Caveat Emptor: I am responding to Montegue's post solely in the realm of mainstream economic thought. That is to say, I am responding as the majority of high profile, publicly known economists would respond and read his arguments. That said, despite my general dislike of Wikipedia, Montegue seems to have invoked it as a viable source. I'll make use of Wikipedia in the same manner he has for obvious reasons.
Monte wrote:
Khross - I assume you understand the concept of the Laffer curve.
If by
Laffer Curve you mean "a theoretical representation of the relationship between government revenue raised by taxation and all possible rates of taxation;" then, yes, I am. However, I'm not sure why you're invoking the Laffer Curve, as the Laffer Curve is a thought experiment rather than a practical experiment or empirical observation; that is to say, the Laffer Curve is a apparatus by which we can visualize various relationships between taxation and revenue given various assumptions but which produces no useful concrete valuation for optimum taxation in and of itself. Of course, Laffer's work deals with various economies and political economy structures. It indicates that, realistically, this optimum revenue value (that is to the say, the point of
Strong Pareto Optimum in the taxation value schema)occurs when the real value of services produced and provided by the government produces a possible year-to-year zero-sum budget and yields the maximum amount of taxation revenue possible for that government. However, the important thing to understand here is that the Laffer Curve for the United States is not the Laffer Curve for Sweden nor the Laffer Curve for China or Japan or Zimbabwe or Chile or the Former Soviet Union. And Laffer Curves, because they are relational concept constructs, as opposed to practicable real value engines, also change year to year or even quarter to quarter. Laffer Curves are not static things that provide specific points of data.
That said, we're speaking about the United States and the political and economic history of the United States. To that end, any discussion of the Laffer Curve, either practical or conceptual, means we have to consider
Hauser's Law: "In economics, Hauser's Law is an empirical observation that, in the United States, federal tax revenues since World War II have always been equal to approximately 19.5% of GDP, regardless of wide fluctuations in the top marginal tax rate." Basically, no matter what Uncle Sam does to the rate of taxation in the United States, the amount of personal income taxes paid remains mostly static. As practically applied to the Laffer Curve, Hauser's Law dictates that in years in which tax revenues fall by any significant measure (relative to GDP), that the tax structure was not at the SPO point for that year's Laffer Curve. This information, however, can only be determined retroactively and provides no useful material for policy going forward. Consequently, why is it that you invoke the Laffer Curve when it indeed has very little to do with the rest of your post? What connection is it you want to make here?
Monte wrote:
I assume you know that Krugman is intensely critical of Supply Side economics. I assume you are familiar with the history of Reagan's presidency, his record deficit spending, his supply side advisors and his massive tax cuts. I assume you know the order in which these things occurred. I don't understand why you're objecting to what I'm saying.
Yes, I know what Krugman's biases and critiques of various economic models happen to be. Yes, I know the history of Reagan's presidency and various economic policies of that President. Those two things, however, are immaterial to the questions I have asked. I am interested in the argument you are making. I have asked for sources on said argument, including the editorials, blog posts, and other textual evidence that have led to said argument so that I might read them. The things you are saying, in this very thread, are curious. They are neither mainstream, in the sense of heterodox mainstream economics (where Krugman falls); nor, are they common knowledge, in the sense that these are the lessons of political economy, political science, behavioral economics, and government economic research as they are taught. Now, it's very well possible you have stumbled onto a new line of reasoning among pundits and researchers that hasn't made it into the journals I read, yet. It's possible this thinking is your own. I'm not sure which. Consequently, I want to read the sources that have led you to these opinions. And to that end, it's not an objection as much as it is a query for understanding.
Montegue wrote:
There is no doubt that in the 80s, candidate Ronald Reagan was advised that the best way to stimulate growth, and maintain revenue and spending levels was to severely cut taxes across the board. The idea being that we could maintain current levels of spending by cutting taxes because economic growth would cover the costs.
There are several problems with this statement.
