Can someone help me out here (about trickle down economics)

[1jfuddle]

I need someone who knows their stuff about government economics who can formulate an extreemly solid rebuttal to the quoted below. Thanks in advance for ANY help.


"First, tax cuts work. John F. Kennedy knew it so back in the 60s he stimulated the economy by cutting taxes. Regan knew that the quickest way to get us out of the recession of the late 70s/early 80s was a tax cut. George W. Bush did the same in 2003 and it already has changed the economy. The 3rd and 4th quarters of 2003 were the most productive in history, and jobs are being created again.Will that continue? I don't know if it can in the face of rising fuel costs.

Tax cuts that give a larger percentage cut to the wealthy over the middle class/poor has come to be known as "Trickle down Economics" or as you refer to it "Reganomics". And while everyone but the rich hate them they work. Why? Lets use the figures stated before $67 versus say $100,000 for a Lexus. If a middle class person gets $67 what do they do with it? They go to a movie, buy clothes etc. This is small item spending. More on that later. If a poor/middle class person gets $100,000 what do they do? They buy one time items like a car, or recreational vehicle, or take a vacation. These are large one time items. If a rich person gets the same $100,000 dollars what do they do with it? They use it to create more wealth! How do they do that? They invest it. Either in the stock market or in business ventures (anyone ever heard of venture capitalists?) it gets inverted into the economy in a way that creates jobs and wealth for many people. A prime example of this behavior was the multi-millionaire that won the HUGE lottery last year (about $300 million?). When asked what he was going to do with the money he said that he was going to contribute to his church, and hire back the 20 or so people that he had just laid off a couple weeks before due to slow business. When have you ever heard of a poor person that wins the lottery express up front that they are going to create new jobs as a first venture?

I disagree strongly with personal income tax. I think it is wrong and doesn't work. All it does is create hassle. I believe you should tax business and consumed goods (I believe that there should be no tax on food, but there should be a tax on resaurants ie luxury taxes).
In our current tax system the top less than 10% (I believe the real number is 4% but I can't remember) pay 70% of the income taxes! There is nothing in the world that gives me the right to take money away from the rich. I am not entitled to the "fruit of the sweat of their brow." Therefore I think it criminal that they have to pay unpurportionately, while there are people who sit, do nothing, and collect tens of thousands of dollars because of race or pregnancy etc.

It has been shown that cutting down on that extreme percentage of tax on the wealthy allows that group of people to take that money and invert it back into the economy by creating new business or investing in established business. Therefore, if the rich person gets a percentage break and creats 20 new jobs, the tax revenue generated becomes more than before the break.

Poor people don't create jobs.
Middle class hold jobs.
The wealthy CREATE jobs and economic movement.

That is the premise of Trickle Down Economics, history has shown that it works. Phychology shows why!"




Again thanks for any input,
John Cameron

[cosmicdot]

1. you could start with these articles

I'm not the economic genius you're looking for ... but, the GOP mislead by quoting JFK ... because in soundbytes the masses don't know the details; and, that's where the comparison gets lost ... plus, the economy in 1960 vs. 1980 vs. 2004 do have differences ... the amount of wealth in the hands of the few ... the growth in tax evasion through off-shore accounts ... our "product" base ... what is determined as a 'capital investment', i.e., heavy-duty assembly line industrial equipment vs. obsolete-when-bought-disposable computer equipment and software one doesn't own (adds nothing to one's 'collateral', one buys the right to use the software, aka, the license ... an industrial-based economy vs. whatever-it-is-we-have-now, i.e. flipping burgers, and scanning tennis shoes at the Wal-Mart check-out line ... and, there's always the military-industrial spending complex which always helps to pick up the slack, yet keeps the world a dangerous place to live, especially when we arm people we later call terrorists and 'the enemy' ...

google is your friend ... I found these articles using that search engine

from:
History Lesson The history behind current events.

Tax Cuts in Camelot?

JFK lowered taxes, but supply-siders wrongly claim he's their patron saint.

By David Greenberg
Posted Friday, Jan. 16, 2004, at 8:00 AM PT

~snip~
his plan, which passed in February 1964, three months after his death, did help spur economic growth. But they're wrong to see the tax reduction as a supply-side cut, like Reagan's and Bush's; it was a demand-side cut. "The Revenue Act of 1964 was aimed at the demand, rather than the supply, side of the economy," said Arthur Okun, one of Kennedy's economic advisers.

