KMA-628

In previous threads, I have seen the question asked several times:

Where are the benefits from the tax cuts? Supply-side economics isn't working. etc., etc.

Here is one answer: LINK

Some highlights from the report:

Less than projected, huh?

Hmm, strong growth in corporate profit equals more tax revenue. I thought we had to raise the rates to get more tax revenues from corporations?

Exactly how it is supposed to work. The people pay less in taxes, spend more money, stimulate the economy, businesses make more money and tax revenues go up without taking more money from you and me.

The one thing that surprises me most about this article (yes, I was suprised) is that this has happened along with the spending binge our gov't has been on. Imagine how much better these numbers (not that they are bad) would be if gov't spending was kept in check (i.e. increase rates you can count on one hand)?

This information is several months old. Have you heard about it before this? I hadn't.

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yatzr

i recently read that this last month (or may I don't remember which), the defecit went down by a pretty large amount (way bigger than expected).

I didn't read the details, but it was along these lines. I was very surprised....I was also surprised it wasn't bigger news since I'm sure the some people would love to use this in arguments for november.

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KMA-628

You know what they say about bad news traveling fast.....

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onetime2

Yes, I was aware of it.

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wonderwench

So was I. The economy is growing, jobs are being added, tax receipts are up, and the deficit is not as bad as had been predicted.

We still need to reign in government spending, however.

KMA-628

I thought I kept up better than this. This is podium pounding stuff, really good news, it should be in every newstand. One cadidate, in particular, should be a little more vocal about this.

But alas, I keep hearing, over and over how the tax cuts wouldn't/haven't worked, how they need to be reversed, etc., when the evidence speaks to the contrary.

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smooth

The evidence doesn't speak to the contrary.

If you want to bandy about stats, then you should educate yourself on pre/post tests before making declarative statements about evidence.

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KMA-628

what evidence?

Are you saying that the facts in this report are wrong? It is numbers, they speak for themselves.

I looked at the budget reviews for several months in a row, they all say the same thing.

Tax refunds to the taxpayers are up, tax revenue is up and the projected deficit is smaller than projected.

This is exactly what every supply-sider predicted (except, of course, the spending increase).

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smooth

OK, evidently you didn't heed my advice.

What you would have found had you googled very basic research design notions is that you can not know if this situation is better than it would have been had we not had the tax cuts.

Your "evidence" isn't indicating anything other than the fact that revenue is higher than predicted. None of us reading this really know what the prediction entailed. It also doesn't mean squat--it certainly isn't evidence that "supply side economics works."

In order to make that statement, you would need to run supply side scenarios simultaneously with demand side scenarios.

Onetime, as an educated economist, most definately knows this.

He didn't dispute you because you support his viewpoint. But if you ask any other economist, or maybe even onetime in person, they will tell you that what you are citing as evidence of supply side tactics as proof of anything isn't worth beans.

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"You measure democracy by the freedom it gives its dissidents, not the freedom it gives its assimilated conformists." -- Abbie Hoffman

KMA-628

You are right in that it doesn't prove predictions. There really isn't a way to "prove" what caused this. You can only assume by looking at the data.

Here is how I came to my decision:

1) We were in a recession, gov't revenue went down as gov't spending increased.

2) The purpose of the tax cuts was to stimulate the economy.

3) I remember hearing about all of the bad things to come from the President's tax cuts. How horrible it would be for our economy

4) Now, for the three months that I have looked at, the opposite is true and the trend is looking good.

This where I don't understand your point.

Supply-siders and proponents of the tax cuts made certain assertions regarding the effectiveness of the tax cuts.

The tax cuts were put in place.

The assertions made turned out to be true.

Sure, you can say that something else caused this growth, but what?

This report follows the predictions almost to the tee.

now...

I have no problem admitting when I am wrong. If the credit goes elsewhere, then I would like to know.

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hannukah harry

i'm gonna have to agree with <b>smooth</b> here... he's just so... i don't know... smooth...

really though, the economy's picking up again which is what is responsible for the increase in tax revenue's and spending. is it the refunds? maybe. or it could just be that more people have jobs/more hours/more pay giving the extra money to spend, among a number of different reasons. the tax refund could be it, but we don't know based on that article.

