Would like an explanation of how supplyside economics works.

When did I ever claim that tax cuts don't stimulate the economy? I'm merely asserting that tax cuts to the working class would do just as much good if not more.

In addition, it's kind of stupid how you credit the economic boom of the 90s to Reagen though it occured five years after he left office. The boom actually occured after Bush Sr. increased taxes. There are a huge multitude of other reasons that fueled growth in the 90s.

Globalization, the fall of the USSR, Internet, all of these had little to do with Reagen's tax cuts. and they all contributed to our economic growth as did many other factors that had little to do with tax cuts.

Let's get back to your claims that supply side economics isn't primarily money given to the rich. How do you explain who Bush's tax cuts mostly wen tot then.

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Centroles wrote:

In addition, it's kind of stupid how you credit the economic boom of the 90s to Reagen though it occured five years after he left office. The boom actually occured after Bush Sr. increased taxes. There are a huge multitude of other reasons that fueled growth in the 90s.

You're right. It would be stupid to credit Reagan which is exactly why I credited Clinton's 1993 Economic plan above. You've got yourself so convinced that you've got the answers you don't even bother to read what people post.

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fishin' wrote:

Bill Clinton's 1993 Economic plan was targeted supply side economics and I don't think you can rationally argue with the results.

Has it come to this? Have the supply-siders, after spending years trying to figure out why the Clinton era was marked by general prosperity and disappearing federal deficits and higher taxes, finally concluded that Clinton was a supply-sider too? Have they reasoned that, if supply-side economics works, then anything that works must be supply-side economics?

Really, the pure, unalloyed audacity of this conjurer's trick, the Orwellian magnitude of this falsehood, leaves me in awe.

(slight pause, polite golf clap, proceed)

Truly, I congratulate the person who came up with this stunning volte face -- was it you, fishin', or are you merely relying on someone else's argument?

Unfortunately, many supply-siders have failed to get the message that Clinton was a member of their club. Jude Wanniski (mentioned in the Wikipedia article you linked, fishin', as a prominent supply-sider) is, I think, less than convinced. One commentator nicely sums up the disjunct between the supply-siders' predictions regarding the Clinton tax hike and the actual results:

At the time of the passage of the deficit reduction plan, supply-siders critics of the package argued that the increase in tax rates would: 1. Push the economy into a recession and reduce long-term growth. 2. Increase the budget deficits as individuals would reduce their labor supply and savings would be reduced. 3. Increase real interest rates because of the increase in deficits. The effects of the deficit reduction plan turned out to be very different from the dismal prediction of supply siders: 1. The budget deficit fell from 290b US $ in 1992 (4.9% of GDP) to 104b US $ in 1996 (1.2% of GDP). The debt to GDP has started to fall after having continuosly increased since 1978. 2. The economy boomed in 1993 and 1994 after the 1990-91 recession and the economy grew at solid an average rate of 2.8% in the 1992-96 period. 3. Real interest rates have remained stable (they are at 2% in 1996 at the short-end of the maturity structure) and significantly lower than the high rates of the 1980s (5% in real terms).Clearly, supply-siders in 1993 didn't view Clinton as an intellectual companion; they viewed him as the enemy.

And rightly so: Clinton was not a supply-sider, and the 1993 economic plan was not an example of supply-side economics, targeted or otherwise.

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Income tax cuts apply to income, not wealth. So the fact that some rich people say that they do not need a tax cut means nothing because they are not getting a tax cut on their wealth, since their wealth is not being taxed anyway,

http://www.townhall.com/columnists/thomassowell/ts20030715.shtml

And this to understand how it works:
http://www.townhall.com/columnists/thomassowell/ts20030114.shtml

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joefromchicago wrote:

Has it come to this? Have the supply-siders, after spending years trying to figure out why the Clinton era was marked by general prosperity and disappearing federal deficits and higher taxes, finally concluded that Clinton was a supply-sider too? Have they reasoned that, if supply-side economics works, then anything that works must be supply-side economics?

Really, the pure, unalloyed audacity of this conjurer's trick, the Orwellian magnitude of this falsehood, leaves me in awe.

