Dow down 500!

Discussion in 'Finance, Investing & Economy' started by Anthony, Feb 27, 2007.

  1. saosebastiao

    saosebastiao New Member

    May 22, 2005
    I agree that Bush is an economic shit-for-brains. But that doesn't mean everything he has done has been bad. I still think the tax cuts have been beneficial, for both the investment side, as well as the government side and consumer side. Fed interest rate and money supply control policy under Bernanke and Greenspan have been deplorable, along with Bush's war. There are literally millions of factors that have affected the economy recently, but not all of Bush's actions have been bad.


    No...you got it all wrong. When the market corrects itself to better reflect intrinsic value, I am happy. When I see that something is undervalued and I can take advantage of that in the form of investment, I am happy. When others selfishly and stupidly run into an "investment" by the masses, causing a huge surge in price for a commodity that everybody needs...I am sad. When those people finally foot the bill for their economic stupidity and selfish lemming-ism, I am happy.

    The example doesn't fit the point you were trying to make, nor does it apply to mine.

    I agree with you, and I do understand the point of moral hazard. If anybody bails out the banks, you can say goodbye to the idea that lessons will be learned from this "tragedy".


    Innovation is hardly a quantifiable object. It is too hard to define, and measurement must come in both qualitative and quantitative forms if any utilitarian good is to be measured. As such, your question or doubt is pretty unanswerable...but I can make an objection to your point: Innovation comes from ideas, which is independent from investment. Investment can speed along the process, but it is not a source of innovation. I would argue, arbitrarily of course, that peoples ideas are more creative in tight times than prosperous times, because prosperity enforces a status quo of creativity.
     
  2. saosebastiao

    saosebastiao New Member

    May 22, 2005
    Everything that people do, whether responsible or irresponsible, affects others. This goes for the good or the bad. Yeah it sucks sometimes, but guess what... sometimes it is good too! Why don't we just get over the whole idea that it is unfair, and call it reality. We can't do anything about the positive or negative externalities of our past actions so just chill out.

    Furthermore, while everybody is affected by the "crisis" to some degree or another...the people that are hurting the worst are the stupid and irresponsible. I'm not denying the negative externalities...but I'm saying the consequences are going to be felt most by the people that made the stupid decisions.
     
  3. bostonsoccermdl

    bostonsoccermdl Moderator
    Staff Member

    Apr 3, 2002
    Denver, CO
    Agreed. And he obviously let it go. As you hopefully have. lets continue on.
     
  4. Matt in the Hat

    Matt in the Hat Moderator
    Staff Member

    Sep 21, 2002
    Brooklyn
    Club:
    New York Red Bulls
    Nat'l Team:
    United States
    I dot agree that thes two things are contradictions. Yes, working people are in the best shape thay have been in the history of the world. But some of them overextended themselves. These two conditions aren't mutually exclusive.

    And when those people that overextended themselves can't pay their mortgages and are evicted from their homes, I'll be there like a freaking vulture, no doubt so long as the investment works out well for me.
     
  5. ratdog

    ratdog Member+

    Mar 22, 2004
    In the doghouse
    Club:
    Chicago Red Stars
    Nat'l Team:
    United States
    The Fed tries to moderate inflation while keeping a moderate pace of overall economic growth and they've been relatively successful in those pursuits but at the cost of creating asset bubbles. Bush's tax cuts, OTOH, were irresponsible unless he also decreased spending. Even Greenspan made it clear that he only supported Bush's tax cuts if spending was also cut. Instead, Bush has engaged in the usual Reep borrow-and-spend like a teenage girl with her first credit card. Even worse, he has borrowed and wasted all that money rather than invest in American economic growth.

    Also, wingtips and others have tried to defend the long-discredited idea that tax cuts are self-financing. Tax cuts are only self-financing in extreme cases where tax rates are about 95%. What has happened is that the Fed lowered interest rates and when corporate American couldn't find any more profitable way to generate profits, we got a new LBO boom that did generate more capital gains tax revenue. But the gain, like much of our economic growth lately, was based on the unsustainable foundation of easy credit, not on tax cuts.

