Actually, they won't. The subject is much more complex than you appear to realize.
It is not my job, or anyone else's, for that matter, to remedy the deficiencies in your education -- and your unwillingness to make the necessary effort (i.e. "go read a book") will be taken as an admission that you would prefer to remain argumentative and ignorant.
If by "reducing taxes" you mean reducing tax *rates* -- yes, I do hold that belief, and it's a mystery to me why anyone does not, as the historical record shows quite clearly that that is exactly what happens.
Wikipedia actually handles this subject very well. I've watched their entry for "supply side economics" evolve there over the years, probably because there are so many partisans on both sides of this issue that they've beaten each other to a pulp until the phony claims have been squeezed out of it. It's more respectful of opposing opinions than the median position of professional economists, the majority of whom treat it more like an ideology-driven hoax.
Nope, I wasn't joking. The fact is the more money that a government prints the less value it has. It takes more money to buy commodities because there are more and more dollars chasing the same amount of goods. A good example of this was in post WWI Germany where the inflation was so high that it was reported that it took a wheelbarrow worth of money to buy a loaf of bread. The German government tried to get out of its economic problems by printing more and more money but all that did was create hyperinflation. Inflation takes the value out of a dollar or whatever currency you are talking about. The more scarce a dollar is the more it's worth and vice versa. Money is just paper with ink on it. Money has no intrinsic value by itself. Much psychology is involved. People have to believe that money is valuable for it to be valuable. Once people see money as not being valuable they want more and more of it to purchase the same thing they did a week ago and on and on. Government creates inflation by printing too much money. Inflation makes the dollar able to buy less and less so you need more and more dollars. It's simple economics really. Right now we'd have tremendous inflation but since we're buying everything overseas prices are staying low. For now.
No, that's not true, so your concept of the "historical record" is clearly wrong. All you have to do is look at Clinton's tax INCREASE followed by years of tremendous economic growth to see that simply lowering taxes does nothing for the economy. Then look at the years when the marginal tax rates were far higher than they are now and the economic level was also much higher. Why was the economy so strong with extremely high tax rates in the Truman and Eisenhower administrations? Thinking all you have to do is lower tax rates to make the economy grow is, first off, factually wrong and secondly it's way too simplistic. You have bought the bullshit story from the business community and the wealthy class who are the two groups who benefit the most from lower taxes. Economic output is dependent on many factors and marginal tax rates are rarely the one that makes a significant difference. Many other factors are far more important to promoting economic activity. However, at all times business and the wealthy want to pay less in taxes and since they traditionally pay a large chunk of the taxes collected overall they are the groups most interested in lower rates. Which explains why they are continually putting out propaganda that lowering their taxes will be good for all. Well, it's not. So why is it that people like you are so susceptible to their bullshit? What's good for the rich is rarely, if ever, good for the rest of us folks, and that is a fact.
You are being over simplistic. Governments print more money so inflation results. Takes a wheelbarrow full to buy a loaf of bread.
It is a bit more complicated then that and I'm not here to educate but the first thing you need to think about is how does the money get from the Government Bank into all those wheelbarrows?
You can equally well blame labor unions for inflation as the union goes on strike; gains higher wages for the employees; who now have more money to spend. As a result of the costs of the higher paid employees employers have to raise the price of goods made and as well need to borrow more from the Bank to finance operations. As more goods are being made the demand, and therefore the cost, of raw materials goes up.
In short inflation and or depressions are caused by a multitude of actions and reactions and are far too complex to explain by a simplistic statement that the Government prints too much money.
Bruce-in-Bangkok (Note:displayed e-mail address is a spam trap)
True, it's all about the economic ideas rather than the evidence.
In that regard, tax revenues have consistently fallen behind the losses due to tax cuts during the times that supply-side economics has been in ascendance. If you look at it in terms of the Laffer curve, it implies that all of the activity has been on the left side of the curve, which is the side where the revenues from tax cuts are slight, and the losses from tax cuts are large. This agrees with the fact that we're running a substantial deficit.
Supply-siders are avoiding acknowledging the left-side arguments because they're accurate descriptions of what has actually happened; all you have to do is measure revenues and tax rates, and plunk the results down on the curve. They're also damned inconvenient to the supply-siders' theories, because they suggest that, in terms of tax revenues, our taxes are already too low. Compared to the rest of the world that does appear to be the case.
However, that's another argument. And the Laffer Curve is about tax revenues, not directly about the health of the economy. So I don't want to even try to argue this one. It's much too complicated.
The Wikipedia links do a good job of fleshing it out, for anyone with that much interest in the ideas and, more importantly, the evidence.
Not according to Milton Freedman. But also understand that I was truncating the process so it could be briefly stated and the gist of it understood by someone who isn't well versed in the subject.