So you deny Clinton's Economic plan of 1993 gave tax breaks to small businesses?

Quote:

Truly, I congratulate the person who came up with this stunning volte face -- was it you, fishin', or are you merely relying on someone else's argument?

Unfortunately, many supply-siders have failed to get the message that Clinton was a member of their club. Jude Wanniski (mentioned in the Wikipedia article you linked, fishin', as a prominent supply-sider) is, I think, less than convinced.

Yes she is. And you'll note that she also totally ignores the tax breaks given to small businesses in that plan.

Quote:

One commentator nicely sums up the disjunct between the supply-siders' predictions regarding the Clinton tax hike and the actual results:
At the time of the passage of the deficit reduction plan, supply-siders critics of the package argued that the increase in tax rates would: 1. Push the economy into a recession and reduce long-term growth. 2. Increase the budget deficits as individuals would reduce their labor supply and savings would be reduced. 3. Increase real interest rates because of the increase in deficits. The effects of the deficit reduction plan turned out to be very different from the dismal prediction of supply siders: 1. The budget deficit fell from 290b US $ in 1992 (4.9% of GDP) to 104b US $ in 1996 (1.2% of GDP). The debt to GDP has started to fall after having continuosly increased since 1978. 2. The economy boomed in 1993 and 1994 after the 1990-91 recession and the economy grew at solid an average rate of 2.8% in the 1992-96 period. 3. Real interest rates have remained stable (they are at 2% in 1996 at the short-end of the maturity structure) and significantly lower than the high rates of the 1980s (5% in real terms).
Clearly, supply-siders in 1993 didn't view Clinton as an intellectual companion; they viewed him as the enemy.

Ah... so lets see... A bunch of critics of Clinton who happend to be supply side advocates predicted his plan wouldn't work but it did. Ergo, it's not supply side economics... Is that you claim here?

Quote:

And rightly so: Clinton was not a supply-sider, and the 1993 economic plan was not an example of supply-side economics, targeted or otherwise.

Really? What was it then? Those tax breaks and investment credits for small business and the R&D tax credits follow the supply side theory. They come closer to Supply Side theory than they do the Keynesian (Centroles thrust here), classical, neo-classical, etc.. theories.

(EDITED TO ADD: The EIC increase in Clinton's plan probably does fit in the Keynesian model. That appears to be the only part of it that did.)

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fishin' wrote:

So you deny Clinton's Economic plan of 1993 gave tax breaks to small businesses?

Well, let's see. The Republican-dominated House-Senate Joint Economic Committee, in 1996, stated that "the Clinton tax rate increase, by targeting entrepreneurs and small business owners, undermined flexibility, innovation, and dynamism in the U.S. economy." The JEC also criticized the entire notion oftargeted tax cuts, arguing that "By artificially distorting relative prices, targeted tax rate cuts alter taxpayers' choices and disrupt the efficient operation of markets."

R. Glenn Hubbard, chairman of Bush's Council of Economic Advisors, claimed in a 2000 paper that the 1993 tax increase stifled individual entrepreneurship (follow the link on this page -- Hubbard's argument can be found on page 21 of his paper).

Now, it's true that the 1993 tax increase had some modest capital gains tax cuts, targeted at small businesses. But at the time, supply-siders clearly did not view this as an example of supply-side economics. If they do now, it is likely because of their penchant for viewing all positive economic trends as caused by supply-side economic policy and all negative trends as caused by deviations from that policy.

fishin' wrote:

Yes she is. And you'll note that she also totally ignores the tax breaks given to small businesses in that plan.

Well if she missed something as big as that then I don't think much of her as an economist. Do you?

fishin' wrote:

Ah... so lets see... A bunch of critics of Clinton who happend to be supply side advocates predicted his plan wouldn't work but it did. Ergo, it's not supply side economics... Is that you claim here?

No, I think that would be their claim.

fishin' wrote:

Really? What was it then? Those tax breaks and investment credits for small business and the R&D tax credits follow the supply side theory. They come closer to Supply Side theory than they do the Kensyain (Centroles thrust here), classical, neo-classical, etc.. theories.