    But when, for example, you lose your job because of the economic slowdown caused by the credit crunch that the housing decline created (the last estimates are that the bust will shave 2% off GDP in 2008) and you end up defaulting on your own house, then you're sad. Or when you buy that foreclosed house but then learn that a crackhouse has opened in one of the other forclosed houses in your neighborhood and you feel unsafe, then you're sad. Now, these may not apply to you personally but they do to the communities affected by the bust. Neither the housing bubble nor subsequent bust is good for the country as a whole. At the very least, boom/bust cycles are not nearly as preferable as moderate sustainable growth which is why we have a Federal Reserve in the first place.

    It fits very well. You just can't see that in economics you often get situations where what is good (or bad) for one person is not good (or bad) for society as a whole. A bank run is another example. It's good if you're one of the first people there and get your money out but it's bad for society because it chokes off the credit and money circulation that the economy needs to function. And even if you do get your money out, in the long run you've still contributed to conditions that might cost you your job in the subsequent overall economic downturn. "It's A Wonderful Life" is on endlessly now that it's the holidays and you can check out the 'bank run' scene.

    You can say good-bye now because no learning is taking place. In five years, both borrowers and lenders will begin doing the same things.

    So you have no backup for your assertion which is a guess on your part. OK.

    Innovation is not entirely beyond measurement. You can measure new patents and the number of new products or services offered, for example, to come with some kind of index I suppose. Innovation comes when people can afford to follow up on their ideas and turn them into reality and other people can afford to buy the new products or services that have been created. They can't do that as well in a downturn as they can in periods of growth. The equation runs thusly:

    Ideas - funding - buyers = fruitless pipe dreams.

    It's funny how people who two years ago were being praised for either contributing to the economy by following the American Dream and for heroically enabling their fellow Americans to follow the American Dream are now suddenly castigated as "stupid and irresponsible" because, in hindsight, they were part of a bubble which has burst. How times change.

    Anyway, those who were most responsible for the bust and downturn like the banking executives who OK'd the aggressive lending, the derivates markets that provided the illusion of safety, the MSM news media that fueled the flames with stories of instant real estates gazillionaires and who chose to spout cheap triumphalism over sober, accurate economic reporting, and the leaders in the Fed, Congress and the White House are, with few exceptions, not hurting as bad as the people who just wanted a house and who listened to all the "professionals" listed above who told them that the good times just couldn't end because... well, because we're America, dammit, and basic normal market forces don't apply to us.

    --------------------

    The factors you listed were:

    1. weakening dollar
    2. the credit crisis
    3. a slowing economy

    The only one of those that would influence the Fed to raise rates would be the weakening dollar. The other two would influence the Fed to LOWER rates. And with the lower dollar boosting exports and lowering the cost of our massive debt, I doubt that Bernanke is losing sleep over it yet.

    Of those, only the 2006 example is an argument that we're heading into a imminent recession. I personally have gone out of my way to point out that I do not believe that we were heading into recession. Yes, this past recovery period has been surprisingly weak given the extreme rate cutting in 2001 and the historically low level of interest rates. But that's a counter to unwarranted triumphalism, not an argument for recession.
     
  6. VFish

    VFish Member+

    Jan 7, 2001
    Atlanta, GA
    Club:
    Atlanta
    The point being under certain conditions he might be forced to raise rates despite a looming recession. That’s why I cited the 1980 example, which had the Fed putting the brakes on an already anemic economy so that they could aggressively fight run away inflation. Check out the current issue of the The Economist. The cover story talks about a full blown collapse of the dollar.

    I’m not losing sleep over this either, just thought a dire scenario might brighten your day. ;)
     
  7. ratdog

    ratdog Member+

    Mar 22, 2004
    In the doghouse
    Club:
    Chicago Red Stars
    Nat'l Team:
    United States
    Then the factors you listed argued against your point rather than for it. Anyyyyyhoo...

    Actually, 1970 would be a better comparison: An accomodating Fed trying to deal with a president pursuing twin inflationary policies of massive government spending mostly for an unpopular war and a huge government program while oil prices rise. Sadly, in 1970, Nixon appointed Arthur Burns who proved to care more about kowtowing to whoever occupied the White House than about fulfilling his duties as Fed chairman and who subsequently insituted politically-motivated easy money spurts (most notoriously during the 1972 presidential campaign) that exacerbated the imbalances then in place in the overall economy. I don't think Bernanke will be anywhere near as bad as Burns or his successor Miller.