That's right, simplistic. For one thing there were many different pressures on the economy during Johnson and Nixon's terms. But the mantra of tax cuts to increase growth and government revenue is very popular with the right wing but not so with everyone else. Many economists look more to money supply than to tax cuts for economic stimulation. And as for the boost to the economy when Kennedy cut taxes you have to understand that he cut the tax rate from the 90% range down to 74%. Showing that it's not simply cutting the rate that matters. Reagan cut the rate to 28%. If you look at the numbers you won't find a big improvement in the Reagan economy compared to Kennedy's even though Kennedy's highest tax rate was in the 70s. I'd love to see us go back to the Kennedy tax rate for the upper income bracket. The economy was good then but some misguided folks seem to thing the rate has to be as low as Reagan's to have a strong economy. Not true. A high progressive tax rate with the top paying high percentages is not bad for an economy and statistics show that. As I said, the wealthy and business always want their taxes lowered. They would have you believe the lower their taxes the greater the economy will be. That's not so either but people like you fall for that line continuously. Try looking at the numbers over the long haul and you will see what they say is truly crap.
I actually get a chuckle out of the supply side "experts". They want to sell the public a bunch of bullshit and dress it up in fancy economic terms to make it sound like it makes sense. Think about it. What they are saying basically is this. Lower the rate of taxes the government charges the population and you will wind up taking in more money. On it's face it's ridiculous. Ask the public to pay in less money to the system and the government will have more money. Give me a break. It's a total con job. If the government wants money from the public it collects taxes. If it needs a little money it collects a little in taxes. If it needs a lot of money it collects a lot in taxes. It does this by raising or lowering the rate. It's so simple that the act of raising taxes is what the government does to get more money that no one has ever questioned it. Now the supply siders come along and say lower the rate and more will come in. As Ed pointed out the record is in. When the government did what the supply siders wanted two things happened. One, less money came in and two, the deficit ballooned. Take away inflation, and raises in FICA taxes under Reagan and the revenue was actually less. So in the end it turns out that supply side is what many thought it was right from the start, a con job perpetuated by the right wing to benefit it's core constituent groups wealth and business. I'm shocked!
HELLO?!?! YOU're the one saying that printing too much money causes inflation, and you're accusing ME of oversimplifying? ROFL!!
No, but when you make blatantly nonsensical assertions, it's your job to defend them with reasoning, unless you don't mind looking like an ignorant windbag. Your choice.
And your INCORRECT assumption that I am unwilling to read a book is just another of the many incorrect assumptions you have made in this thread. When you use "go read a book" what you really mean is, "I don't know anything about it and don't want to admit that, so stop asking me questions." I am AMREADY reading up on this subject. And though I just started, what I'm finding out is that printing more money doesn't cause inflation.
Actually, you are the one who is argumentative and ignorant. I proved you wrong through simple logic, but you still cling to your silly belief that printing too much money causes inflation. If you actually think about it, that makes no sense. You haven't provided a shred of reasoning to support your assertion, you're basically just saying that you're right because I'm wrong. I am AM willing to learn about this, and I am doing so. I never said I was unwilling to read about it, that's your assumption--because I called you out on your belief by asking you to answer a few simple questions about it--which you couldn't do.
That's what I thought. You sound like one of the victims of the neocons. They hook people by making them feel clever. They give people nuggets of "wisdom" which make them feel "in the know" about things. However, if you actually examine those nuggets, they are made not of wisdom but of excrement. Now, you're probably going to make the assumption that I'm a liberal, right? Have they programmed you to think that anyone who challenges the things they've told you to believe is a liberal dupe who's going to hand America over to the commies? Feeling angry, beligerant, unwilling to discuss it further? Want to dismiss me as a hopeless idiot who refuses to see the truth? I hope not. Because if so, then you're a great neocon puppet.
Actually, it doesn't. I'm sure you believe it does, but have you ever seen the actual evidence, or are you trusting some extremist nut-job who's telling you that the evidence exists? If you've seen the evidence, please submit a link. And don't try to weasel out of this by telling me to look it up--you're the one making the claim. Back it up or admit your ignorance and STFU.
Reducing the tax rates (since you obviously have some sort of trouble with the phrase "reducing taxes") brings less money in to the government. The money stays in the hands of the people instead. Let's look at this with applied reasoning.
---Scenario 1: The government reduces the tax rate ten percent across the board. What happens to it? Let's say 5% goes into savings accounts. That
5% is out of circulation. Of the 95% left, much of that, say 40%, will be spent on merchandise such as tools, clothes, digital cameras, TVs, DVD players, computers and accessories, MP3 players, cell phones, PDAs, appliances, cookware, etc.