1. What do you mean by "we could maintain current levels of spending"? The "we" in this sentence is problematic, because it has no established antecedent. Do you mean "we" as in the entirety of the United States economy, including consumer spending, government spending, corporate spending, production spending, deleterious spending, etc.? Or, do you mean "we" as in "the U.S. Federal Government" alone?
2. Assuming you mean "we" as in "the Federal Government," then Hauser's law indicates that personal taxation rates have very little effect on the amount of revenue generated as a matter of how things actually happened. Consequently, cutting tax rates merely shifts the distribution of taxes collected as opposed to altering the total amount of taxes collected. And to that end, the argument is correct. Assuming there is no increase in spending, then lowering taxes across the board produces similar, that is to say functionally identical within a very small window, revenues for the U.S. government as raising taxes. Hence, the problems with your invocation of the Laffer Curve as it applies to the United States: raising individual income taxes, at any point, doesn't in practice produce more money for the government. Nor, for that matter, does lowering taxes reduce total revenues. The causal system is, consequently, irrational by the measures you have put in place. Neither Reagan's Tax Cuts nor Bush's Tax Cuts actually had the impact you're claiming. The system cannot be said to behave as you have claimed because it does not behave as you claim. To that end, you will need to reconcile your position vis-a-vis Hauser's Law and demonstrate how you have done so.
Now, I should note that irrational, in this sense, does not mean irrational as in the behavior of psychosis or outside the bounds of logic. Irrational in this sense is irrational in the sense of undefined and unknowable variables in a complex structure.
3. If you mean "we" as in the system in general, then the situation becomes vastly more complex than limiting said spending to the government: it becomes an issue of aggregating microeconomic realities into a collective understanding of what happened without attempting to homogenize the data or realities retroactively. To that end, one must invoke progressive (in the mathematical sense) as opposed to regressive (in the mathematical sense) models of behavioral economics. And that alone is material for hundreds, if not thousands, of doctoral dissertations on the subject of political economy during the Reagan Administration.
4. Your argument is reductive in the sense that ignores the fluidity of the economic system. The system does not stop, that is come to an absolute halt, and evolves according to mechanisms and realities we do not currently understand. More importantly, because we're discussing macro-economics, we need to negotiate the epistemological problems with top down explanations for quantum systems. And, quite honestly, that's a level of applied mathematics I'm simply not comfortable with discussing at length on these forums. Philosophically speaking, I can use it to illustrate some of the inherent flaws in current macroeconomic methodology, but even then the math makes Krugman's Nobel work look like second grade arithmetic. And because we're talking about something that ultimately hinges on behavioral psychology and behavioral sociology for explanation at the point of action, the math is currently beyond the collective knowledge of the human race.
Nevertheless, Reagan's administration did not happen in a vacuum, nor did it leave Bush's administration some
tabula rasa state in which to recreate or build a new economy. Rather, the system continues to move, change, and behave even without the externalities created by government, corporate, or individual action to regulate it. It is, in this sense, truly organic (again a consequence of being a system comprised of organic entities behaving in organic manners that may or not may be subject to any homogenizing rules). Now, we can assume, at least based on observational data, that there are realities and patterns within the system which behave something like Newtonian Mechanics relative to Quantum Theory or Relativity.
That said, we need to establish what you think the situation was when Reagan took office and why you think he adopted the policies he did. I will note that George H.W. Bush inherited a recession from Reagan, as Reagan did from Carter, and Clinton did from George H.W. Bush, and George W. Bush did from Clinton, and Obama did from George W. Bush.
Monte wrote:
In fact, his primary opponent and future VP called Reagan's theories voodoo economics (he would later adopt them in order to secure his party's nomination for his own bid for the White House).
A lot of economics are voodoo in any sense you will use the term. In fact, Keynesian theories remain primarily voodoo despite your stated adherence to them. Consequently, it is time to look at the terms Demand-Side and Supply-Side as they apply to schools of political economy and policy directing thought. And, as a bonus measure, we'll throw in Trickle-Down Economics, because there is an obvious conflation or misprision in your assumptions about how these things worked, which policy models and assumptions were made during the Reagan Administration, and exactly what happened.