Really, fishin', if you keep this up you'll be mistaken for a Clinton-apologist.

The fact that some tax policies may have benefited small businesses does not make the 1993 tax increase an example of supply-side economics, any more than the fact that Reagan raised taxes made him a Keynesian.

I suggest that you quit now, fishin'. Arguing that the 1993 tax cut was "targeted supply-side economics" is just going to get increasingly difficult as we get further into the topic.

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joefromchicago wrote:

Well, let's see. The Republican-dominated House-Senate Joint Economic Committee, in 1996, stated that "the Clinton tax rate increase, by targeting entrepreneurs and small business owners, undermined flexibility, innovation, and dynamism in the U.S. economy." The JEC also criticized the entire notion oftargeted tax cuts, arguing that "By artificially distorting relative prices, targeted tax rate cuts alter taxpayers' choices and disrupt the efficient operation of markets."

R. Glenn Hubbard, chairman of Bush's Council of Economic Advisors, claimed in a 2000 paper that the 1993 tax increase stifled individual entrepreneurship (follow the link on this page -- Hubbard's argument can be found on page 21 of his paper).

And yet, despite the claims otherwise, the number of small businesses increased every year from 1993 through 1999 and the economy flourished. It's hard to argue against proven results.

Quote:

But at the time, supply-siders clearly did not view this as an example of supply-side economics. If they do now, it is likely because of their penchant for viewing all positive economic trends as caused by supply-side economic policy and all negative trends as caused by deviations from that policy.

I doubt most of them do but I also doubt it has much to do with the theory per se. The arguments are more about politics.

Quote:

Well if she missed something as big as that then I don't think much of her as an economist. Do you?

Actually, I was rather disappointed in her paper. She also advocates a flat-tax scheme that I disagree with.

Quote:

Really, fishin', if you keep this up you'll be mistaken for a Clinton-apologist.

I've made no secret that I've been a fan of Clinton's economic policies. If that makes me a Clinton apologist so be it.

Quote:

The fact that some tax policies may have benefited small businesses does not make the 1993 tax increase an example of supply-side economics, any more than the fact that Reagan raised taxes made him a Keynesian.

Considering that the small business tax reductions and credits were the major thrust of the 1993 plan I don't see how it could be considered anything but.

Quote:

I suggest that you quit now, fishin'. Arguing that the 1993 tax cut was "targeted supply-side economics" is just going to get increasingly difficult as we get further into the topic.

It's not all that difficult joe. Did Clinton's 1993 plan focus on production or demand?

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fishin' wrote:

And yet, despite the claims otherwise, the number of small businesses increased every year from 1993 through 1999 and the economy flourished. It's hard to argue against proven results.

Your DNC membership card is in the mail.

fishin' wrote:

I doubt most of them do but I also doubt it has much to do with the theory per se. The arguments are more about politics.

Indeed.

fishin' wrote:

Considering that the small business tax reductions and credits were the major thrust of the 1993 plan I don't see how it could be considered anything but.

This is beginning to feel like a discussion with someone who claims to speak authoritatively on Catholic doctrine but who, at the same time, disagrees with the pope.

You never answered my question regarding the origins of your views, fishin', so I'll assume that your natural modesty prevents you from claiming full credit for this portrayal of Clinton as a closet supply-sider. But given the unanimous opinion of recognized supply-side economists that Clinton's 1993 tax increase was not an example of supply-side economics, I have to wonder if maybe you have missed something here.

fishin' wrote:

It's not all that difficult joe. Did Clinton's 1993 plan focus on production or demand?

Overall, or just certain "targeted" parts?

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Joe writes:

Quote:

Your DNC membership card is in the mail.

Whoa now, don't forget that GOP assumed control of both houses of Congress dujring this time and the idealistic GOP freshmen were able to push through a whole raft of reforms and initiatives. It is to Clinton's credit that he didn't throw up a bunch of roadblocks and he did sign off on almost all of them.
So the honors for success can legitimately be shared here.

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Foxfyre wrote:

Joe writes:

Quote:
Your DNC membership card is in the mail.