    I think that whoever takes the White House next year will not be as bad as Bush if only because they'll be freer to stop some of our financial bleeding by getting out of Iraq.

    If the Dems take the White House and Congress, they can reverse Bush's war on working Americans and use some of the money saved by not wasting it in Iraq to begin re-investing in our infrastructure and education system. They won't overhaul our inefficient and wasteful health care system but they can make it a little more rational and less expensive. They can push for much-needed regulation in the finance industry to make it harder for banks, brokerages and mutual funds to hide non-performing assets and to provide more consistent pricing for derivatives for which firms can currently simply value at whatever they feel like. They can bring much-needed regulation to the real estate industry and to lenders to stop some of the predatory practices until recently in vogue. The big question is if they WILL do these things or if the corporate special interests that own both parties will enforce the status quo. Unfortunately, the most likely outcome of a Dem victory is Hillary in the White House and Pelosi as Speaker in the House. I don't trust them to do what needs to be done. Then again, I distrust all the likely Reep candidates even more.

    The Economist article does bring up a good point, though: What we'll also have to accept is the dollar's hegemony as the world's only currency of choice is over. But then maybe a little competition will be a healthy thing as long as it's based on co-operation by the central banks.

    The good news is that we'll probably avoid recession and foreigners will help make sure the dollar does not catastrophically melt down because that's not good for anyone. But that's still not exactly anything to crow about. At best it deserves a sigh of relief and a recognition of a wasted recovery period that could have used to built a sound foundation for long-term sustainable trend growth.
     
  8. VFish

    VFish Member+

    Jan 7, 2001
    Atlanta, GA
    Club:
    Atlanta
    Again, the factors cited weren't meant to say the Fed should raise or cut rates, only that the conditions could arise that might require conflicting actions, i.e. cutting rates to spur the economy, raising rates to fight inflation and bolster a faltering dollar. Anyyyyyhoo...
     
  9. saosebastiao

    saosebastiao New Member

    May 22, 2005
    Belated news flash: The bush tax cuts actually increased income tax revenue. Your entire argument goes out the window.

    And BTW, the fed has not been successful at moderating inflation. Inflation has followed boom bust cycles just as much as economic growth has.

    Tell me something...do you know how the housing decline has affected employment? If so, I would love to hear you retract this statement.

    And boom bust cycles are not good for an economy, nor are they bad for an economy. They are just part of an economy...planned or free. And for every example you have of a bad effect, I have an example of a good effect. I can go all day if you like.


    That is another absolutely silly straw man to this argument. It does not apply.

    Just so you know...what you are doing is called misdirection. When I say "Kids shouldn't play video games all day long", and you respond with "Well I don't think kids should play in the streets", you have created a misdirection and have not addressed the argument, but have skirted around it.

    Who has been bailed out so far?


    Your assertion has no backup either.


    I think you are confusing me with Bush. I'm not Bush.
    How many times has it been said that investment is always risky and you reduce your risk by becoming educated on the matter? Did all of these people forget to listen when teachers, parents, investment professionals, history books, and everybody else told them so? Or did they stupidly think that the hype was too true to be bad?

    I didn't buy into the hype, and I am glad that the market is back to normal, even if it means somebody lost their house.
     
  10. wolfp10

    wolfp10 Member

    Sep 25, 2005
    Pulling out of Iraq isn't going to create well-paying jobs, end our dependence on foreign oil, raise the dollar, loosen the credit market, end foreclosures and magically change everything.

    Even if a Democratic President pulled out of Iraq, I highly doubt the funds would go back to taxpayers; the Democratic frontrunner's haven't hidden that they have some big social programs they want to implement.
     
  11. bojendyk

    bojendyk New Member

    Jan 4, 2002
    South Loop, Chicago
    This is patent nonsense. Bush's own treasury secretary and economic advisers believe that the effect on income tax revenue was minute.
     
  12. saosebastiao

    saosebastiao New Member

    May 22, 2005
    Let me ask you the question then...did budgets have to be cut because of lost revenue? Was there lost revenue?

    If not, then my point stands. The nonsense is what I was replying to.
     