Supply-Side EconomicsQuote:
Supply-side economics is a school of macroeconomic thought that argues that economic growth can be most effectively created by lowering barriers for people to produce (supply) goods and services, such as adjusting income tax and capital gains tax rates, and by allowing greater flexibility by reducing regulation. Consumers will then benefit from a greater supply of goods and services at lower prices ...
Typical policy recommendations of supply-side economics are lower marginal tax rates and less regulation.[3] Maximum benefits from taxation policy are achieved by optimizing the marginal tax rates to spur growth, although it is a common misunderstanding that supply side economics is concerned only with taxation policy when it is about removing barriers to production more generally.[4]
Many early proponents argued that the size of the economic growth would be significant enough that the increased government revenue from a faster growing economy would be sufficient to compensate completely for the short-term costs of a tax cut, and that tax cuts could, in fact, cause overall revenue to increase.[5][/b]
This is an apt and basic description of Supply-Side Economics, but it's slightly lacking in one regard: it fails to mention the commodity in question. As it happens to be, we're talking about monetary policy and money as thing; that is, money itself is the commodity in question. The same holds true for Demand-Side Economics. Basically, by making money more available to spending segments of the economy, you increase the rate at which the economy grows through reinvestment and innovation. Consequently, if individuals have more money to spend, invest, or innovate with, the economy will grow based on the expansion of available capital. It's simply a different way of looking at the supply/demand curve for money than Keynes used. And, to that end, they are far more similar than you might imagine. But, we're not actually talking about Supply-Side Economics, because the policies coming out of the Reagan Administration were Keynesian:
Quote:
Today, supply-side economics is often conflated with the politically rhetorical term "trickle-down economics", but as Jude Wanniski points out in his book The Way The World Works, trickle-down economics is conservative Keynesianism associated with the Republican Party.[2]
You are, in effect, conflating two different terms in an effort to give legitimacy to an argument you don't understand. Supply-Side Theory maintains that the market will create growth in the absence of intrusive regulation and burdensome tax policy. That, in effect, monetary policy generally causes more harm than good because it prevents the economy from reinvesting significant portions of GDP into itself. As such, the monetary policy of Supply-Side Theory is only conservative in the sense that it minimizes the government and public sector role in the Supply of Money.
Demand-Side Economics: John Maynard Keynes
Keynesian EconomicsQuote:
Keynesian economics (pronounced /ˈkeɪnziən/, also called Keynesianism and Keynesian theory) is a macroeconomic theory based on the ideas of 20th century British economist John Maynard Keynes. Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and therefore, advocates active policy responses by the public sector, including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle.[1] The theories forming the basis of Keynesian economics were first presented in The General Theory of Employment, Interest and Money, published in 1936; the interpretations of Keynes are contentious, and several schools of thought claim his legacy.
Keynesian economics advocates a mixed economy—predominantly private sector, but with a large role of government and public sector—and served as the economic model during the latter part of the Great Depression, World War II, and the post-war economic expansion (1945–1973), though it lost some influence following the stagflation of the 1970s. The advent of the global financial crisis in 2007 has caused a resurgence in Keynesian thought. The former British Prime Minister Gordon Brown, President of the United States Barack Obama, and other world leaders have used Keynesian economics to justify government stimulus programs for their economies.[2]
According to Keynesian theory, some microeconomic-level actions – if taken collectively by a large proportion of individuals and firms – can lead to inefficient aggregate macroeconomic outcomes, where the economy operates below its potential output and growth rate. Such a situation had previously been referred to by classical economists as a general glut. There was disagreement among classical economists (some of whom believed in Say's Law – that "supply creates its own demand"), on whether a general glut was possible. Keynes contended that a general glut would occur when aggregate demand for goods were insufficient, leading to an economic downturn with unnecessarily high unemployment and losses of potential output. In such a situation, government policies could be used to increase aggregate demand, thus increasing economic activity and reducing unemployment and deflation.