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filtherton

Supply side economics isn't working for me, that's for damn sure. Corporate profit increases don't mean shit to the average person.

wonderwench

Corporate profits mean a great deal to people who work for those corporations; corporate losses mean a great deal to those who are laid off when the corporation can no longer afford to employ them.

KMA-628

Did the amount you are taxed decrease? Mine did, plus I got more deductions. It significantly reduced my tax liability last year.

If your tax rate went down, then you benefited from the tax cuts.

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filtherton

They still don't mean squat to the average person. They don't mean squat to corporate employees who get laid off so their bosses can make a quick killing, the corp's ability to employ them be damned. Corporate profits mean a great deal more to those running the corporations than they do to the those employed by the corporation. They mean even less to the consumer. Trickle down has more to do with being pissed on than it does with a just distribution of capital.

My cost of living, a more meaningful representation of my quality of life, has increased in the past year. Like many americans i'm in a tax bracket that was unaffected by the bush tax cuts. They mean exactly nothing to me. What has affected me are the tuition increases caused in at least some part by a decrease in public funding for the university system in which i am enrolled. That means a lot more to me than corporate profit increases.

KMA-628

Argument/Debate aside - that comment was funny.

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wonderwench

This is where taking a longer range view benefits. Wouldn't you rather pay more for your tuition now so that you can keep more of your income over the course of a few decades? If you do a net present value of the two, you will find the cumulative life time tax savings to be worth far more.

filtherton

I don't have a problem with taxation. In any case, it seems right now that our current tax-levels are unsustainable in light of our current spending. So actually, i'll probably end up paying more for tuition now and paying more when tax rates actually rise up to sustainable levels.

Seaver

It's called a war... two of them... at once. Every war in US history has put us in debt.

hannukah harry

1) i'm sorry, but we're only at war in retotric. i apologize for any spelling errors, i've been drinking, but i'm trying.

2) we have no formal declarations of war (i guess it's a part of #1 really).

3) the police action (what else would be proper to call it?) in afghanistan is justifiable, but not in iraq.

i have no problem with paying taxes. just use themoney wisely, which isn't happening.

/norway, here i come....

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whocarz

Arguing semantics now? Whether the wars/police actions are justifiable or not, they still cost hukkah amounts of money.

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cthulu23

While this statement does have a common sense ring to it, in reality corporate profits do not always translate to higher pay or job security for our nation's workers. Witness the offshoring of jobs to India, Mexico, etc. by successful companies, as well as the dramatic growth in CEO pay that hasn't been matched by increases in worker pay.

wonderwench

One problem we have with the definition of profits in today's world is that they do not always represent cash flow. The true test of the health of any business is unencumbered cash flow. I have theorized that the different accounting treatments of expenses under GAAP vs. tax policy has exacerbated this problem. Some of the justifications used for schemes such as the Enron off-the-balance-sheet treatments have been that such transactions are perfectly legal under tax accounting.

The main problems with tax accounting are that it is negotiated via the political process and political standards of accounting have nothing to do with the fundamental health of the enterprise.

Seaver

No, we're in war in everything BUT rhetoric.

Ask any man in uniform if this is a war. To the military (the ones who actually fight), this IS a war, declared or not.

Has nothing to do with the bills we pay for it, and the debt caused by it.

smooth

You are partly correct. Every war in US history has been accompanied by tax increases--except this one.

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"The theory of a free press is that truth will emerge from free discussion, not that it will be presented perfectly and instantly in any one account." -- Walter Lippmann

"You measure democracy by the freedom it gives its dissidents, not the freedom it gives its assimilated conformists." -- Abbie Hoffman

roachboy

echoing flitherton's post above:

http://www.nytimes.com/2004/07/18/bu...8WAGES.html?hp

depends on what you look at.
purchases at neiman marcus are up, however--so the wealthy do predictable things with their extra cash.

good thing cowboy george is on the case to make sure they can buy more personal luxury goods.

great for everyone, the wealthy having more personal luxury goods.

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filtherton

I thought the costs of the war weren't being factored into current forecasts because they would paint too grim a forcast. I seem to remember something about war appropriations being left out of budget forecasts.

KMA-628

All of the reports mention "defense spending". I would assume that includes the war, but I don't know.

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smooth

My understanding is that "defense spending" refers to normal yearly budget requirements. War costs are extra expenditure and aren't being included in the analyses.