  13. bojendyk

    bojendyk New Member

    Jan 4, 2002
    South Loop, Chicago
    Bush's economic advisers note that the increase in revenues was the result of a very normal business cycle. The problem with the Laffer curve theories is that they simply haven't been verified by actual events. Reagan, you'll recall, had to *raise* taxes a year or two after his initial tax cuts to compensate for the enormous budget shortfall.

    Tax cuts on dividends and capital gains likely do have a positive effect on the economy, but there's simply no evidence that tax cuts on individual incomes--especially those of the richest Americans--have any effect at all. Look up the top rates and compare them to the rate of GDP growth over the past half-century. Even when the top rate was confiscatory, the GDP still grew at a level roughly equal to the rate today.

    What I dislike about tax cut zealots is that they believe that cutting taxes is the solution to every problem that government faces. Note that, when Clinton was moving our budget toward a surplus and the economy was humming along, that Norquist and his disciples still wanted tax cuts. They didn't seem to be concerned that additional tax cuts would overheat an already febrile economy.
     
  14. saosebastiao

    saosebastiao New Member

    May 22, 2005
    I don't have any problem with what you are saying, but the highlighted part is a little misleading.

    I would say that cutting government involvement is a solution to about 90% of the problems that the government faces, and will be good for the economy as a whole. The tax cuts just happen to go along with it:D
     
  15. VFish

    VFish Member+

    Jan 7, 2001
    Atlanta, GA
    Club:
    Atlanta
    Let’s clear up some misconceptions. First, supply-siders don’t claim all tax cuts pay for themselves. The Laffer curve simply encapsulates some pretty obvious and uncontroversial observations:

    1. Tax revenue is dependant on both tax rate AND TAX BASE
    2. Raising taxes discourages taxable behavior shrinking the base, offsetting some of the revenue gains
    3. Lowering tax encourages taxable behavior increasing the base, offsetting some of the revenue loss

    Whether or not a tax cut pays for itself depends where tax rate is on the Laffer curve. Furthermore, certain taxes are more responsive to cuts because tax payers are better able or more willing to change their taxable behavior. As you corrected noted investment taxes are extremely responsive to tax rates, as are marginal income taxes. Sales and property taxes are not that responsive. It is safe to say the Bush’s EITC and the 10% bracket didn’t pay for themselves.

    And history is full of examples when income tax cuts were followed by economic growth and increased revenues - the Mellon tax cuts of the 20s, the Kennedy tax cuts of the 60s. As for Reagan, When he entered office the top marginal rate was 70%, when he left office was 28% yet revenues rose by something like 65%. True he raised the capital gains rate, but that was a quid pro quo agreement that Democratic congress would cut spending $2 for every $1 tax increase. Of course Congress reneged on that deal, which brings me to my last point…

    What I dislike about class warriors is that they believe that raising taxes on the evil rich is the solution to every problem that government faces. They fail to acknowledge there are two sides to budget equation, revenues and spending. Bush’s real failure has been his inability (or unwillingness) to control government spending.
     
  16. ratdog

    ratdog Member+

    Mar 22, 2004
    In the doghouse
    Club:
    Chicago Red Stars
    Nat'l Team:
    United States
    110% wrong. The increased tax revenue was caused by the stimulus (to both the stock market and to the general economy) of lower rates. For more, go here:

    https://www.bigsoccer.com/forum/showthread.php?t=468985&highlight=cuts+themselves&page=5

    This "tax cuts pay for themselves" (TCWPFT) nonsense keeps popping up like a supposedly dead killer in a slasher film franchise and it fails every time because nobody can explain how it would have happened - because it didn't. Like holocaust denial or the so-called 'Protocols of the Elders of Zion', the reason it has kept popping up and will keep popping up until the sun goes supernova despite being desicively refuted each and evey time is that it has an irresistable appeal to a certain political outlook and some (but not all) of the proponents of that outlook tend to prize their wishful thinking over objective reality.

    When most citizens of the USA pay tax rates of 95%, then the "TCWPFT" argument will have some validity. Until then, it is a waste of time and bandwidth. My argument stands while TCWPFT lies broken and smoking in a charred heap of rubble.
     
  17. saosebastiao

    saosebastiao New Member

    May 22, 2005
    Read V Fish's post already.
     