Whoa now, don't forget that GOP assumed control of both houses of Congress dujring this time and the idealistic GOP freshmen were able to push through a whole raft of reforms and initiatives. It is to Clinton's credit that he didn't throw up a bunch of roadblocks and he did sign off on almost all of them.
So the honors for success can legitimately be shared here.

Yes, what a difference bipartisanship makes. I am a firm believer that whenever one party has control of both houses and the executive, things tend to get out of control.

The fact remains however, that the Reagan cuts were overkill. First Bush I, then Clinton, increased tax rates on the upper income levels. The sky did not fall in. The deficit went down. The country prospered.

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I took an economics class a year ago in which we discussed supply-side economics.

The general conclusion was that they worked great - in a zero-inflation society, that is. In reality, where there IS inflation, we invariably reached the same conclusion; that the poor and lower middle class would be screwed over by it.

And, can you say that this has not been the case?

Cycloptichorn

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During the Reagan years ALL socioeconomic classes that attempted to prosper prospered. Supply side economics has been shown to generally keep inflation and interest rates low. The more the money is moved through the private sector, the more stable the economy.

In ANY economy, if the lowest class is static with no increase in income, the poorest can get screwed by regressive taxes like sales taxes. However, in supply side economics, the poor pay very little or nothing in state and federal income taxes so it generally evens out.

Bush's tax cuts for instance dropped many many thousand low income tax payers off the tax rolls altogether.

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Quote:

During the Reagan years ALL socioeconomic classes that attempted to prosper prospered.

It's statements like this which are often used to justify supply-side economics.

You see, it's apparent that this statement implies that those who didn't prosper very much in the Reagan era obviously weren't attempting to do so. Excellent job shifting the blame, there. You could have a real future in the GOP if you applied yourself, ya know.

Cycloptichorn

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And that's the truth. There were many who opted to stay on welfare than go to work. There are some who prefer to play and goof off than earn their keep. But in supply side, there are opportunities for all who want them because jobs and entrepeneural opportunities are more plentiful.

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Foxfyre, you're avoiding the issue. The question posted wasn't whether tax cuts help the economy (indeed they do).

The question was whether tax cuts that overwhelmingly go to the rich (like Reagan's and Bush II's tax cuts where over 80% of the entire tax refunds went to the top 20% richest population) under the guise of supply side economics do more to stimulate economy than if these tax cuts went to the working class and some perhaps targeted at small start up businesses like Clinton did. If you look it up, Clinton lowered taxes on the working class quite a bit too.

There is no basis for suggesting that tax cuts to the wealthy do more to stimulate the economy than if these tax cuts were given to the working class.

In deed, the fact that Clinton's relatively modest tax cut to the poor and to small start up businesses paid for by a tax hike on the rich did a great deal more to stimulate the economy than either Reagen's or Bush II's MASSIVE tax cuts that overwhemingly went to the rich strongly suggests that tax cuts to the working class and small businesses along with tax hikes on the rich would actually do more to stimulate the economy.

Ergo, supply side economics is a farce. History has already shown that demand side economics and targeted tax cuts can achieve better results even while doing the opposite of supply side theory by hiking the taxes on the rich. How by increasing demand and sales, you actually give the wealthy an encitive to build more factories, produce more products and employ more workers and actually spend all that money they have lying around. How this mechanism works, how tax cuts to the working class ensure that a larger percent of these tax cuts is reinvested directly into the economy, was well explained throughout this thread.

So does this mean that the entire basis for republican economic policy (massive tax cuts mainly going to the rich in order to boost the economy), is a faulty policy? Would a policy similar to Clinton's targeting the working class and small businesses for these cuts be a better approach. I think so.

You want to argue the facts. Then how do you argue with this. Both Reagan's and Bush II's massive tax cuts to the wealthy only produced modest gains. Clinton's tax hikes to the wealthy along with targeted tax cuts to the working class and to small businesses produce tremendous economic gain while also paying off the defecit and keeping inflation low. Shouldn't Republicans be advocating that approach instead?

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Centroles, the rich got a smaller percentage than did the middle class. Both got a larger percentage than did the poor because the poor were paying so little to begin and there was very little space between what they were paying and the zero they were paying after the tax rate cuts.