Keynes argued that the solution to the Great Depression was to stimulate the economy ("inducement to invest") through some combination of two approaches: a reduction in interest rates and government investment in infrastructure. Investment by government injects income, which results in more spending in the general economy, which in turn stimulates more production and investment involving still more income and spending and so forth. The initial stimulation starts a cascade of events, whose total increase in economic activity is a multiple of the original investment.[3]
A central conclusion of Keynesian economics is that, in some situations, no strong automatic mechanism moves output and employment towards full employment levels. This conclusion conflicts with economic approaches that assume a strong general tendency towards equilibrium. In the 'neoclassical synthesis', which combines Keynesian macro concepts with a micro foundation, the conditions of general equilibrium allow for price adjustment to eventually achieve this goal. More broadly, Keynes saw his theory as a general theory, in which utilization of resources could be high or low, whereas previous economics focused on the particular case of full utilization.
There's really little reason to dispute this description of Keynesian Theory, but practice is entirely different model entirely. Nevertheless, Demand-Side Economics is synonymous with Keynesian Economics. The basic argument is that in the event of macro-economic inefficiency, Government action is taken to correct the aggregate outcome of micro-economic transactions. Practically speaking, this is problematic for several reasons: 1) you can't homogenize entire states or counties in the United States, much less the entire nation; 2) deficit spending is trickle down economics, which you believe to be widely discredited; 3) the measures used for national and global aggregation don't account for the literally thousands of variables in individual and small group behaviors that ultimately drive the economy of any given place. And, that third point is key because you see it evidenced in mainstream media and economic reporting all of the time. Certain communities exist in the extremes of national homogenization all the time, such as the Latin Communities in Detroit which are experiencing double digit growth and economic expansion despite the absolutely devastating state of that City itself.
That said, the fundamental problem with Keynesian Economics is that it literally puts the cart before the horse: there cannot be demand for anything until such a thing has been supplied. Even if we restrict our discussion to strictly economic policy, the demand for money is a factor of the demand for all other goods, services, and sinks in the economy. The political economy of Keynes becomes problematic, at this point, because policy that seeks to correct the inefficiencies of natural behaviors creates unnatural and untenable situations.
For example, the current state of "national" housing markets in the United States. The supply of housing currently outstrips demand by a significant margin. Basic economics, as in the Law of Supply and Demand, indicates that an excess of supply will drive up demand while consequently pushing down the transaction value of a given commodity. This is what results in S/D Curves. That said, an excess of supply or an excess of demand both constitute micro-economic inefficiencies. If these same inefficiencies appear in enough local and regional markets that they can be said to form a pattern, they aggregate into a macro-economic inefficiency. Currently, housing is in the state of macro-economic inefficiency for a wide variety of speculative, policy, and monetary reasons. Indeed, it is a complex situation, but the American housing market is well outside the bounds of a normative Supply and Demand Curve. Nevertheless, it's a perfect example for the problems invoked by thinking in terms of Supply Side and Demand Side Theories of Economics.
If Keynes is correct, then the glut of supply is a response to initiatives that increase demand. Consequently, the significant number of guaranteed loans provided to high risk borrowers through government agencies are an integral part of the problem. By stimulating demand in an economic sector previously incapable of breaking into a specific market, government action caused a problematic and deleterious rise in supply. Investors and speculators, seeing opportunities for monetary gain in two markets (credit and housing) pushed supply up to meet newfound demand without considering the sustainability of that demand. And, while I'm sure some of the individuals with access to housing because of this policy worked out, a significant enough number were higher enough risk that the credit market found itself inundated with loans that won't bear fruit. (This gets compounded by an emerging market for long term, low risk investments created by the declining viability of U.S. government bonds, but that's not really important here). 20 years later, the Demand Tables have stabilized but the macro-economic inefficiency still exists, and mostly so because the government created that inefficiency in the first place. There are now too many houses for buyers and too much property in circulation. The external pressure of demand side policy has subsequently devalued and deflated the primary individual investment vehicle for the United States based, fundamentally, on a misguided moral principle.
