Question for supply siders

[RichardR]

See Nothing to be Thankful For (a .pdf document): which seems to show that tax cuts have little or no effect on growth in the US economy from 1948 to 2003 (see figure 7 in the link).

So is it true, do tax cuts have no effect on growth? I'm genuinely curious what the economics experts think about this one.

 

[Vagabond]

See Nothing to be Thankful For (a .pdf document): which seems to show that tax cuts have little or no effect on growth in the US economy from 1948 to 2003 (see figure 7 in the link).

So is it true, do tax cuts have no effect on growth? I'm genuinely curious what the economics experts think about this one.

This is a loaded question. This hugely depends on who is actually getting the cuts and how much. The 300 dollar cut Bush gave wasn't nearly enough to do anything.

It also hugely depends on what the tax cuts are coming from. If you are taking money out of defense or something that has a tangible impact on the economy you are just robbing Peter to pay Paul.

If you are measuring economic success purely on the rate of growth of the economy it's probably better and more efficient to just have the government dole out big contracts than for thousands of small business owners to do it. Particularly in the short run.

 

[Freakshow]

This is a loaded question. This hugely depends on who is actually getting the cuts and how much. The 300 dollar cut Bush gave wasn't nearly enough to do anything.

What $300 tax cut?

 

[RichardR]

This is a loaded question. This hugely depends on who is actually getting the cuts and how much. The 300 dollar cut Bush gave wasn't nearly enough to do anything.

1. The "rich" got more than a $300 tax cut from Bush.
2. The figures go back to 1948 - it's much more than Bush's tax cut. It includes for example Reagan's top rate tax cut from (IIRC) 70% down to 28%.

It also hugely depends on what the tax cuts are coming from. If you are taking money out of defense or something that has a tangible impact on the economy you are just robbing Peter to pay Paul.

So we should increase taxes and increase defence spending as much as possible?

If you are measuring economic success purely on the rate of growth of the economy it's probably better and more efficient to just have the government dole out big contracts than for thousands of small business owners to do it. Particularly in the short run.

I think the evidence of the Soviet Union and elsewhere would tend to contradict this assertion.

 

[Vagabond]

1. The "rich" got more than a $300 tax cut from Bush.
2. The figures go back to 1948 - it's much more than Bush's tax cut. It includes for example Reagan's top rate tax cut from (IIRC) 70% down to 28%.
So we should increase taxes and increase defence spending as much as possible?
I think the evidence of the Soviet Union and elsewhere would tend to contradict this assertion.

I was talking about the middle class tax cut which was supposed to be about 300 per family or thereabouts.

If your only concern was to raise the growth rate of the economy as much as possible perhaps. But, there are other factors involved and other things to consider. That wasn't the crux of your question.

Well the Soviet Union didn't have a tenth of our economy so they didn't have the muscle required. Their military expenditures did keep a large part of their population employed. But, since they weren't really concerned with making any consumer goods, their economy isn't going to be effected by any spending on that side either. Not really a good comparison, totally different kind of economy and they also had much corruption as well.

 

[RichardR]

No one disagrees with this report then? Tax increases / tax decreases have no effect on growth?

 

[Vagabond]

No one disagrees with this report then? Tax increases / tax decreases have no effect on growth?

I think they could have an effect on growth but they usually do not because they are done haphazardly for political reasons and not for economic reasons.

 

[RichardR]

So that's it? No libertarians or low-taxers jumping in to explain why this study is wrong? OK, tax cuts are of no benefit to the economy then.

 

[brodski]

I think they could have an effect on growth but they usually do not because they are done haphazardly for political reasons and not for economic reasons.

So what you are arguing for is the right level of taxtaion at the rigth rime, rather than low taxes all round?

 

[Jocko]

No one disagrees with this report then? Tax increases / tax decreases have no effect on growth?

That's silly. Reduce fixed costs like taxes, and you free up capital for growth, hiring, etc. You don't need a PhD to figure that out.

Tell me, if you pay $1000 less in taxes, what do you wind up doing with that $1000? You buy something or upgrade something, or you save it in whcihc case it gets loaned out at a low rate (cuz you're saving more, funds are more available!) to someone else who buys something or upgrades something. It's a oversimplified example, but the theory is as simple as can be.

So yes, I strongly disagree with the conclusion, on the same grounds I would disagree with a report on rain that says it doesn't make the ground wet.

 

[Jocko]

So that's it? No libertarians or low-taxers jumping in to explain why this study is wrong? OK, tax cuts are of no benefit to the economy then.

Nice debate style. You AUP's apprentice or something?

 

[brodski]

That's silly. Reduce fixed costs like taxes, and you free up capital for growth, hiring, etc. You don't need a PhD to figure that out.

Tell me, if you pay $1000 less in taxes, what do you wind up doing with that $1000? You buy something or upgrade something, or you save it in whcihc case it gets loaned out at a low rate (cuz you're saving more, funds are more available!) to someone else who buys something or upgrades something. It's a oversimplified example, but the theory is as simple as can be.

So yes, I strongly disagree with the conclusion, on the same grounds I would disagree with a report on rain that says it doesn't make the ground wet.

