The economy is booming right now. Economic growth is flirting with 5% over this quarter. The Fed Chairman Ben Bernanke (if that's his real name) is likely to raise federal reserve lending rates again. If I'm to believe the heart and soul of supply-side economics then this is the time that our deficits should be disappearing.
I'm not going to argue with anyone about how lower tax rates can increase actual tax receipts. Every serious economist from Friedman to some schlub down at Schwab understands this is true. Hell, play Sim City for awhile and you'll understand it's true...anyway....
But where supply-siders continue to LIE to us is that they're not really interested in reducing the deficits. They only sell that as one of the benefits to lowering tax rates for high wage earners. Because of this they're always being accused of giving tax breaks to their rich buddies. Whether it's really true or not doesn't matter to me...it looks true.
It's time for supply-siders to take this cash that has been bringing in federal receipts hand over fist and start paying down. Don't let it sit around in your precious general fund to be yet again swallowed up by another omnibus package.
Will they do this? Probably not and this is one reason alone that anyone in Washington who claims to be a fiscal conservative is a liar. If you keep sending fiscal conservatives to Washington then be prepared to watch your dollar shrink in your wallet.
6 comments:
Well, supply siders aren't so much interested in reducing the deficit immediately as they are in gradually jumpstarting the economy, mostly through increasing employment, expansion and debt resolution on the part of businesses. The deficit will probably not disappear very quickly, I've come to terms with this, I just demand that the deficit doesn't get bigger, and seeing as how it is currently shrinking that is not a problem. Look at the current economy and you will see increased optimism among businesses, increased home ownership, less massive layoffs such as those of the Steel Plants. As there is less strain on businesses, there is more optimism because they can spend what would otherwise be tax money on overhead and other costs. The modern economy does not run on dollars and cents- it runs on optimism, and lightening the load of taxation for businesses increases optimism.
Anecdotally, I can tell you that my uncle who owns a local Garden Center built his largest and highest-revenue garden-center after the Bush Tax Cuts and the expansion has done wonders for him, possibly doubling the number of employees in his company.
There are no real supply siders in power, so we'll never know if the theory is BS or not. They just give it lip service. Supply side economics are doomed if goverment spending rises while taxes are cut. It defeats the whole purpose. Yet the three modern so-called supply side presidents all spent more than anyone else in history - Reagan, Bush41 and Bush43.
The biggest dope of all is Bush43 without question. He lowers taxes while waging an enormously expensive war and occupation. Then he pretends there is no cost to the war by omitting it from the budget. Any fool knows that waging war requires sacrifice. We expect to pay for it, if it's a worthy cause. You raise taxes to fight a war - at least every single president except Bush43 did. But how can he set that expectation when his explanation of how we got in this mess keeps changing and the whole show is run more incompetently than Enron?
You're right on the money about omnibus packages. You can bet that both sides of the divide will scramble to get their pork passed by tagging onto bills that have nothing to do with bridges to nowhere and leaky tunnels under Boston. More money spent, more debt and we get a nice bridge that a handful of Alaskans will use and don't even want.
In short, any rise in the economy is an illusion. A bubble that will burst as soon as we discover that this time, for real, there is no more oil. Or there really is such a thing as global warming.
The rosy economy is paid for by selling the debt to China and Japan. It's like running up your charge card and partying. Great fun until the bill is due. Sooner or later, read my lips, taxes will have to be raised to new all time highs or else we will default on our debts for the first time in history.
With any luck, the drunken sailors of congress who got us here will be tossed out shortly and a new load of drunken sailors will take over.
Let's not deny the Bush Tax Cuts now Mr. Grumpy Grump! I am willing to give plenty of grief to the President over his spending, but the tax cuts I must give him credit for. Besides taking on terrorists, the tax cuts have been this administrations greatest contribution to the US.
Sadly, little-cicero, I find nothing to praise with the president's economic policies. You can't cut taxes and then spend more without creating a bigger deficit that will eventually have to be paid for. If you cut taxes you must contain spending. Doing it halfway is half-witted.
Your uncle may be dancing today, but your first-born will be paying for it in his/her lifetime.
The way Bush did it, it's just more tax breaks for his rich buddies. I'd like it better if I was one of them, but I don't own enough stock to make a windfall killing and nobody rich is going to die and leave me money. I guess if I wait long enough it will be my turn with Paris Hilton, and then I'll enjoy Bush's tax breaks for the top 2%.
The tax cuts didn't work for Reagan either. I know that Republicans will try to rewrite that history, but the economy sucked under Reagan and continued to suck under Bush41. Reagan left office with horrible approval ratings as a direct result of his crappy economy. His ratings weren't as horrible as GW has right now, but bad. Reagan spent money on defense like Imelda Marcos at Shoe Emporium.
Right-wingers claim that Reagan's insane spending brought down the wall and ended the cold war. Maybe, but you can't prove it. I say that communism was always doomed because it is a corrupt failure and Reagan didn't give it any more of a push than did Gorbachev.
Giving Bush credit for his tax policies is like giving him credit for winning the war in Iraq. Win? Really? What about the occupation? That's what I'm saying about the economy. Tax breaks? Great. Why is spending up? Why is the deficit not going down?
In a world where the best rapper is white, the best golfer is black and the tallest basketball player is Chinese, It's no surprise that the last president to balance the budget is a Democrat.
Bush has been cutting taxes for six years and the economy sucked until recently. Flatline. Are you saying that his tax cuts all of sudden started working?
I don't buy it. I say the economy is improving DESPITE Bush, not because of him.
Bush's greatest contribution to the country are his semi-hot daughters. Other than that, he's as impressive as Buchanan, Andrew Johnson or maybe Harding.
...and by the way supply-siders have used the "additional receipts to the treasury" line to promote this economic policy. This is why they trot out Kennedy's old speech talking about the paradox of reducing tax rates and increasing tax receipts...
...secondly....the deficit isn't going down because the money never buys back debt. It sits in the general fund as a paper surplus and then gets spent...overall increasing the deficit even more.
lastly...Bush41 was not a supply-sider...he proved that when he was president and by coining the term "voodoo economics"
I agree 100% that doing it halfway is half-witted, but there is no doubt that cutting taxes stimulates the economy. Stimulate the economy and the government will reap the rewards later. What we should agree upon is that increasing taxes at this point would do more harm than good. Sure, you balance the checkbooks at the Treasury, but what then? Employers don't have that money to pay their employees, eventually the lay-offs begin.
Like Bush, Reagon was facing an Evil Empire that threatened to render us irrelevant or worse. Frugality is not wise in such circumstances.
Reagon reduced inflation highly efficiently by unburdening producers. With time this would have led to a reduction in unemployment, but Bush reversed those policies and there was no chance for return.
Clinton balanced the budget and had a thriving market, but he did so by wittling our big stick down to a twig and pushing al Quaeda under a rug. That is not the kind of President I want in office.
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