Give all the money to the poor? I believe the theory is that for economy stimulation, the best place to put the money is with the rich. The poor use windfalls to pay off their credit card debts or catch up on their mortgage whatever. That is very nice but it doesn't stimulate the economy. The money the rich used to spend, invest, or pay out in new or increased wages to people does stimulate the economy.

The middle class also used their tax windfalls to pay off debt, but they also spent and invested some of it, so it was all good.

Now for the morality of it.

Citizen A studies hard, graduates highschool, works his way through college, scratches and scrambles and pays his dues in the trenches to get very good and successful at what he does and he becomes rich. He saves money (so there is money in the bank to borrow) and he invests money (that helps business grow) and he expands his business providing employment for people in his community,
He also spends a lot of money that helps his community enormously. He is one of the rich and, while he and the rest of the rich pay at least 50% of the total taxes that are paid, he lives quite comfortably.

Citizen B finishes highschool and goes to work on a union job. There isn't a lot of growth potential where he works, but he makes a decent living wage, is able to put back a little, afford a nice home and car and raise a family. He provides a consumer base for his community and thereby contributes to its prosperity. He outnumbers the rich by several hundred to 1, but he pays the next 45% of the total taxes paid.

Citizen C drinks and does drugs, doesn't finish highschool, and has a pretty poor work ethic. He works just enough to draw unemployment insurance and spends the rest of his time drinking beer, watching wrestling on TV, or goofing off at the poolhall. There aren't as many of these as Citizen B, maybe as many as Citizen A. He pays 5% of the total taxes paid.

Now you would suggest that when it comes time to cut the tax rates, Citizen A shouldn't get any break, Citizen B and C should get it all with an emphasis on Citizen C. Where is it moral to take money from those who do work and contribute and give it to those who won't?

The rich got a smaller percentage of tax cut than did the middle class in the Bush initiative, but because they are rich that translated into a lot of dollars. It also translated into a lot of new jobs as evidenced by the much better job creation numbers following a brutal recession.

The huge lions share of the percentage of cuts went to Citizen B middle class who receive proportionately more (per taxpayer) percentagewise than what the rich received. And they are happyily spending and investing it.

And Citizen C doesn't have to pay any taxes at all any more. I sort of disapprove of that, but that's the way it worked out.

Maybe it doesn't look fair to you. It sure looks fair to me.

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Centroles wrote:

The table on this page clearly shows that the top 20% of income makers recieve 70.9% of all of Bush's tax cuts while the remaining bottom 80% only get a little 29.1% of Bush's tax cuts.

So much for your assertion that most of bush's tax cuts went to the middle class. The vast vast majority of them went to the richest of the rich.

http://www.ctj.org/html/gwbfinal.htm

Define supply side economics however you want. You can't deny the numbers. The vast majority of the money given back in tax cuts based on supply side economics goes to the rich.

So I guess there goes your defense.

Did you not total up the numbers Foxfyre?

The richest 20% of Americans got over 80% of Bush's tax cut.

There is no way that that Citizen B you mentioned falls anywhere near the top 20% of the richest Americans. He's at the very most in the bottom 60% but likely in the bottom 50%. He got jack off of Bush's tax cuts.

There really aren't nearly as many Citizen C's around as you seem to believe. And if you draw unemployment, you pay next to nothing in taxes already. No tax cut, including clinton's targeted tax cuts to the poor is going to Citizen C's in any significant proportion.

The sensible policy is to spend most of the money to pay off the national debt and ensure that the US government will remain strong and stable in the future. And of the tax cuts given, most should go to the the Citizen Bs. The people that do need the tax cuts, and that do work hard. These are the working class. These are the ones that I've repeatedly stated should get the bulk of the tax cuts, like Clinton did. This is what stimulates the economy. The citizen Cs of the world pay next to nothing in taxes anyway. How would a tax cut beneit them?