This distinction, taught in Economics 101, seldom makes it into the Washington sound-bite wars. A demand-side cut rests on the Keynesian theory that public consumption spurs economic activity. Government puts money in people's hands, as a temporary measure, so that they'll spend it. A supply-side cut sees business investment as the key to growth. Government gives money to businesses and wealthy individuals to invest, ultimately benefiting all Americans. Back in the early 1960s, tax cutting was as contentious as it is today, but it was liberal demand-siders who were calling for the cuts and generating the controversy.
~snip
http://slate.msn.com/id/2093947/

from

Varnish Remover

JFK as Forrest Gump

By Robert Shrum
Posted Friday, Aug. 15, 1997, at 12:30 AM PT

~snip~
History is the more persuasive when the facts are blurred: Lost is the fact that JFK proposed to cut the top rate from 90 percent to 60 percent, whereas the '97 Republican bill reduced the capital-gains tax from 28 percent to 20 percent and even lower.
~snip~
http://slate.msn.com/id/1616/


The Myth of Republican Tax Cuts
April 10, 2002
By Jackson Thoreau

If you're frantically in the midst of finishing that annual math test given by the IRS, you probably don't have time to figure out whether or not you actually received a much-publicized tax cut that Republicans like to claim they gave you in 2001.
~snip~
http://www.democraticunderground.com/articles/02/04/10_myth.html

[Lefty48197]

2. George Bush is holding America's front door open

While his rich and corporate friends are raiding the American cookie jar and walking off with the silverware. I'd ask your right wing friend to rebut that.

[swinney]

3. Supply Side=Trickle Down --Part I

Most major economists have ruled it out as an economic stimulus.
Even some Reagan Council Of Economic advisers have turned against it.

Reagan head of OMB said his tax cut was a Trojan horse just to reduce the top rate for his wealthy backers. Larry warned Reagan his fiscal policies would create "200B deficits as far as the eye can see". Read Larry Speakes book. He was off target. Over 200B per year.

Let me cover tax cuts per president--

JFK--Conservatives have screamed from roof tops since JFK that his tax cuts zoomed the economy. Not a Bit Of Truth.
Facts--His tax cut was a grand, hugh total of 12 Billion. The GDP was 635 Billion. How will 12 jump start 635? No way. You have $635 in pocket and find $12 so you go shopping?

Bush is blarneying his now in same manner. His 2001-2002-2003 tax cuts put 234 B in our pockets to spend. Wow!. Our Consumer Spending portion of GDP is about 7,000 B. You have $7,000 in your pocket and someone gives you $234 do you scream Hallelujah! I is going on spending spree? No way.

Interest rates jump started the economy for Bush.

Reagan cut taxes 750 Billion. 3000 GDP. 20% of GDP. Hugh.
Bush cut taxes 1800 Billion in 10,000 GDP. 18%. Hugh.
Clinton increased taxes 250 Billion in 7,000 GDP. 3%.
JFK cut taxes 12B in 635B . 2%.

This will consume so much space I will continue on a supplemental post. Supply Side II.

[swinney]

6. Supply side=Trickle Down --part II

JFK--tax cut-zoom economy. Bunk!
Recession in 1959 and 1960.
Economy was growing since middle of 1961.
Tax cut was proposed by JFK but implemented in 1964 by LBJ.
Economy was zooming in 1964.
LBJ started spending on war in 1965 and his spending-borrow helped growth.
--------------------------------------------------------
JFK Tax Cut had absolutely zero do with GDP growth. Zero.
-----------------------------------------------------------