Now, I get that everyone should own a home and have a reasonable opportunity to do so, which is the state that the housing market existed in during the late 60s and early 70s. But that should, that moral/ethical reality should not be encumbered by policy which attempts to extend that reality to those individuals who will not take on the investment in good faith. Nevertheless, the Housing Market is a failure of Demand Side Economics. It is a failure of policy to correct a macro-economic inefficiency by creating a larger and more deleterious inefficiency.
Hopefully, though, we've established a point at which the basic definitions of both Supply Side and Demand Side as used in economic texts and classes are implemented today. That is to say, whether you agree with my examples or not, you understand the terms you've invoked as Paul Krugman or Tyler Cowen or Megan McArdle or Nouriel Roubini might use them.
But, it gets a little more complex, and for a full understanding Keynes, we need to turn Marx: yes,
Karl Heinrick Marx of
Communist Manifesto and
Das Kapital fame. In particular, we want to look at Marx's contribution of the
Labor Theory of Value primarily developed by David Ricard and Adam Smith. And, I admit that here it gets a little heady simply because Marx's application is far more Hegelian than economic, but speaks to the issues of the Twentieth Century. Namely, with the advent of the time clock, minimum wages, and income taxation, our government exerts enormous marginalizing pressures on the fundamental economic commodity: Labor. Indeed, money in the United States represents the exchange value of Labor (see Marx), which is why Keynesian economics become problematic at the macro economic levels. Policies which increase the demand for labor while simultaneously marginalizing its exchange value create deflationary pressures that continually depress that value of labor vs. the goods and services it is used to acquire. Going back to the explanation of Keynesian economics, this reality makes impossible the goal of full employment. Consequently, you can never have enough demand for labor to meet the supply. When coupled with other various external shifts, this creates the broader economic difficulties of the last 50 years. Needless to say, current attempts to increasing taxation and spending ignore the fact that labor supply relative to jobs has increased, that education relative to population has increased, that wages relative to hours worked per household have fallen 60%. Were Demand-Side economics correct, then the government intrusions of the last 50 years should have yielded some sort of economic utopia based on real wealth and real innovation during the Clinton Administration (and don't read that as any critique of Clinton's policies, because it's just a temporal marker). But it did not, rather we're now facing a series of demand driven bubbles and supply over-corrections encouraged by the very Keynesian policies of every president post-Eisenhower.
So, with the basics established, I'll deal with the following:
Monte wrote:
I assume, Khross, that you know full well just how much Reagan ballooned the deficit while he was in office.
Except, deficit spending isn't a hall-mark of Supply-Side Economics. It's a distinctly Demand-Side mechanics that assumes the market will naturally correct an artificial inefficiency with real equilibrium. More to the point, it ignores the one thing Keynes was spectacularly accurate about: Governments must take austerity measures with regard to their own debts during periods of growth. That is to say, if governments do take action to pay back their debts incurred, Demand-Side policy will simply cascade into a series of growing inefficiencies. Reagan's policies were two-fold: 1) increase the supply of money available to actual economic actors; 2) increase demand for labor by spending money in various defense and education driven sectors of the economy. Indeed, it is this odd conflation of Krugman and many others that fail here: Reagan did not unilaterally approach the economy from one point or the other. Rather, like Supply-Side Theory suggests, Reagan made capital available to more people. And, like Demand-Side Theory suggests, he increased the demand for labor. And, at least in the short term, it worked. But, again, like every President I've mentioned in this thread save one (Eisenhower), the total government at that time ignored the Debt Accumulation Problem. More to the point, because macro-economics at the policy level is reactive, at best, governments will almost invariably overshoot the equilibrium point of their measures except by mistake. Consequently, Supply-Siders hold (and this is actually rather true) that the inefficiencies created by natural micro-economic behavior are preferable to the inefficiencies created by over-intrusion on the Demand-Side by government behavior.
