Scipio

Here's my simple criticism of supply side economics, as that seems to be the direction that the thread is now taking.

The essence of supply side economics is the trickle down effect. The tax rates that the wealthy pay are lowered, and they take that extra money, grow it, and spread it through the economy.

There are simple economic reasons to think that this isn't a good idea. One, wealthy people have a relatively low marginal propensity to consume. This means that for each extra dollar they get out of a tax cut, they will spend less of it on consumption than middle and lower class people will.

Granted, the wealthy are able to spend their money on things that the poor can't, such as starting companies or investing in captial, human or otherwise. However, the past few years have shown that the wealthy don't always do this. Even after large tax cuts, significant gains in capital investment weren't observed.

There are many reasons that tax cuts that send more money to the lower and middle classes are more desireable. One, they spend the money, and it goes into the economy. When money starts moving, it gets spent multiple times, and drives the economy. Wealthy people are more likely to sit on the money they get for some time, so the economy doesn't benefit as much.

Two, from a welfare standpoint, it's better to give money to people who are having trouble making ends meet than it is to give money to people who are having trouble deciding what options to get on their third BMW.

Three, even though the rich aren't getting the money outright, they have shouldn't have much trouble getting a share of the money that went to those less well off, in that (many of them) make profit off of the purchases made by consumers. (And, as noted, the lower and middle classes will consume when they get tax cuts.)

Finally, I think that it's possible to have a capitalist republic that values keeping the distribution of wealth relatively narrow. I believe that people who work hard have a right to do well or even get quite rich, but no CEO is truly worth tens of millions of dollars a year.

Louis Brandeis put it best:

"We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both. "

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