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Do tax cuts pay for themselves?

  1. Sep 10, 2005 #1
    With the $100 billion a year for the Iraq/Afhgan wars, and now $60 billion for Katrina, we are going further and further into debt as a nation.

    I hear the argument all the time in support of Reagans 'voodoo economics', which this administration has embraced, that cutting taxes increases revenues.

    I read a few articles a few weeks ago saying that federal revenues are up this year and the presidents projections of halving the deficit in 5 years is on course. This is an obfuscation of the facts.

    Here is an in depth analysis of the tax revenue picture.

  2. jcsd
  3. Sep 10, 2005 #2


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    Perhaps it depends on the tax cut. Personally I believe tax cuts given to the average American results in stimulation to the economy more than to the wealthy and big business. Trickle down, means "to flow slowly in a thin stream" if indeed it ever does find it's way to the poor (like aid--if you want to ensure people receive donations, give it directly to the people). :rolleyes: At this time of deficits that will now increase, there must be a different approach in regard to revenues. This article discusses options for the Estate Tax, which I feel cannot be completely repealed--ever.

    For more: http://www.cbpp.org/3-16-05tax.htm
  4. Sep 10, 2005 #3
    Jobs produced by tax cuts. What does a job cost? One hellava lot.

    Last edited: Sep 10, 2005
  5. Sep 10, 2005 #4
    'Voodoo' economics. That alone sounds like bull****.
  6. Sep 10, 2005 #5
    It's called supply side economics. I don't know where the name Voodoo economics came from but obviously it's a loaded term. I guess attaching a BS name to a theory you don't like is some how good logic..... :rolleyes:
  7. Sep 10, 2005 #6


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    Yah it is called supply side economics. Reagan's critics were the ones who coined the term "voodoo economics" when Reagan introduced the idea.
  8. Sep 10, 2005 #7
    Vice President Bush (1) was a Reagan critic wasn't he? While the term was coined when the two were vying for the presidential nomination nod in 1980 the term sprang up before the economic policy was put into place so either name is equally applicable. I say Tom-a-toe(phonetic) you say To-motto(phonetic). I say you have to tax the public to pay for governmental programs while you think a sprinkle of fairy dust from Tinker-Bell's b-hind will do the trick.

  9. Sep 10, 2005 #8
    The name has been attached as long as the theory has been floating around. See links above.
  10. Sep 10, 2005 #9
    So you say liberalism I say communism...same thing I guess? :rolleyes:
  11. Sep 10, 2005 #10
    Attaching a loaded name to a thing to change the way the public perceives it is an unsound practice. It is for all intents and purposes, lying.
  12. Sep 10, 2005 #11
    George Bush 1 was the first person to use the term Voodoo Economics" extensively. That is the term he used to describe Ronald Reagan's proposed economic policy when they ran against each other in the 1980 primary election.

    It is also called the trickle down theory ie if the wealthy have more money it will trickle down to the lower classes. It never happened with the Reagan tax cuts. Most of the money saved by wealthy businessmen went to pay for moving factories to Mexico starting in the late 80's.

    It appears that the GW Bush tax cuts are helping to send jobs to China and India.
  13. Sep 10, 2005 #12
    I never said it was the best policy.....I realize it has problems like what you mentioned, to some degree anyways.

    I read above that Bush senior was the first to use the term...I didn't know that before but it doesn't change the fact that attaching a negative name to something is dishonest. Does that mean I am calling Bush senior dishonest, of course. Most politicians are dishonest and I hate their dirty little underhanded tricks, like this one, that they use to manipulate the public.
  14. Sep 10, 2005 #13
    I agree with you on this one. Both political parties are guilty of doing it.
  15. Sep 10, 2005 #14
    The problem with supply-side economics is that it ignores the saving vs. income distribution. It is a well-documented fact that propensity to save increases with income, not because richer people are necessarily smarter, but because people who make $20,000 a year are forced to spend all of their money on food, rent, and utilities, while people who make $200,000 might only spend $80,000 on those same things. Therefore, tax cuts to the poor typically go directly into the economy, while tax cuts for the rich will mostly go into savings accounts or other assets. So, supply-side economics might work when your goal is for people to save up for a rainy day, but it doesn't really work that well in recession, when it is better for tax cuts to go straight into the economy.
    Last edited: Sep 10, 2005
  16. Sep 10, 2005 #15
    I thought that the idea was to increase savings for the rich so they would increase their spending in areas like starting new businesses which create jobs.

    Tax cuts for the poor might go directly into the economy but the idea of supply side economics is that by increasing savings and investments you expand the PPC (production possibility curve) which will raise the countries GDP which will have the effect of increasing the wealth of everyone in that country.
  17. Sep 10, 2005 #16
    I used the term deliberately to cast aspersions, because it was Bush's daddy who popularized the term. He may even be the one who coined the phrase, but I don't know that for certain.

    In any case, as an economic theory, it has been demonstrated that it does not work. At least it does not work to generate enough tax revenue to balance the federal budget.
  18. Sep 10, 2005 #17
    I am not defending it per say....I already said I don't think it is the best system out there. I was simply explaining that when rich people invest it expands the PPC which is good for everyone including the poor.

    I have a theories about what would work best and while I will not disclose any details (I wouldn't let you animals any where near my personal ideas) I can assure that my ideas are a long ways from anything that has ever been tried before. :smile:
  19. Sep 10, 2005 #18
    Ah, but in a recession, the wealthy will not want to invest in small businesses. The recession environment is inherently difficult to work in, and many would-be small businesses would go belly-up. Honestly, if you made $1 million per year, and suddenly received a 5% tax break during a recession, would you invest that 50 grand or hold onto it until the recession ends? It's almost like a failed self-fulfilling prophecy: yes, reducing taxes on the rich can encourage some small business growth, but only when the recession is over. During a recession, those tax cuts are useless, and cannot dislodge the economy from the recession.

    Likewise, many of the wealthy are wealthy because they're heavily involved with big business. Do you think that Bill Gates or the Waltons are going to invest in small business if they are given the chance?

    On a side note, the PPC cannot shift outward due to increased savings or even increased financial investment. The PPC only encodes the current...er...production possibilities. Just because you have a billion dollars in the bank with which you could conceivably build a candy factory, it doesn't mean that you can produce candy. By definition, it will only shift outwards due to capital investment.
    Last edited: Sep 10, 2005
  20. Sep 10, 2005 #19
    Let's not forget all the small businesses that arn't on the open market. This is all just another example on how the current system is descriminatory against the poor/small.
  21. Sep 10, 2005 #20
    It's been a while since I studied macro economics but from what I remember Keynesian economics suggest that because of the lack of flexibility in certain areas of the market place, like employment, it can take a long time to recover from a recession. In order to speed this recovery up he suggest that the government run a deficit to kick the economy into gear. Those tax cuts are needed along with increased government spending to take up the slack when the economy is in a recession.

    Am I wrong about that?

    There is more than one kind of wealthy...there is well to do and then there is richer than god. I like the idea of becoming well to do and I like the idea of having a system that promotes people working to become well to do. However to become richer than god you need to practically have a monopoly which I am wholly against.

    So increased savings does not lead to increased capital investment? If buy some stock as an investment..what happens to that money?
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