The myth that tax cuts stimulate the economy

[niteowl]

Chris46227 wrote:

<quoted text>
The top 20% control 84% of the wealth.

Wealth isn't "controlled", it's created.

[niteowl]

The Jerk Store wrote:

<quoted text>
Do you have a link for those stats?

http://www.ntu.org/main/page.php...

[niteowl]

In Moderation wrote:

Mr. Harris, I will go against the trend of responses here and praise your letter.
I have no idea where individuals get the idea that tax cuts increase revenue by stimulating the economy. I have never seen the supporting breakdown...

Care to explain how these record revenues were possible AFTER tax rates are cut?

http://www.msnbc.msn.com/id/18595849/

[Lee]

This resident expert has really failed to study history. Take a look at when Reagan took office. I'd agree that giving everyone a $300-$600 rebate will do little to stimulate an economy that has become overly dependent on consumer spending and consumer credit. However, income tax reductions have stimulated an economy. Folks know better how to spend their money than the federal or state government.

[Enforcer]

Lee wrote:

This resident expert has really failed to study history. Take a look at when Reagan took office. I'd agree that giving everyone a $300-$600 rebate will do little to stimulate an economy that has become overly dependent on consumer spending and consumer credit. However, income tax reductions have stimulated an economy. Folks know better how to spend their money than the federal or state government.

Clearly, this is the right direction, Lee. Several people (James Tobin, Greg Mankiw and even Andrew Sawick, Bush's 2003-04 economic advisor) have pointed to tax cuts or rebates as not really stimulating the economy enough to make a huge difference. Cutting to the left on the Laffer Curve will stimulate growth as long as government spending is held in check: the problem here is that Bush & Co. have continued to spend, resulting in one of the largest deficits in U.S. history. Essentially, with that much debt, the dollar runs the danger of becoming more worthless than the paper it's printed on.

[Dan of Seymour]

Baloney!..Kennedy's tax cuts in the '60's invigorated the economy. Reagan's did the same in the '80's, and so did Bush's.

[Carl Hoffman papa serf]

Fact is the removal of property taxes would help our economy. Eveyone knows we need to pay taxes, what is needed is a fair way to do so. Only a sales tax allows for that. What is now happening is class taxing. Rich pay higher percent etc. This is not fair as at what point is a person rich, if you do not know what they need to pay?
Rich spend more so would pay more sales taxes, exempting food and medicial would be only thing exempted.
Tax land when sold and real value known. Allowing real ownership of land, would help our economy grow and force the government to live within a budget.

[In Moderation]

niteowl wrote:

<quoted text>
Care to explain how these record revenues were possible AFTER tax rates are cut?
http://www.msnbc.msn.com/id/18595849/

Of course I will. The record collections in the attached article consisted of the month of April of last year. Collections are always highest in the month of April, when the bulk of tax remissions are received. Despite what the "White House Budget Director" says,(remember, he is a politician) the surge of collections in the month of April is hardly a notable event.

[In Moderation]

Further, GDP growth and growth in the money supply occurs every year. To say that revenue collections hit a record in a year, let alone in one month - the month of April, no less, is using political spin to its fullest.

[In Moderation]

niteowl wrote:

<quoted text>
http://www.ntu.org/main/page.php...

Your source is the National Taxpayers Union, an advocacy group that opposes the Balanced Budget Amendment. Hardly an objective source. I copied the following from Wikipedia.org :

"History
James Dale Davidson began the organization in 1969 as a way to launch a career in elective politics, but decided to stay with the organization rather than pursue politics.[citation needed]

In 1970, Davidson hired A. Earnest Fitzgerald, a United States Air Force analyst, as the president of NTU. In 1978, Grover Norquist, was named executive director; after his departure in 1982, he was replaced by former Maryland State Senate Majority Leader George Snyder.

In 1997, Davidson left NTU; John Berthoud was named president and served until his death in late 2007.

Duane Parde was named president of the organization following the death of Berthoud.

If you recall the name Grover Norquist, he is the Jack Abramoff associate involved in the Lobbying scandals Abramoff went to prison for.

[In Moderation]

Enforcer wrote:

<quoted text>Clearly, this is the right direction, Lee. Several people (James Tobin, Greg Mankiw and even Andrew Sawick, Bush's 2003-04 economic advisor) have pointed to tax cuts or rebates as not really stimulating the economy enough to make a huge difference. Cutting to the left on the Laffer Curve will stimulate growth as long as government spending is held in check: the problem here is that Bush & Co. have continued to spend, resulting in one of the largest deficits in U.S. history. Essentially, with that much debt, the dollar runs the danger of becoming more worthless than the paper it's printed on.