Where is all that stuff made? 90% of it is made in China and the rest is made in a smattering of other countries. Less than 1% is actually made in the US. Some of the money goes to the resellers, so let's say of that 40%, one-fourth (and I am being VERY generous here) goes into the US economy rather than straight overseas.
So far, out of 45%, 15% is going into the US economy.
Utility bills? Most of the cost of utilities is energy, which comes from oil (imported for the most part) natural gas (imported for the most part) coal (some is imported and some is mined here) and a small amount from other sources such as nuclear, hydro, etc. At least 50% of the cost of utilities goes to foreign countries.
House payments? Well, the interest goes to the bank, which if local, goes into the US of course, but if it's one of the banking systems owned by an international corporation, only some of it is going into the US economy. The rest of the cost for house payments goes to materials and labor. Labor is basically 100% local, but much of the materials are imported.
Cars, of course, are made almost entierly in other countries--even the ones which are "made" in the US are actually made elsewhere and only the final assembly (connect the drivetrain to the chassis) takes place here. Gas for those cars? Again, almost all foreign.
Interestingly, entertainment is largely local. If you go into a bar and order drinks made with domestically-produced beverages, practically all that money is going into the US economy. Pot? Well, I heard it was California's biggest cash crop, but who the hell really knows where that stuff comes from. Movies are produced in the US, most food is produced locally, sporting events are mostly domestic, and other divestions such as "theraputic" massage, salons, spas, etc--largely domestic. So entertainment budgets (which don't include buying merchandise such as DVD players etc) go mostly into the US economy.
So, probably (and roughly) 25 to 40% of the money people have as a result of a tax rate reduction actually goes into the US economy!
However, tax rates will drop for businesses as well. This will be good for the service industries and what little manufacturing/production industries we have that are staying in the US, but many US businesses have already outsourced so heavily it won't make a difference within the US.
In other words, reducing the tax rate is a great way to boost China's economy and the economies of other foreign countries, but doesn't really do so much for the US economy.
---Scenario 2: The government decided not to reduce the tax rate and instead keeps that money. What happens to that money? Well, then they spend it of course. Now, if you've ever worked for the government you may already know this--I didn't--apparently if you are buying something for the government, you have to buy products produced and sold within the US unless you can prove that there is no product produced and sold within the US which could meet your needs. I found this out when my company bought a Norwegian company, and discontinued one of our software products because that Norwegian company had a similar product that was more advanced than ours (we had put resources into other products instead for several years.) A government employee called and wanted to buy a large volume license. I explained that the purchase would need to go through our new Norwegian office, and he then told me that it would be a huge headache and practically impossible for him to get approval for buying something produced and sold overseas, even though it was technically now a branch office of our company which was based in the US.
So how much of the money that the government spends goes into the US economy? Why, damned near all of it! There are entire industries which would not even exist if they didn't have Uncle Sam as a client. Government spending is what's kept the US out of severe economic recession since 1982 (except for the brief period during the middle- and latter-1990s when the PC boom was in full force, before major outsourcing had taken place which of course ended the boost to the US economy.)
From around 1945 through 1982, even through the Vietnam war, the US debt stayed fairly level (when adjusted for inflation.) When Reagan's first budget took effect in 1982, the debt leapt up and continued to rise until it had *more than doubled* by the time he left office. Not the deficit, mind you, but the entire debt of the nation *more than doubled* in eight years. That's an economic catastrophe right there. By the time Clinton got into office, the national debt had nearly tripled from what it was in 1982 (ALL these values are adjusted for inflation.) Why? Because as the US economy grew stronger and stronger during the 1940s, 1950s and 1960s, we priced ourselves out of the world market due to the high cost of labor, and the
1970s brought the start of a recession which could last many decades. Reagan kicked off a massive borrow-and-spend trend which boosted the hell out of tyhe US economy through the trickle-down effect. It worked all right, but saddled the nation with a crushing debt which will be one of the major contributing factors in the upcoming years of rampant inflation and depression of the US economy.
During Clinton's time in office, the increase to the debt slowed, stopped and began to decrease. I don't credit Clinton with this, though. He was in the right place at the right time, during the PC boom. However the PC boom was ending just as he was leaving office, and he had sharply reduced government spending. Now that the cold war was over, the government needed a new excuse to start that same borrow-and-spend trend. In 2001, 9/11 occurred, and gave the persect excuse: the waar on terror. I'm not one of those who believes the US government perpetrated the attacks on September
11, but it sure did seem to happen at *just* the right time (One month before the US fiscal year was to start in October.) How lucky for them.