REAGAN tax cut.In 1981-1982-1983
First part in 1981.
Depressive recession in 1981 and 1982. Bad.
Tax cut did zero on stimulation.
Federal Reserve loosened money supply in 1983.
Paul Volcker whipped inflation by horrendous big interest rates in 1980-1981-1982
Economy started rebounding in 1983 and large 7% growth in 1984 which no economist has been able to explain as of this date.
------------------------------------------------
Reagan helped stimulate economy by spending and borrowing. He increased spending by 80% and debt by 187%. Records that still live.
Volcker killing inflation and loosening money supply helped create growth.
----------------------------------------------
WJC tax increase-1993-1994
250 billion increase on top 2.4% with cut for small businesses and 15 Million on EITC for lower income persons.
Greatest economic growth in history.
Tax increases or cuts create it?No way.
Confidence in his Fiscal Policies created it.
Bond traders loved his plans. Lowered long term interest rates.
Home mortgage re financings by millions of households created an increase in household disposable income.
They spent it. Rich would have bought stocks.
Clinton had the most"conservative" budgets in history.
Plus-Newt and GOP head of CBO said "most honest budgets in history".
Clinton did not brag. Clinton did not bs us. He was very very very honest on his policies. I have hundreds of hours of videos on his speeches and cannot find where he attempted to deceive me.---
------------------------------------------------------------
BUSH tax cuts--
1800 Billion in a 10,000 economy.
18%. Hugh. We will borrow more than the tax cuts. By far.
42% to top 1%. 75% to top 10%.
They will not spend it on consumer items which are manufactured and create jobs.
The two richest men in America said "the tax cuts are wrong and wrong priority for America. Bill Gates and Warren Buffett.
Economy started slowing in summer 2000 due to--Greenspan 6 interest rates hikes.
It would have slowed regardless who was president.
Bush blabber made it worse.
He knocked the economy all thru 1999 and 2000.
His promise of hugh tax cuts scared the markets.
They lived through Reagan deficits and high interest rates.
Greenspan, a true Republican,came to the rescue.
Interest rates down to rock bottom.
Remember he gave President Clinton 13 interest rate hikes during two election periods.
He could not reduce them lower enough for a republican president.

Low Interest Rates=Key

Housing starts have been phenomenal.
Buy now. Low down payment. Low monthly payments.
Same for autos.

$300 refund. Recall it.
Bush bragged all over this nation about "his refund".
This is the difference between Clinton and Bush.
Clinton wouldn't take credit for a GOP policy success . He would congratulate them.
Bush did not-did not--get a refund policy
It was a Democrat addendum to his tax cut plan.
Democrats refused to sign the tax plan without something for lower income and immediate spending stimulus.
Bush has no honor.Compared to a great man like Clinton he is Satan
---------------------------------------------------------------

[54anickel]

4. A couple of links - google for supply-side economics to build an

understanding of the issue. I am not good at giving others advice on how to debate an issue.

Perhaps someone else can give a good comeback argument.

http://mirrors.korpios.org/resurgent/23More.htm

http://www.ndol.org/ndol_ci.cfm?kaid=131&subid=192&contentid=251449
The linked report is worth a look.

http://pages.stern.nyu.edu/~nroubini/SUPPLY.HTM
Lots of good links to this one.

Here's a fairly decent explanation of Say's Law, twisted by supply-siders as their basis (they fail to take other matters into account such as sticky down wages, deficit spending and fiat money, globalization - all new concepts since the days of Say) If you're interested in the thought process behind this BS.
http://www.friesian.com/sayslaw.htm

[workforpower]

5. Iraq is the supply side model.

Iraq was a socialist economy. The tyranny of that travesty was removed. Supply-side is now in place and the benefits are manifold. For example,there is now a 15% flat tax.

For updates please check the American Enterprise Institute. Type AEI in the google search frame.

Although the Iraqis may not be grateful for this bounty that it is being bestowed upon them superior military power will win their hearts and minds.

[shrike]

11. Are you nuts??

"Superior military power will win their hearts and minds"? Have you read no history? Have you never heard of Vietnam?

And I am sure, as they bury their dead and endure the humiliation of prisoner photographs beamed worldwide, they are careful to thank Allah for supply-side economics.