Regarding personal spending vs government spending, both stimulate the economy. In fact, Roosevelt used public works projects to stimulate the economy out of depression. This is known as "Keynesian Economics".

The economy was already chugging along with GDP growth to near record-levels prior to the tax cuts. The tax cuts were implemented to satisfy the Bush Administration's constituent base, and was not needed to stimulate the economy - the same basic economy that was strong throughout the '90's. A shallow recession occured in the second year of the Bush Administration, which could have easily been handled with Greenspan-type surgical interest rate reductions.

[The Judge]

Chris46227 wrote:

<quoted text>
The top 20% control 84% of the wealth.

Are you still using that stupid stat after people rubbed it in your face the last time. New material, please!

[In Moderation]

niteowl wrote:

<quoted text>
Care to explain how these record revenues were possible AFTER tax rates are cut?
http://www.msnbc.msn.com/id/18595849/

Your link is to an article that says that Federal Revenue collections hit a record level in the month of April of last year. Even the article notes that April is the month of the individual tax return deadline, which normally is the month when revenue collections are greatest. The White House Budget Director is quoted as praising the revenue for the month as if it weren't a seasonal number. Typical politician. If you choose to extrapolate that number to the entire year, that is your decision, but you are misleading the other posters on this thread. Bear in mind that last year's deficit was nonetheless real.

[The Judge]

Tiocfaidh Ar La wrote:

<quoted text>Giving tax cuts to the lower 50% is driven by the fact that they will spend money on more "need-driven" items than the people you claim to pay all the taxes. SInce the American economy is based on consumerism, it's a better bet that those without will spend more freely than those who have more, when money is available. Logically, that makes sense. The current administration believes that continued spending stimulates the economy but the question begs to be answered: when will it be enough? Eventually a recession, in light of continued spending, is inevitable.

You are so right. The question that begs to be answered is: When will it be enough? When will the government take enough from the people who earn money and give it to those who do nothing? When will it be enough for you socialist?

It truly amazes me why it is so hard for liberals to understand the simpliest economic models. Why can't they understand that if you take all the money people work for and give it to people who do nothing, no one would work!!!! The incentive to sit through years of school, or to learn a skill is more money!!! The model is right in front of your faces, liberals. Look at why Germany, France and many other socialist countries have double-digit unemployment. If you make it comfortable for people to sit on their butt and get by, they will.

Talking to liberals about economics is like talking to people in trailer parks about how to get rich.

[The Judge]

Chris46227 wrote:

<quoted text>
The top 20% control 84% of the wealth.

Please show everyone your reciept for donating your money when you get your rebate check. Otherwise, don't stand on your soap box and tell everyone how to spend their money unless you do as you say.

[anon]

why don't they just give us gift cards for the store they want us to spend it in?

and why do I have to give it back next year?

[lastrep]

In Moderation wrote:

Mr. Harris, I will go against the trend of responses here and praise your letter.
I have no idea where individuals get the idea that tax cuts increase revenue by stimulating the economy. I have never seen the supporting breakdown. All I know is, that along with the idea that war stimulates an economy, these two factors have somehow coincided with what many economists are calling a recession. Couple that with an annual US deficit in each and every one of the years in this Presidential Administration.
We have a weakening dollar, thanks in large part to a historic trade deficit. The only redeeming factor is China is taking the dollars they have earned in the aforementioned deficit and purchased dangerous amounts of US debt.
I sympathize with those whose taxes are proportionally larger in relation to their incomes. However, if we spend $12 Billion monthly on war, and our revenues are no where near paying that war budget, something has to give. We have had tax cuts, we have had war spending, and yet we still have a looming recession. Business as usual is not working. It is time to get away from the economics of political partisanship, and work together for what will truly save the US economy. Providing additional taxcuts in this age of unprecedented federal spending is a dangerous to address our economic ills.

Then in a nutshell you believe the government will spend your money in a more prudent fashion than you do.

[In Moderation]

lastrep wrote:

<quoted text>
Then in a nutshell you believe the government will spend your money in a more prudent fashion than you do.

I can only imagine the distillation process that ended with this post. It is, in my opinion, an oversimplification. Capitalism produced the greatest standards of living in the world. No one disputes that. However, the government has a responsibility to step in and intervene when an optimal level of competition is not achievable through a laissez-faire approach. It is incontrovertable that government spending stimulates the economy. My point is that the economy was doing tremendous before the tax cuts. Add the fact that the country prospered as it has never done in history through Greenspan's gradual interest rate cuts. In comes an Administration that says record GDP growth is not good enough, and suspiciously rewards its constituent base by providing it with it's most cherished prize - tax cuts. Now, we can arguably say we are in a recession. Skyrocketing commodity prices, rising unemployment, and a slow-down in economic activity are here. What purpose did the tax cuts serve? I think the answer is ultra clear.

