Quote:
Originally Posted by roachboy
but even if that argument held--which leans on the quite non-conservative claim that the american capitalist system was once geared around over-production and required ways to dump that over-production in order to operate at anything like full capacity---which is the war economy argument....even if that held,
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I am a supply sider and I will readily admit the laws of diminishing returns when it comes to tax rate cuts. A 10% reduction in marginal tax rates when the highest applicable rate being paid is 100% has a bigger impact than if that rate is 1%. I think there is a theoretical equilibrium marginal tax rate, a point where taxes received by the government is maximized against the benefits of economic growth
. I wonder if Kaynsian's believe the law of diminishing returns applies to fiscal policy or spending by the government. I can accept that government spending on something like education, when there was no previous spending on education could have a positive impact on economic growth. However, I think the benefit of government spending on education quickly diminishes when a basic infrastructure for education is in place and that additional spending by government becomes inefficient and wasteful. And that after a basic education infrastructure is in place private sector spending will be the most beneficial.
I think you mis-characterize the intent of American capitalism. I think it is geared to equilibrium production or equilibrium period and not over production. I think that explains our normal business cycles. Over-production is followed by under-production, which is followed by over-production, etc, all in search of equilibrium. If you argue this is inefficient I only agree to the point that sometimes the feedback mechanism is inefficient. However, I think this feedback mechanism will almost always be more efficient in the private sector than in the public sector.