[leftyandproud]

7. when you tax something, you get less of it..

sorry this isn't a rebuttle...just an annoying FACT that you need to find a way around in this debate...If you tax investment, there is less...Tax work...you get less...tax profits...you get less. People try to avoid taxes...and the cost of avoiding often ends up erasing any potential gain you had by raising the tax in the first place. Just ask yourself, "If we raised corporate taxation to 95% tomorrow, what would happen?" Would revenues increase? Hello no...They'd probably drop to 1% of their current levels within a month...There would be no incentive to earn profits, and we'd have an unempoyment rate of 70% almost overnight. The only ones working would be in government...and not for long. Taxes do affect incentives...they do affect risk taking...and they do effect jobs. All of these things determine what the government makes...the dispute is over what level is optimal. Freeptards think a lower level is best..and we do not. You need to ignore the economic arguments for the most part and stick to moral arguments, which they can't rebut.

[tritsofme]

8. Supply side is a great theory!

But only that, a theory. It really is wonderful! There are no trade-offs, and lunch is free!

[bws]

9. the trickle down effect

<<<Tax cuts that give a larger percentage cut to the wealthy over the middle class/poor has come to be known as "Trickle down Economics" or as you refer to it "Reganomics". And while everyone but the rich hate them they work. >>>

I'm no economist but have taken some classes on this kind of stuff. The idea from what I understand about the trickle down effect, is that it argues that the rich have a higher spending per dollar rate than the poor. Basically, if you gave a dollar to a rich person and a dollar to a poor person who would spend more of it? Trickle down economics says that the rich would spend more of that dollar. I would say that especially in recent years this is not necessarily the case. This whole theory is just bad.

<<<Therefore I think it criminal that they have to pay unpurportionately, while there are people who sit, do nothing, and collect tens of thousands of dollars because of race or pregnancy etc.>>>

This is where you can really attack republicans in my opinion, because their argument is simply not sound. In 1996 the median national monthly benefit was slightly over $400 per month(hardly tens of thousands of dollars).70% of people on welfare leave within 2 years.

He's trying to fight a moral battle here. Who is truly profiting more from our free-market system? My feeling is that if you are profiting from our free-market system, then you should be more responsible for keeping that free-market system enforced than somebody who is not profiting from that system. This is our way of attaching the price different people attach to a public good to the costs of that public good to different people in society(the more you're profiting from our free-market system, the more you pay for it).

I'm still no economist, but that's how I see the matter. Anyways, someone tell me if I'm wrong or if I missed something.
Brad

[rapier]

10. notes

The US savings rate is at an all time low. Guess which decile of income earners have cut their savings most over the last two decades. The top 10%. During the late 90's boom only the bottom 20% increased their savings.

This pretty much destroys the whole arguement that the poor people will just sit on the porch and drink wine all day if you give them $50. I say pretty much because the term 'investment' has been hijacked by the 'free market' supply siders.

Huge portions of the 'investment' of the top decile has been not investment but speculation in financial assets particularly stocks. Stock buying is ALWAYS a speculation by the way. While a certain amount of speculative activity is vital in a market economy excessive speculation leads to malinvestment.

On a more basic level buying stocks does almost nothing for the economy because it does nothing DIRECTLY for the companies except when they issue the stock. When it is issued they get the money to invest in plant and equipment and people. After that all stock sales are just a game among speculators hoping their stocks inflate. The financial asset mania has been hugely rewarding for the financial industry of course but someday it will be obvious that this didn't create wealth. Huge portions of the financial world are parasites who destroy wealth.

The stock mania has simply been the inflation of financial assets. It has made many stock owners rich but has done squat for the economy. In fact that inflation coupled with the tax incentives for 'investment' over work has led to massive malinvestment and misallocation of resources.

Besides stocks, all manner of speculative financial exotica has been invented, most going under the name derivatives, as an avenue for upper income folks to 'invest' in thru the explosion in hedge funds. Much of this has been in the arena of credit insturments based on borrowing short term and lending long term. The carry trade this is called. One might recall that the S&L's collapsed by borrowing short and lending long. (They are an imperfect analogy however so don't use this arguement too much but I do mean to imply that the systematic risks are gigantic.) The credit derivatives market however drarfs the S&L's by several orders of magnitiude due to the massive leverage used in order for the 'profits' to acrue.

The old arguement of the lazy dumb lower and middle class wasting their tax savings while the rich 'invest' to make us all richer predates supply side. It is as old as modern conservatism if not older. JK Galbraith commented often on it in the 50's and 60's. It is a stupid, dishonest and just plain wrong argument. The massive tax shift against work in favor of 'investment' in fact will someday be seen as the cause of our looming disaster.