But Bush's tax cuts, Reagen's tax cuts, and just about all tax cuts that supply siders and republicans alike advocate are anything but sensible. The vast vast majority of their tax cuts always go to the rich. Such an overwhelming majority as bush's 80% of the tax cuts to the top 20% of Americans is unbalanced enough that once inflaction, rises in college tuition as a result of this overwhelming debt and the cuts that resulted, is factored in this tax cut essentially totaled up to a tax hike on the bottom 40% of Americans, the Citizen Bs of the world.

End of story

Clinton created a lot more jobs than Bush did by hiking taxes on the rich while cutting them for the working class and small businesses. After he passed these initiatives, the US economy went through an unprecedented boom. He also managed to lower the debt in the process. Bush gave out a ton more money in tax cuts, balloned the defecit all while creating a meager number of jobs compared to how many Clinton did. Of course, there were other factors involved. But there's no argueing that Clinton's method worked and worked well. Even fishin is backing up this point.

It breaks down to this. Working class people have stuff they need to buy. And when given money, they'll put it right back into the economy in order to do just that. And in doing so, they provide an incentive for rich people to build another factory or open up another store in order to make and sell these good. Rich people already have money. They already bought just about everything wanted to. They already invested in everything they felt was worthwhile. A few thousands dollars in the form of a tax refund is probably not going to convince them otherwise.

And frankly, I'm getting sick of this whole you're only poor because you deserve to be philosophy.

There are a lot of factors other than hard work that determine how rich you are: how rich your family is, where you grow up, how high an IQ you're born with, how influential your family is, whether any tragedies significantly hurt your life, whether you grew up in an abusive home or a loving one, whether you even had parents, whether you were born with physical disabilities or psychological disorders, whether or not you had to work your way through school and college, etc. and the single most important of all, pure dumb luck. Most poor people aren't druggies, alcoholics, gamblers, or lazy bums just leeching of the system. They do work very very hard and have been there whole lives just to make ends meet. So in the words of Mrs. Kerry, shove it.

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Okay Centroles. Wealth is not taxed. Income is taxed. The big refunds when to the high income earners because they paid the lion's share of the taxes. This was to the advantage of the country. You do not wish to see this or the way supply side works. I am very much NOT among the rich and I very much appreciated the cut in tax rate that helped me and my family. And I appreciate the improving job market and the booming economy that is resulting from that very cut in tax rates.

You may be a died in the wool Democrat that thinks the government ought to have the money instead of the people who earn it; that the government should dole it out as they see fit (mostly to buy votes) and they do a better job than people will do with their own money. I don't think that way. Which is why I'm not a Democrat.

Anyway, I did my best. And I wish the best to you.

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Don't tell me what I think. I'm an individual who believes that our priority one is to pay of the debt before it destroys us.

Already a huge huge chunk of our tax revenue goes into just paying the interest on this debt. Bush doesn't seem to care. He increased it by 2 billion dollars. Even before 9/11, he turned Clinton's huge surplus into a huge defecit in just a few months. Inspite of the ever increasing spending needs to fight this war on terrorism, Bush insisted on giving a huge tax break that primarily went to the richest of the rich.

In doing this, in giving so much money back to the rich and cutting funds to the states instead, Bush has increased inflation, Bush forced college tuitions to skyrocket. The measily tax cut that the working class recieved is easily negated by the additional cost they'll spend to send their kids to college, if they can still afford to.

By taking Clinton's approach, just giving tax breaking to the working class and small businesses, he could have achieved the same effect for a fraction of the cost. We could have had a booming economy without having had to ballon the defecit.

I used to like the republican party in that they actually cared about paying off the national debt. It's all but apparent that they do not.

We have the party that does not care that so much of the tax revenue just goes to paying off the debt. We have a party that does not care that this money we are borrowing will have to be paid off by our children and grandchildren. We have a party the does not care that we can't sustain ourselves as such a strong economic presence if we continue to allow the debt to ballon. We have a party that cares more about descrecrating the constitution by passing an amendment specificially to exclude a certain group of people from engaging in a loving commited relationship than about addressign the serious concerns that we are facing. We have a party that does not care about the welfare of either the nation or it's people. That is why I am no longer affiliated with the republican party.

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So the job market is booming in New Mexico, is it?
hah.

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Would like an explanation of how supplyside economics works.

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