Professor Harris merely pointed out what empirical studies confirm - that tax cuts as a tactic to stimulate an economy, are clearly overrated.

[lastrep]

In Moderation wrote:

<quoted text>
I can only imagine the distillation process that ended with this post. It is, in my opinion, an oversimplification. Capitalism produced the greatest standards of living in the world. No one disputes that. However, the government has a responsibility to step in and intervene when an optimal level of competition is not achievable through a laissez-faire approach. It is incontrovertable that government spending stimulates the economy. My point is that the economy was doing tremendous before the tax cuts. Add the fact that the country prospered as it has never done in history through Greenspan's gradual interest rate cuts. In comes an Administration that says record GDP growth is not good enough, and suspiciously rewards its constituent base by providing it with it's most cherished prize - tax cuts. Now, we can arguably say we are in a recession. Skyrocketing commodity prices, rising unemployment, and a slow-down in economic activity are here. What purpose did the tax cuts serve? I think the answer is ultra clear.
Professor Harris merely pointed out what empirical studies confirm - that tax cuts as a tactic to stimulate an economy, are clearly overrated.

Attributing all the ills of the economy to a single cause is being oversimplistic. Raising taxes cuses competition? Is that what you are trying to say? The opposite is true. Why do you think companies are leaving the US? Could it be because corporate taxes are higher in the US than elsewhere, so in order to be competitive, the corporations have to go where they can produce a product and be competitive with other manufacturers of that same product. Why do you suppose GM, Ford, and Chrysler are in such difficulty? Not because of tax cuts. Why do you suppose food costs are rising? Because we bought into the ethanol scam that takes land formerly used for livestock corn and using it instead for ethanol corn. In the end the ethanol scam is costing much more than the gasoline that it was supposed to cause to reduce in price, plus it gets one third less in mileage. Government interference in the mortgage business is what resulted in these loans that never should have been allowed in the first place. Do you think Hillary will carry through with her promise to take oil company profits if she is elected? You think gasoline is high now, just wait until we can't get it anymore due to government meddling. You want energy independence? Due to government interference, we cannot drill for oil in our own country where the oil is, we have to pretend that wind farms will provide us with the energy we need. Due to giovernment interference, we cannot build nuclear generating plants, the most efficient means of energy production. Nice word, oversimplification, and you demonstrated it very well.

[In Moderation]

lastrep wrote:

<quoted text>
Attributing all the ills of the economy to a single cause is being oversimplistic. Raising taxes cuses competition? Is that what you are trying to say? The opposite is true. Why do you think companies are leaving the US? Could it be because corporate taxes are higher in the US than elsewhere, so in order to be competitive, the corporations have to go where they can produce a product and be competitive with other manufacturers of that same product. Why do you suppose GM, Ford, and Chrysler are in such difficulty? Not because of tax cuts. Why do you suppose food costs are rising? Because we bought into the ethanol scam that takes land formerly used for livestock corn and using it instead for ethanol corn. In the end the ethanol scam is costing much more than the gasoline that it was supposed to cause to reduce in price, plus it gets one third less in mileage. Government interference in the mortgage business is what resulted in these loans that never should have been allowed in the first place. Do you think Hillary will carry through with her promise to take oil company profits if she is elected? You think gasoline is high now, just wait until we can't get it anymore due to government meddling. You want energy independence? Due to government interference, we cannot drill for oil in our own country where the oil is, we have to pretend that wind farms will provide us with the energy we need. Due to giovernment interference, we cannot build nuclear generating plants, the most efficient means of energy production. Nice word, oversimplification, and you demonstrated it very well.

You're missing the whole point. The point from the very first of this thread was that tax cuts did not stimulate the economy. You're going from one extreme to the next. First, you make a pointed statement that I am insinuating that the government can spend money more effectively than the individual. A loaded question if I ever heard one. Now, after I explain that in SOME circumstances that the government must intervene, you are twisting the statement into the government must ALWAYS intervene. Then you give specific examples as to when the government got it wrong. You are arguing just to be arguing.

Let's get back to the original letter and debate. The Gross Domestic Product was growing at a very healthy rate when Mr. Bush told us that the economy needed to be stimulated. Then, OF COURSE, the magic bullet as explained by Mr. Bush just happens to be the only plank in the Republican platform - tax cuts. Now we are in a recession, despite these supposedly all powerful tax cuts and $12 billion a month in war spending. This is voodoo economics, pure and simple. If you want to end entitlement programs to put more money in your pocket, just say so. But don't try to BS the public by saying tax cuts are needed to stimulate the economy. It is a sham, as pointed out by Professor Harris' original letter.