At any rate Galbraiths final word on this was that, and I hope the quote is perfect but if not it's close.

The modern conservative is engaged in one of the oldest tasks in moral philosophy, that being in finding a superior moral justification for selfishness.



It is almost impossible however to carry on any debate about these issues with not only the true believers but almost anyone because the terms of the debate have been set by the other side. The cannot see the forest for the trees. Our economy is now dominated and defined by the rolling bubbles associated with excess speulation and the resultant inflation of various financial assets.

If you think about it work and savings, in the past the holy grails of conservatism have been not just forgotten as a source of wealth building but are now actively attacked by the very policies conservatives embrace. Capitalism and markets are being destroyed by their erstwhile champions.

[Robert Oak]

12. pull up statistics

ever since we've had giving the rich more money and everyone else
less (trickle down economics) the statistics are in that all that
is happening is the rich get richer and the middle class erodes.

on our website are numerous statistics as well as on many of the links,
to show how the income power of the middle class has dropped.

Tax Me if you Can rails the Bush tax cuts and also shows this,
great book.

go to our website and start reading...it's one stop shopping for
some great analysis papers we've found.

[Saltdog]

13. Who pays the taxes

Here we are again with misleading neocon arguments that miss the basic facts.

First of all, his contention that the top ?% of tax payers pay about 70% of the taxes makes it seem as if the rich are horribly over-taxed. We hear this argument often and it is convincing. That is, until you realize that people in the top 10% income bracket receive the majority of all personal income as well.

For example, imagine that I and nine of my coworkers earn a total of $100,000 in income and out of the $100,000 we must pay $10,000 in taxes. I earn $91,000 and everyone else earns $1,000 each. If we each pay 10% of our salary toward meeting our tax obligation, then, horrors of horrors, I would have paid 91% of the taxes! How unfair! How can we live in such an unjust system!!! Obviously, income levels must be taken into consideration when we discuss tax burden.

Secondly, his example of the benefits of giving tax cuts to the wealthy is idiotic. OK, somebody with a $67 tax refund isn't going to buy a Lexus. But, what if 1,000 people all have $67 tax refunds and spend 100% of it? Is that better than one person with a $100,000 tax refund who spend 66% of it? You bet! Really, the thing that conservatives avoid discussing about the tax code is that welfare payments to the poor are the most effective means of stimulating the economy, but, because it is considered, by them, to be immoral to give money to the poor for nothing, they refuse to do it.

Imagine, once again, that the federal government has the choice of giving a $1,000 tax break to a millionaire or a $1,000 check to a poor person. Economic advisers tell us that since 2/3 of the economy is based on consumer spending, the government should give the $1,000 to the person most likely to spend all of it (thereby increasing what is known as the multiplier, or how much total effect a single transaction has on the economy via subsequent transactions - you buy a candy bar, then the candy shop owner spends a dollar on cleaning supplies, then the cleaning supply shop owner spends a dollar on new work gloves, etc.). The wealthy person will likely add the $1,000 to their checking account and spend some of it, but it is not likely they will spend all of it. They might, in fact, spend none of it and invest the entire amount, effectively killing its economic benefit. A poor person, on the other hand, is likely to need and want a great many things and is very likely to spend the entire $1,000. What is more, they are likely to spend it in ways that promote the greatest multiplier effect.

As far as the whole "poor people don't create jobs nonsense" he needs to get his facts straight. Worshiping rich people doesn't make them any better than they are and hating poor people doesn't make them any less important to the economic well being of the US. What would he say about all of the check-advance businesses, pawn shops, casinos, goodwill stores, weekly-rate motels, fast food restaurants, used car lots, service stations, gas stations, convenience stores, and a whole slew of other businesses that employ millions of people in the US even though a large percentage of their clientele is made up of the poor who, according to him, don't create jobs?

AND, by the way, can we stop thinking of job creation as a philanthropic activity? Jobs are created out of economic necessity and certainly not out of the goodness of a rich person's heart (assuming they have one). The second your employer discovers that they can make more money without you than with you, you will be out of a job. The only reason they pay you is that they make more money off of you working for them than it costs them in pay to employ you.