But that money is not just "lost", it is then spend by government, reinvesting it into the economy, which can then be used for the very purposes you just outlined.
ETA- the experimental data appears to contradict your "simple" theory, do you have any data to support your assertions, or ar you just going to rely on "common sense"?

 

[Jocko]

But that money is not just "lost", it is then spend by government, reinvesting it into the economy, which can then be used for the very purposes you just outlined.
ETA- the experimental data appears to contradict your "simple" theory, do you have any data to support your assertions, or ar you just going to rely on "common sense"?

Sometimes, common sense is all you need. For example, who spends money more efficiently: private business with a profit motive, or government bureaucracy with a vested interest in self-preservation? Can you point to any government entity that competes with a private interest based on performance alone? Because I can't think of any, and most people would agree than the less the government does the better (and cheaper).

While the experimental data may seem to contradict common sense, history likewise contradicts the experimental data. I don't need to know every bolt in my car to know that it runs a certain way.

 

[brodski]

Sometimes, common sense is all you need. For example, who spends money more efficiently: private business with a profit motive, or government bureaucracy with a vested interest in self-preservation? Can you point to any government entity that competes with a private interest based on performance alone? Because I can't think of any, and most people would agree than the less the government does the better (and cheaper).

You may want to look into the UK's experience with "PFI" to see how public projects can be more effectively run than private projects.But that's still not the point, government taxation and spending does not removed money from the system, it just redistributes it, you would have to show that where government spending creates less growth than taxation. And no, common sense is never all that you need, the experimental data IS historic data, or do you have some alternative history with which to support your case?

 

[Mark]

What $300 tax cut?

The one he promised would be temporary...which he blatantly lied about.

 

[Jocko]

The one he promised would be temporary...which he blatantly lied about.

Would like to see a cite on this one, Mark. I remember quite the contrary.

 

[brodski]

The one he promised would be temporary...which he blatantly lied about.

Please, this could be an interesting debate on economics, do we realy have to trun it into annother Bush thread?

 

[Jocko]

You may want to look into the UK's experience with "PFI" to see how public projects can be more effectively run than private projects.But that's still not the point, government taxation and spending does not removed money from the system, it just redistributes it, you would have to show that where government spending creates less growth than taxation. And no, common sense is never all that you need, the experimental data IS historic data, or do you have some alternative history with which to support your case?

Well, I can see that you have no interest in life here on planet earth. Good luck with your "making less is making more" philosophy; keep your taxation, and I'll keep as much of my own money as possible. If you want to convince me otherwise you'll have to offer me more than opinions. Such as:

1. a cite that backs up your assertion, and
2. a reason why what may be good in Britain is automatcially good for the US.

Revisionist history? With your premise, the Germans and French would still be running the world due to their tax-funded "prosperity." You may want to look at their unemployment rates and stagnant economies before answering, however.

 

[RichardR]

That's silly. Reduce fixed costs like taxes, and you free up capital for growth, hiring, etc. You don't need a PhD to figure that out.

Tell me, if you pay $1000 less in taxes, what do you wind up doing with that $1000? You buy something or upgrade something, or you save it in whcihc case it gets loaned out at a low rate (cuz you're saving more, funds are more available!) to someone else who buys something or upgrades something. It's a oversimplified example, but the theory is as simple as can be.

I understand that, but that's not what the study shows.

So yes, I strongly disagree with the conclusion, on the same grounds I would disagree with a report on rain that says it doesn't make the ground wet.

OK, so what is wrong with the study? What is wrong with the data?

 

[brodski]

Well, I can see that you have no interest in life here on planet earth. Good luck with your "making less is making more" philosophy; keep your taxation, and I'll keep as much of my own money as possible. If you want to convince me otherwise you'll have to offer me more than opinions.

Well, you could try and address the evidence posted in the OP, instead of asserting that you have received THE ECONOMIC TRUTH (TM), and all evidence to the contrary must be dismissed out of hand.

1. a cite that backs up your assertion,
.

http://education.guardian.co.uk/schools/story/0,5500,875379,00.html

a quick Google search, If you are really interested, I will trawl through the Audit commission website for primary evidence, but past history suggests that you dismiss out of hand any evidence which contradicts the opinions you already hold.

and
2. a reason why what may be good in Britain is automatically good for the US.
.

Supply side economics predicts that tax cuts will be a "good thing" in all circumstances, not just in the US, however we have presented to us historic data which just happens to be from the US, seeming refuting the assertion that tax cuts automatically lead to economic growth.

Revisionist history? With your premise, the Germans and French would still be running the world due to their tax-funded "prosperity." You may want to look at their unemployment rates and stagnant economies before answering, however.

Not at all, The Keynesian supply curve ( as opposed to Friedman's "supply line") predicts that tax and spending cuts may be appropriate at some time in the economic cycle, but counterproductive at others., i do not support tax increases in all cases, to do so would be a ridiculous as to support tax cuts in all cases.
The French economy has been mismanaged, in various ways, the German economy to a lesser extent, although absorbing East Germany is still having a massive (negative) impact on the economy.
You are still left with the awkward question of the evidence posted in the OP, there is no significant correlation between US tax cuts and economic growth.