Monte wrote:
Krugman had many things to say about the bunk that is supply side economics. I assume you must know that, too. Among those things were -
Paul Krugman wrote:
The specific set of foolish ideas that has laid claim to the name "supply side economics" is a crank doctrine that would have had little influence if it did not appeal to the prejudices of editors and wealthy men
Paul Krugman wrote:
"When Ronald Reagan was elected, the supply-siders got a chance to try out their ideas. Unfortunately, they failed."
Despite being sound bites, neither of these states are actually meaningful in any economic sense. The first is Krugman being Krugman, which is to say, it is Paul Krugman making moral declarations based on politics as he thinks they should be, not economics as they happened. More to the point, the economy recovered, the End of Reagan's Presidency was not nearly as problematic as the Carter Administration, and George H.W. Bush's Recession was relatively mild all things considered. Now, there was a whole lot going on during that period, but Supply-Side policy and Demand-Side policy had a lot less to do with the total picture than Krugman will admit. Moreover, since George H.W. Bush's tax increases immediately pushed a labor recession in the United States that didn't recover until Clinton's Second Term, how exactly did Demand-Side prevail? Now, I know that Krugman is smarter than those soundbites make him seem, but your argument, Montegue, fails to address the complexities of the system and accepts bare assertions as reality.
Monte wrote:
Wiki wrote:
Krugman and other critics point to increased budget deficits during the Reagan administration as proof that the Laffer Curve is wrong. Supply-side advocates claim that revenues increased, but that spending increased faster. However, they typically point to total revenues[28] even though it was only income taxes rates that were cut while other taxes, notably payroll taxes were raised.[29] That table also does not account for inflation. For example, of the increase from $600.6 billion in 1983 to $666.5 billion in 1984, $26 billion is due to inflation, $18.3 billion to corporate taxes and $21.4 billion to social insurance revenues (mostly FICA taxes).[30] Income tax revenues in constant dollars decreased by $2.77 billion in that year. Supply-siders cannot legitimately take credit for increased FICA tax revenue, because in 1983 FICA tax rates were increased from 6.7% to 7% and the ceiling was raised by $2,100. For the self employed, the FICA tax rate went from 9.35% to 14%.[31] The FICA tax rate increased throughout Reagan's term, jumping to 7.51% in 1988 and the ceiling was raised by 61% through Reagan's two terms. Those tax hikes on wage earners, along with inflation, are the source of the revenue gains of the early 1980s.[32]
Again, this quote is both misquoted and mis-stated for the purpose of this thread. First, it ignores Hauser's Law, which indicates that any revenues from taxation, including payroll taxation, remain in such a nominally small window as to be constant relative to GDP. Second, it attributes to inflation gains that the sources don't otherwise index to non-real gains. That said, it also creates the impression that Reagan increased taxes on the poor while providing shelters and breaks for the rich. But payroll taxes affect everyone uniformly; indeed, the only reason payroll taxes are constitutional is their uniformity of application. Nevertheless, a true demand-side argument against the Reagan Administration would suggest that increasing uniform taxation relative to spending should simultaneously push up wages, push up employment, and drive down deleterious economic effects. That, in point of fact, the entire segment you just quote was the appropriate course of action and success by the Reagan Administration. Rather, however, it is presented as a critique of Supply-Side Economics because it demonstrates a disconnect between the intended consequences of action (Government push to correct) and the economic reality. And, once again, it persists in the erroneous conflation of Trickle Down Economics with Supply-Side Economics. A careless mistake indeed for a Nobel Laureate and his colleagues. In fact, this mistake is compounded in your vaunted EPI Ad Quote:
Montegue wrote:
We can see supply side's debunking today. In 2003, ten noble laureates for economics had the following to say about Bush's tax cuts -
Fortunately you for, I'll do your homework for you on this quote ...
Economists' Statement Opposing the Bush Tax CutsThe Economic Policy Institute wrote:
Economic growth, though positive, has not been sufficient to generate jobs and prevent unemployment from rising. In fact, there are now more than two million fewer private sector jobs than at the start of the current recession. Overcapacity, corporate scandals, and uncertainty have and will continue to weigh down the economy.