__________________
"The theory of a free press is that truth will emerge from free discussion, not that it will be presented perfectly and instantly in any one account." -- Walter Lippmann

"You measure democracy by the freedom it gives its dissidents, not the freedom it gives its assimilated conformists." -- Abbie Hoffman

Nizzle

Except now I pay more for healthcare and education of my children. How did that benefit me? Well, it's a net balance for me. Not for everyone. Certainly not for those who are not already making a substantially comfortable living. I count myself among the lucky in that regard. And I have no problem paying taxes as long as the money is spent responsibly on something worthwhile.

That's really the issue. Massive tax cuts don't help the people that are struggling. If you want to argue that the government should not help these people, fine. If you want to assert that giving rich people more money leads to more advantages to the poor (the meat of "trickledown economics"), feel free. I will gladly take up that debate. But to make the blanket statement that getting a refund of any size is a bonus without offsetting what you lose in assistance is just dishonest. This rhetorical device used by proponents of the Bush tax cuts is utterly maddening.

The reality is that the tax cuts were directed at the wealthy who were just as wealthy before the tax cuts. Everyone else gets a pittance and a cut in social program funding to balance the books, and they are supposed to lap this up as a net gain? It seriously boggles me.

Let's stick with the Supply-Side argument that spawned this thread. Your assertion is that by making rich people richer, that they will pass this wealth on to the average worker by raising wages and creating new jobs, instead of hording it jelously and still lobbying for legislation to axe workers safety, rights, and wage regulation. Does that about sum it?

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Nizzle

KMA-628

Nizzle,

The comment wasn't directed to you, it was in reference to a different conversation.

^^My point exactly, why are you posing this as an argument? Almost every time I discuss economics on this board I mention the out-of-control spending of Bush. I have yet to change my position nor offer a different one.

^^You're trolling here..... I did not say that. I do not believe nor do I propose demand-side cuts to stimulate growth. Way off topic on this one. Demand-side cuts, if they were to occur, would not be to stimulate the economy, it would be to lower the burden.

Trolling (again) aside, my point was simple. If you look at the economic predictions that were used to justify the tax cuts, you will see that they came true.

Prediction: Lowering income taxes will actually increase tax revenue.

Outcome: Income tax revenue decreased while corporate tax revenue increased. This was followed by an increase in tax refunds and later, an increase in income tax receipts.

Prediction: The deficit will improve not get worse.

Outcome: It did get worse before it got better, but that is o.k. because of the corresponding interest rates. Now it is trending towards the prediction, which is what we want to see (i.e. deficit below projections).

Could something else have caused the recent economic growth?

Sure.

But by admiting to this you have to also admit that the outcomes followed predictions close enough that it is entirely possible that this was the result of the cuts.

I have no problem discussing this further, but not in the manner in which you presented yourself here.

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Scipio

The whole premise of this thread seems to be a simple piece of evidence gleaned from the first paragraph or so of the linked article from May of 2004:

http://www.cbo.gov/showdoc.cfm?index=5417&sequence=0

Here's the one from July, which references data from May:

http://www.cbo.gov/showdoc.cfm?index=5623&sequence=0

All it says is that revenues were slightly higher than expected. Is this an example of "supply side economics working?" You're arguing that these small revenue increases were caused by a somewhat lower marginal federal income tax rate. That need not be the case. These increases can be attributed to a variety of things beside the theoretical supply side mechanism.

Quite simply, you're ignoring the obvious in order to advance a theory you like. It would take nothing more than the inherent unpredictability in the economy (and the real world) to cause the difference in numbers.

Here's a good graf that sheds some light on what the CBO believes is happening (from the May data posted above):

1. Income went up more than expected. Why? We don't know, and they don't seem to either. As noted above, to show that tax decreases have increased revenues, you'd have to know how much would have been collected w/o the tax cuts. (Moreover, many supply siders believe that tax cuts cause so much economic growth that more taxes will be collected at a lower rate than would have been collected had the higher rate been maintained; I doubt that this is true, and even if it were, I doubt it)

2. The effective tax rates on that income (corporate income) were higher than expected.

http://www.ftmarketwatch.com/diction..._tax_rate.html

This means that the ratio of tax payed to amount of income taxable went up more than expected. I'll take their word for it.

