from within the country. This combination provides a stimulus to the economy, and it is on these grounds that advocates of supply-side economics frequently argue for tax cuts...
It should lead to economic growth, bringing about greater general prosperity, though unless managed carefully it will also lead to inflation. A government making tax cuts and incurring debt usually hopes that the economic stimulus of the tax cut will be large enough to produce a long-term increase in tax revenues, allowing the debt to be paid off in the future. If that does not occur then the government can be left with a severe budgetary crisis..."
In other words, this goes way beyond the complexity of the discipline. It is centered, more than anything, in the reading we do of our own financial situation and realities. Those who spend more (comparatively) are not the ones making more, when considering income. 500 dollars out of my paycheck to pay fore a roof leaking, is not the same as 1.5 million coming out of wealthy individual's bank account who saw a neat car, limited edition, fabricated in Italy, made only after a specific order and a hefty cash payment are received.
Just food for thought. Link to John Kenneth Galbraith:
http://www.johnkennethgalbraith.com/
Wise man, indeed