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Old 12-13-2009, 10:31 AM   #38 (permalink)
guy44
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Quote:
Originally Posted by aceventura3 View Post
Is Obama's carrot to small business and indication that on some level even he acknowledges supply side economics can have a stimulative affect on the economy?
No.

Long Answer:

A) Supply side economics never, ever meant offering tax breaks to small businesses. It meant increasing overall supply through incentives to produce, usually achieved by lowering taxes. Right now, we don't live in a world with a supply deficit - we live in a world with almost no demand. What Obama's talking about now has literally nothing to do with supply side economics, it has to do with employment.

B) Tax expenditures are extremely commonplace. That Obama is offering some to small businesses - after he campaigned on a platform of helping small businesses - has nothing to do with the supply side economics.

C) We're in the midst of a serious recession. One of the worst results is that unemployment hovers at above 10%. Furthermore, poor unemployment numbers will kill Democrats at the ballot box. So Obama is proposing a large number of measures to increase employment. Some of these measures include tax breaks to small businesses with the hope that they will use their extra expected savings to expand (and thus hire new employees), or not fire current employees because of the poor economy, or even just not close down.

I question how effective these measures will be (studies on the multiplier effects of various stimulative proposals have shown that tax expenditures are amongst the least effective) but I am hard-pressed to see how one can view Obama's actions as supply side. I think you might be misinterpreting the term to mean any government action taken on the corporate sector that involves cutting taxes. But it really doesn't. Especially in a world with minimal demand.
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