3. More taxes were actually paid (I'm guessing this means that fewer companies cheated on their taxes).

So, I'm going to come back to the claim: supply-side economics is working. You haven't given a prima facie case that this is true. I feel that that has been satisfactorially demonstrated. All we can do now is wait for someone else to try and support this claim with new evidence. The current CBO reports are clearly inadequate.

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KMA-628

read my second to my last paragraph, I have no desire to repeat myself over and over

Did I say that my conclusion was 100%

No.

Is it possible that my conclusion is right.

Yes.

Offer up a better reason than less people cheating on their taxes and I would continue the discussion.

Otherwise, what is your point?

Do you have to be contradictory to everything stated?

Like I said, more than once. You have predictions. The outcomes were very similar to the predictions. It is not 100% but it is possible to come to the conclusion that the closely matched predictions may have been right.

If you actually paid attention to my post you would know that:

a) I pull from the entire article. What is your point about gleaning info from one paragraph. You say this but it isn't even remotely accurate. Does it make the argument easier for you if you cheapen the debate?

b) You talk about income going up and nobody knows why. How did you add to the debate by making this statement? Other than looking for an argument, what is your point? Let me see, "I don't know why this happened but since I disagree I am just going to say that you are wrong and say that I have demonstrated this. I wouldn't want to cloud this discussion with any meaningfull information. No, I think I don't know why is the best answer."

c)OMG, this information and other information came from a different paragraph. Now that I am thinking about you early comment. Why post something so blatently false? Why make a silly comment like that when it is easy to prove that not only is the comment out of line but it is a useless way to denegrate the argument?

d) I dunno. I will have to do some research on your "cheating" theory. It sure sounds a lot better and more informative than mine.

and...

by merely stating, at the end of your post, that nothing was demonstrated, you prove nothing, absolutley nothing.

Especially when you start you argument with false comments and assertions and end your comment with the brilliantly quoted theorem: Less cheating is the answer to increased tax revenue after tax cust have been implemented.

I will send word to Laffer, Wanniski and Mundell right away.....

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Kadath

I find myself thinking back to the last few times supply-side has been touted as working, and it usually took more than four years.

It comes back to the fact that no one knows what's fixing things because people are so damned unpredictable. Economics is a voodoo science to start with. We should be happy if things are on an upturn, and it'll look good for the administration that's around when it happens.

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onetime2

Actually it supports my viewpoint in only a cursory manner. Put simply, when the economy grows (almost without regard to the reason) the government takes in more money. I didn't debate it because we've covered this ground before. The only question that was new, IMO, was if people were aware of the latest news about the lower than expected deficit.

But smooth, going by the typical rules of economic politics KMA is right about the fact that Bush should be making this podium pounding stuff. Since his opposition has been pounding him on the "weak" economy for the last year or more, the strengthening economy becomes a plus for the Bush campaign.

Additionally, by your own argument here, could it not also be said that we have no way of knowing how bad the economy would have been had the tax cuts not been enacted? I have my opinion (which is that they made no real difference) and others have theirs. In the end the discussions around economics on this board (and in the media in general) are way too warped around partisanship and Party agendas.

I suspect that the political reality is that Bush pointing to a "lower" deficit only draws attention to the still massive size of it. Also, it's always far easier to make something look bad in a few catch phrases than it is to explain the results of complex predictions, tax revenue projection, economic theory, etc.

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Scipio

I feel like I'm on the right track here. Your combative tone only reinforces my belief that you're imposing a theory you like onto something you've observed, and have in the process ignored a number of reasonable and perhaps more likely causes.

When I quote the CBO report for the second time, I provide their explanation of the slightly higher tax receipts. Strangely, they don't mention supply side economics working their magic. Call me crazy, but that got me thinking that you might be wrong.

Perhaps my favorite argument you've made is this (I summarize):

If you deny that supply side economics has caused the increase in revenues, you necessarily concede that an increase happened. This opens up the possibility that supply side economics has caused the increase.

More precisely, here's what you said:

What, then, were the predictions? Tax cuts will strengthen the economy? Sounds like a vague prediction to me. If all it takes for this to come true is tax cuts and economic growth, its value as a prediction is practically zero. Saying the economy is going to grow is kind of like saying the sun is going to rise in the morning, or that Americans will celebrate Christmas on Dec. 25th.

That leaves us with the errors in the predictions made by the CBO.