The tax cut plan proposed by President Bush is not the answer to these problems. Regardless of how one views the specifics of the Bush plan, there is wide agreement that its purpose is a permanent change in the tax structure and not the creation of jobs and growth in the near-term. The permanent dividend tax cut, in particular, is not credible as a short-term stimulus. As tax reform, the dividend tax cut is misdirected in that it targets individuals rather than corporations, is overly complex, and could be, but is not, part of a revenue-neutral tax reform effort.
Passing these tax cuts will worsen the long-term budget outlook, adding to the nation’s projected chronic deficits. This fiscal deterioration will reduce the capacity of the government to finance Social Security and Medicare benefits as well as investments in schools, health, infrastructure, and basic research. Moreover, the proposed tax cuts will generate further inequalities in after-tax income.
To be effective, a stimulus plan should rely on immediate but temporary spending and tax measures to expand demand, and it should also rely on immediate but temporary incentives for investment. Such a stimulus plan would spur growth and jobs in the short term without exacerbating the long-term budget outlook.
1. You fail the mention the 14 American Nobel Laureates in Economics who refused to sign this ad.
2. The ad is sufficiently vague that it fails to mention that George W. Bush increased the taxable revenue caps for FICA and Social Security withholding.
3. The ad fails to mention that the tax cuts in question would not produce any substantive reduction in revenues pursuant to Hauser's Law.
4. The ad fails to mention that real discussions about over-employment and over-saturation of service industry markets have been a real topic of Economic discussion for the last 20 years.
5. The ad fails to make any address of the Debt Accumulation Problem.
Retrospectively speaking, nothing in the ad came true in any real sense you want to suggest. Labor growth during the 2003-2008 period was neither anemic nor hyper; in fact, the U.S. saw increases in domestic production of durable goods and jobs available in the sector for the first time in nearly 30 years. But, we're in a Depression now, right? So those 450 economists who signed that full page ad must have been correct? Bush's Tax Cuts are responsible for what we're facing now? I mean, that's what you contend here right:
Monte wrote:
There is no doubt that their position was spot-on. The Tax cuts did not stimulate our economy in any meaningful way. In fact, it ballooned our deficit even further and did not increase overall revenues to compensate, nor did it cause significant or even very measurable growth. Bush's tax cuts were just a continuation of the already debunked policies of the Reagan administration. Lowering taxes might help with growth, but it does not do what the supply siders claim it does - it does not replace and increase overall revenue via new business tax income and income tax revenue.
Now, for the sake of argument, I'm going to accept that Clinton's Budget Balancing Maneuver is valid; that is, shifting FICA and SSI revenues into the General Fund constitutes legitimate accounting (we're not arguing whether it does or doesn't here) ... as,
this CBO data indicates that the Federal deficit decreased every year after 2004 when the 2003 Tax Cuts went into effect, despite your claims otherwise"
Code:
Year Revenues Outlays On-Budget SS Total
------------------------------------------------------------
2001 1,991.4 1,863.2 - 32.4 163.0 128.2
2002 1,853.4 2,011.2 -317.4 159.0 -157.8
2003 1,782.5 2,160.1 -538.4 155.6 -377.6
2004 1,880.3 2,293.0 -568.0 151.1 -412.7
2005 2,153.9 2,472.2 -493.6 173.5 -318.3
2006 2,407.3 2,655.4 -434.5 185.2 -248.2
2007 2,568.2 2,728.9 -342.2 186.5 -160.7
In fact, if we look at these numbers in earnest, you can see that despite starting two wars, wherein the deficit accounted for initial and ongoing costs, George W. Bush reduced the deficit every year from 2003 forward. More to the point, his increases in payroll taxes bolstered Social Security surpluses and reserved funding. So, in what reality, are the statements in that ad true? Because we're in a depression now?
All of this said, I have one question for you: Do you know what the Debt Accumulation Problem is?
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