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Old 08-01-2004, 08:50 PM   #7 (permalink)
KMA-628
....is off his meds...you were warned.
 
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Location: The Wild Wild West
Quote:
So when Reagan and Bush the First had 12 years to make this concept work, why couldn't they?
Gov't spending wasn't kept in check. Reagan's plan actually significantly increased gov't revenue, but outlays grew too much. Then, Sr. raised the taxes thinking that would help--it didn't, never has.

Also, compare the numbers of the 70's with the numbers of the 80's, there was a dramatic difference. I remember the inflation rates under Carter--I also remember looking for gas stations that had a green flag in front (red flag = no gas). Those days were not fun.

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The trickle down theory works great on paper, but unfortunately, it assumes that people will always do what's best for the economy. That's a false assumption - people will do what they percieve as best for them.
That is incorrectly protraying "trickle-down" theory. It never says that people will do what's best for the economy. People will do what is best for themselves--Basic Economic Theory, taught the first week in Economics class. Claiming that "trickle-down" economics "assumes that people will always do what's best for the economy" - Is a False Assumption



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if you give me $5,000, I could buy stock with it which would help generate jobs etc etc, or I could buy a nice TV, or I could stuff it under my mattress for a rainy day. Most people are gonna take the 2nd or 3rd option.
Actually, the 3rd option is the worst thing anyone can do, regardless of the political persuasion - Cash never increases in value, it always decreases. That thinking applies to the pre-FDIC days when nobody trusted banks and their money wasn't safe in a bank.

Either Option 1 or Option 2 stimulate the economy, in a way (without having to argue the "broken windshield" theory).

To your last point, the "under-privileged" pay little or no taxes. There is no point giving a tax break to someone who has no burden. Giving a tax break to someone who pays almost nothing (I have prepared several of their returns, so I see the numbers) does absolutely nothing for the economy. Their ratio is already imbalanced (what they get versus what they pay).

I really cannot think of any economic theory involving the "under priviledged" which leads to economic growth.

Trickle Down/Supply-Side/Whatever has never had the chance to work. It and any other economic stimulus package has always been offset by spending.

Further Info:

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The JFK tax plan, passed after his death, reduced marginal tax rates from 91% to 65%, and unleashed a prosperity which lasted until 1971.
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Reagan's presidency began with the Kemp-Roth tax cuts, which were 25% across-the-board. But the Federal Reserve insisted on an overly tight monetary policy on the advice of monetarists like Milton Friedman, driving interest rates up to ridiculous levels.
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The 1986 tax reform in the U.S. contained a provision which raised the capital gains tax from 20% to 28%. This was the first in a series of factors which led to the 1990-91 recession. The others were the Bush 1990 tax hike, the oil price runup from the first Gulf War, and more monetary blundering by the Fed.
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Bush was elected, and he cut taxes, but the economy refused to improve. Why? He was running deficits, increasing defence spending, etc.; it seemed to be Reagan redux. However, not all tax cuts are created equal. Essentially, his cuts were based around expanded credits rather than dramatically lower rates. The 2003 tax plan was much more supply-side in nature, and sure enough GDP grew at 8.2% annualized a few quarters later. The bust has its roots in the Fed's policy. The Fed has always seemed to err against inflation, so it hiked rates several times despite the falling prices of gold, oil, metals, and other commodities, early indicators of deflation and an unstable dollar. Then when oil jumped up a bit, the Fed saw red and hiked rates again and again. Then the markets tumbled, and everything went to economic hell in a political handbasket.
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