Republicans often argue that what they do with their tax deductions, giving huge tax gifts to their friends at the country club, primes the economy and ultimately causes their super wealthy friends to spend their money, which becomes the GDP multiplier. I say their way is anemic and too slow and will eventually lead to a very poor and very unmarketable middle class.
Look below for an illustration of why we are where we are today.
If the economy is primed from the top, taxpayer A gets a refund and then buys something from seller B with a commission going to stockbroker C. Now seller B has additional funds so he buys another stock from stockbroker D and the commissions earned by stockbroker C are now used to buy stock from stockbroker E. Stockbroker E breaks the chain and buys a new house on 4 acres from Homeowner F. Homeowner F retires to Florida and buys a condo from builder G and invests the rest with stockbroker H. Builder G pays off the bank and his men who are Haitians who snuck over the border and they work for $5 an hour and he also pays off the architect, the electricians and the plumbers. The architect, the electricians and the plumbers buy a few extra things they need for business, clothes for the kids, a new car, etc. So, here is the first time the multiplier breaks out of the investment or conspicuous consumption purchases. Meanwhile, American business does not see a resurgence of economic activity, they never increase production and begin to lay off workers.
Now, let's say the top tax bracket for dividends never got down to 15%, the estate tax was not removed and the top tax bracket was 55% instead of 35% (remember for Divs and Cap Gains it is only 15%).
Now the middle and the upper middle class has more money to spend. They want new refrigerators, they want to go on more vacations and drive around the country, they want to play golf (which has become expensive), they want to go back to school for retraining in different areas, they have money to send their children to college (even state schools are out of reach for many families), they give the kids lessons and little league and school trips and they work on their house, they buy new bathroom appliances and kitchen cabinets and furniture, they get medical insurance, they vote to increase the county budget so that the parks can be fixed up (which means new parks employees are hired) and so on. American business sees these new demands for product and factories and sales forces start to increase, people begin to get hired again and these new hires now have more money to spend.
Can you see the difference? Do you see where this money goes? Yes it goes to people who are wealthy but, these are people who provide Americans with goods and services. They do not get disbursed as super gifts to the super wealthy, who just are rich beyond all means, who are already spending all they can spend and all they do is recirculate money in the investment strata.
We are in a hole and Bush is digging it deeper and deeper every single day. With some money staying in the hands of the middle class, the middle class will get devastated, with no future, with now education and unable to compete in the global economy.
We need Democrats who are willing to explain this to Americans and Democrats who are willing to charge Republicans with CRIMINAL SLEFISHNESS!