Here's a link to a graphical representation of the debt. Please check its accuracy for yourself (as I did) by looking up the national debt histiory on the US Dept. of the Treasury's web site and using an online inflation adjustment calendar to adjust each year's debt to one year's dollar value so you're comparing apples to apples (You'll have to log in to myspace to see the graph, creating an account to log in is free):
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Again, check this graph's accuracy for yourself. I think you'll find out it's right on the money (and I'm sorry for the pun.)
Neocons are not conservative. Their borrow-and-spend policies are a large part of the cause of the impending implosion in the value of the dollar. Other major factors include loss of the petrodollar exclusivity, baby boomers retiring and the rise of the Euro. We're in for a rough ride.
Because they use the reasoning "Reducing taxes stimulates the economy, increasing business and creating more jobs, which means more salaries are being paid out and taxed, which brings more money in as taxes." In reality, supply-side economics is fundamentally flawed and the boost to the exonomy comes from government borrowing and spending.
Unless there's a neocon president, in which they just borrow it:
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LOL yep, exactly. They sucker people into believing this crap by giving them simple explanations which seem to make good sense, but if you actually look at them are smoke and mirrors.
What you're saying is based on the presumption that the amount of goods and services produced remains constant.
Does it?
Let's take a step back, and pinpoint this principle. It's not the fact that there is more money which makes it less valuable, it's the fact that it's easier to obtain. That might seem like not-picking, but it's actually the crux of the belief. If the feds printed 500 trillion dollars tomorrow, and kept it all, the value of money wouldn't change even though there's more of it.
However, if they spent it all, they would be buying an incredible amount of goods and services. This would drive up the price of goods and services because extra workers would have to be hired and overtime paid to meet the demand; plus when the demand is high, sellers tend to increase their profit margins.
The real issue here is that money is not a commodity in itself, it's a representation of value. If the government prints 500 trillion and is unable to find any goods and services to spend it on, all that cash is effectively worthless except maybe as furnace fuel. The actual value is in the goods and services produced, not in the money.
Inflation is caused largely by an increase in the demand for goods and services. That's only part of the story, and an oversimplification at best. However, it seems to be a more precise way of saying what I believe you're getting at.
Well, if they subsequently paid off their debt in DM, then they succeeded! If they owed one billion DM, and they caused so much inflation that the value of a DM dropped by a factor of, say, 100,000, then they're paying off a biillion-DM debt with what's actually worth only ten thousand DM. How convenient for them!
Now, we're at a point at which the US government has suddenly started skyrocketing the national debt in 1982 after the debt remained relatively steady from 1948 through 1981 (adjusted for inflation of course) and is now approaching *quadruple* the amount it was in 1981, with no sign of slowing down. How do you suppose the government is going to pay off this debt?
You certainly did truncate it. You stated that the government printing money caused inflation to the extent that in the Wiemer Republic it took a wheelbarrow full of currency to buy a loaf of bread.
However - you neglected to show any relationship between the government printing plants and the wheelbarrow. In other words how does the number of bank notes effect the price of bread? Your analysis sounds logical until one applies a little thought to the problem and then the simple equation of number of bank notes vis-a-vis inflation fly right out the window.
As I said, inflation is a complex action and an over simplistic answer does little to explain it.
Bruce-in-Bangkok (Note:displayed e-mail address is a spam trap)
Strange how well selling in volume at a lower price works so well for Walmart but you say it won't work from the other side of the balance sheet isn't it?
It would seem to me that if it works for retail sales it ought to work for taxes.
The Chinamen do it too. Sell a whole bunch cheap and make more money they selling a few expensive ones
Must be some sort of exotica Asian Magic?
Bruce-in-Bangkok (Note:displayed e-mail address is a spam trap)
Which is why after a tax break, revenuse steadily in crease, but after a increase in taxes, revenues sharply increase, then rapidly fall off as taxpayers start finding shelters.
Democrats...always trying to tax us into prosperity.
Gunner
"[L]iberals are afraid to state what they truly believe in, for to do so would result in even less votes than they currently receive. Their methodology is to lie about their real agenda in the hopes of regaining power, at which point they will do whatever they damn well please. The problem is they have concealed and obfuscated for so long that, as a group, they themselves are no longer sure of their goals. They are a collection of wild-eyed splinter groups, all holding a grab-bag of dreams and wishes. Some want a Socialist, secular-humanist state, others the repeal of the Second Amendment. Some want same sex/different species marriage, others want voting rights for trees, fish, coal and bugs. Some want cradle to grave care and complete subservience to the government nanny state, others want a culture that walks in lockstep and speaks only with intonations of political correctness. I view the American liberals in much the same way I view the competing factions of Islamic fundamentalists. The latter hate each other to the core, and only join forces to attack the US or Israel. The former hate themselves to the core, and only join forces to attack George Bush and conservatives." --Ron Marr
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