Though some might raise their eyebrows when an economic prediction turns out to be incorrect, a rational observer is bound to realize that the economy is unpredictable, and that our predictive capabilities are often unreliable.

In short, as noted above, although it's possible that supply side economics is working, the evidence shown to prove it is clearly inadequate.

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KMA-628

That is all I was getting at.

I never said the only reason, I said a reason.

BTW the comabtive tone was on purpose as this was getting tiresome.

It took all of this for you to say the above quote. Why make it so hard?

plus, your re-quote of my statement didn't really work for me. As I read your wording my only thought was, "I didn't write this?!?!" Then I saw what you were trying to paraphrase. I still don't think you understood what I was trying to say.

Anyway, the above quote was what I was getting at so I am happy.

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Scipio

For what it's worth, when I say it's possible, I mean only that I lack the evidence to disprove it. I'm no expert, and I'm not even a savvy layman with some good facts handy. I just plain don't know. If that level of certainty makes you happy, then so be it.

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"Erections lasting more than 4 hours, though rare, require immediate medical attention."

Nizzle

KMA - Off topic, but I believe you are abusing the word "troll." One who disagrees with the basic premise of your earlier stated argument does not a troll make. Making bogus inflammatory statements intentionally to cause trouble does.

Your first post is clearly stating that supply side economics "works," and you provide a link which apparently proves this lofty claim. Expect to be disagreed with and deal with it.

Truly, Godwin's law should also state that declaring another person a troll when they disagree with you to be as much of a thread-ender as invoking Hitler.

Cheers!

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Nizzle

shakran

you know, i was reading through this thread (ignoring the stupid little troll war at the end) and I must say, W must be an amazing president.

I mean, despite the fact that KMA-628 is crediting the economic policies of Mr. Bush as the factors behind the economy's "upturn" (more on that later), the largest economic boom in recent memory, under Clinton, was credited to Bush's dad. Why? Because, the republicans said at the time, a president's fiscal policy takes at least 8 years to have a measurable effect on the economy. Now, if we're to take that ludicrous notion at face value, then Bush is certainly not responsible for what the economy is doing now since he hasn't even been in office 4 years. How is it that when the economy is genuinely good under a democrat, it's credited to the republicans, and when the economy is bad under a republican (see earlier in Bush's term) it's blamed on the democrats, yet when the economy is "good" under a republican, it's the republicans' brilliant leadership.

I'm not sure what's more sad - the fact that they actually believe the American people are stupid enough to swallow this twisted, bullshit logic, or the fact that their belief is correct.

As for the economy being good, that is a load of crap.

Don't tell me about jobs being added because so many were taken away due to the crappy economy that Bush brought about that at the current rate we'd be decades replacing them all. I mean, if I stole $1,000 from you and then gave you 50 cents, would you really be grateful about it?

The debt continues to climb, and Bush himself has said he doesn't care - "I don't care about the deficit, I care about jobs."

Just because the deficit isn't as bad as predicted doesn't mean things are great. If I'm diagnosed with prostate, lung, skin, and liver cancer, and the doctor later tells me that I don't really have skin cancer, I'm still just as dead.

supply side economics is a moronic concept that cannot work. Let's reduce our income, and increase our spending, and we'll get rich. It's such a load of utter crap that it astounds me people still believe in it. Look, you guys had 12 years to try it out under Reagan/Bush and it never worked, yet you keep pushing it. Hell even rats in mazes are clever enough to try a different passage when they keep hitting a dead-end in the one they're in.
The system is just like communism - looks great on paper but the theory fails utterly to take into account human nature. Communism failed not because the idea of everyone sharing equally was bad, but because humans are by and large assholes, and a select few decided they wanted to be more equal than others. Supply-side (I like the name Bush Sr. gave to it before he changed his tune to become Reagan's VP candidate - Voodoo Economics) says that we'll let the rich keep most of their money, they'll invest it, the places they invest it will hire more people, and the money will trickle down to the unwashed masses. Aside from the fact that it's an appallingly classist system, it relies on the idea that the rich guy will invest his money instead of buying that new porsche. It also relies on the idea that companies will take that money and hire more people with it rather than buying more robots to do the same job. Unfortunately, this isn't a fairy land, it's the real world, and in the real world, with real money, voodoo economics simply can't work for any but those who are already rich.