----- Original Message ----- From: "JDG" <[EMAIL PROTECTED]> To: "Killer Bs Discussion" <brin-l@mccmedia.com> Sent: Thursday, January 20, 2005 7:50 AM Subject: Re: Kotlikoff's PSS plan
> At 09:03 PM 1/19/2005 -0600 Dan Minette wrote: > > It's true that the present budget > >deficits are very worrisome....and it bothers me that many people still > >believe in trickle down economics. > > It bothers me that people will write things like the above. Do you find > the above statement to be particularly persuasive? Actually, I was writing it as a signal > >The national debt, in real terms, went down by a factor of four between '46 > >and '80. It ballooned under the two Bushes and Reagan, > > So, what is this so-called "trickle-down" economics practiced by the two > Bushes and Reagan??? Supply side ecconomics. Let me give a definition of a supporter of this type of ecconomics: <quote> Supply-side economics doesn't work in the trickle-down model at all. It works two different ways: It allows people at all economic levels, and particularly at the top, to keep their own hard-earned money and use it as they see fit. That may mean spending it. It may mean saving it. It may mean investing it. In any of those three scenarios, the money brings more benefit to one and all than it does if the money is transferred to the government. If businesses and wealthy people keep more of their money, they are more inclined to invest it in businesses - hiring more employees, starting new enterprises, expanding operations. After all, it's the rich who tend to hire people. I don't know about you, but I've never been given a job by a poor person. <end quote> from: http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=29739 >(And in what way is this so-called "trickle-down" > economics tied to the nominal balancing of the annual budget?) By cutting taxes on upper income earners, you free them to do what they do best, grow the ecconomy. Tax receipts go up as taxes go down because these are the folks who make our country go. >As near as I can tell, your "trickle-down" economics is both tax cuts (Reagan I and > W.) *and* tax hikes (Bush I and arguably Reagan II). Once again, no matter > what Republicans do is wrong, and what Democrats do is right. Republicans and Democrats come in distributions, of course (a NY Republican is usually more liberal than a Texas Democrat), but for the most part Republicans favor lower taxes on upper income tax payers. Historically, this was to be balanced by lower governmental spending. The theory was that the upper income tax payers generate jobs with their money; they knew better than the government how to invest money, so leaving it with them was the best thing possible for all. With Reagan, Republicans dropped fiscal prudence and embraced large deficits....well not all Republicans, but supply siders carried the day. The real deficit went down until Reagan, with only short upward blips. It also went down under Clinton. Democrats, on the other hand, believed that government action represents community action. Direct governmental spending, with the New Deal and then WWII was what first kept the Great Depression from getting worse and then jump started the American economy. In addition, the foundation of economic growth is a good wage for workers, so they can buy things from the factories. Concentration of wealth leads to economic volatility. And, if deflation takes hold, money under the mattress starts to be a good investment. Only governmental guarantees can stop runs on banks, and only governmental pump priming can work when things get bad enough. I realize that fiscal policy is now in disfavor among most economists, but from what I've read, the main problem with fiscal policy as a tool is that it's time constant is longer than the present economic cycle. In other words, the stimulus will hit too late....unlike monetary policy which can have an effect in a few months. But, there is a limit to monetary policy. We came close to that with a 0.75% discount rate. It's hard to go below zero. For real big, long term problems, like the Great Depression, you couldn't "push a rope" with monetary policy alone. Thus, governmental spending was also needed. In general, if Republicans want to change tax structures, they think that a less progressive structure is better. Democrats think a more progressive structure is better. The argument Republicans give is that the less progressive structure is better for the economy because cutting the taxes of the high income earners is the best fiscal policy for stimulating the economy. Democrats have long called this idea "trickle down" economics, because the benefits of tax cuts for high income earners are supposed to "trickle down" and benefit everyone. Since the last time you chided me for this, I've heard this argument repeatedly from Bush and Snow. I've also heard various forms of it from Republicans for almost 40 years. And yet, you seem to think I've invented the concept. Dan M. Dan M. _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