  18. ratdog

    ratdog Member+

    Mar 22, 2004
    In the doghouse
    Club:
    Chicago Red Stars
    Nat'l Team:
    United States
    I did. He's still wrong, although I'll give him points for the straw man at the end of his post. It's too bad you didn't bother to read the thread I linked to in my post or you'd have learned that this isn't the first time his arguments have been kicked to the curb.
     
  19. ratdog

    ratdog Member+

    Mar 22, 2004
    In the doghouse
    Club:
    Chicago Red Stars
    Nat'l Team:
    United States
    Then it's a good thing I never said it would do all those things. Nice straw man, though. 'A' for effort.

    What stopping the wasteful spending in Iraq WOULD do is save us money that could be used to pursue domestic objectives that we cannot pursue as efficiently as we could if we weren't paying interest to waste so much money. Ending the war would, btw, also help lower interest rates if we stopped borrowing as much as we do now to pay for the war.

    Then at least the money would go back to taxpayers but not in the form you'd like it to. I'd prefer we take advantage of stopping the bleeding to invest intelligently in America so that even if we still spent the same initially and then decreased spending as time wore on, it will create dividends down the road. Right now, you (and your grandkids) are being taxed on billions of dollars that are being flushed down the toilet while Iran laughs at us. Meanwhile, our infrastructure rots while China modernizes theirs partly on the interest we pay them pretty much regardless of how much Bush wants to devalue our currency. That's kinda dumb on our part and it's time we face up to it like adults instead of retreating into pathological denial. It's just a shame that I don't trust the likely Dem winners to use any "peace dividend" as wisely as I'd like and I distrust the Reeps even more seeing as they got us into this mess in the first place.

    Oh, and I somehow missed danny's question from earlier:

    The answer is "No, because we just kept borrowing". You see, that's what Reeps do. They borrow-and-spend, which is worse than tax-and-spend because it costs us interest. It's a shell game. They "lower" taxes but then just borrow more which will eventually have to be paid back later by taxes. People taken in by this snake oil or the myth of self-financing tax cuts in all but the highest tax rates should repeat the following line until they understand it: "There's no such thing as a free lunch".
     
  20. Sachin

    Sachin New Member

    Jan 14, 2000
    La Norte
    Club:
    DC United
  21. VFish

    VFish Member+

    Jan 7, 2001
    Atlanta, GA
    Club:
    Atlanta
    Please do follow his link, it's an interesting discussion on investment taxes, which are most responsive to tax cuts. Nothing gets kicked to the curb but it is amusing to watch a certain peacock strut.
     
  22. wolfp10

    wolfp10 Member

    Sep 25, 2005
  23. Wingtips1

    Wingtips1 Member+

    May 3, 2004
    02116
    Club:
    Liverpool FC
    that is what you miss joe, we don't like gov't intervention. I think the bailout is absolute BS. I don't think the Fed should be lowering rates. if you're an individual and you bit off more than you could chew, have fun being homeless. if you're a business built on CDO's and you didn't foresee problems with SUB-prime (ie, more risk!) mortgages and debt, have fun in the unemployment lines.

    in spite of such miscalculation, the capitalist economy is going to continue to move forward. we've seen job #'s come in solidly. we've seen consumer spending and retail reports coming in ahead of predicted.
    the individuals and companies who have behaved as they should will come out of this disastrous time very much ahead. you will see the rich get richer since the middle class and poor tried buying themselves to 'prosperity' (a four bedroom, 2.5 bath house with all the electronic toys and a new prius hybrid in the driveway) with debt and failed miserably. and that is capitalism: to the winners go the spoils.
     
  24. saosebastiao

    saosebastiao New Member

    May 22, 2005
    Oh I read it alright...which is why I have completely stopped responding to him. It took a while for his true ridiculousness to come out...but once it did, it revealed enough about him to be able to move on.
     
  25. ratdog

    ratdog Member+

    Mar 22, 2004
    In the doghouse
    Club:
    Chicago Red Stars
    Nat'l Team:
    United States
    Come back when you can distinguish between correlation and causation and the requirement for each. And if you ever do figure those out, please inform wingtips and danny because they have no clue either, apparently.

    ------------------------------

    For everyone else:

    I had hoped that the level of discourse would be higher than all the other threads involving supply-siders, TCWPFTers, creationists and other habitual victims of pathological denial. Sadly, we seem to be already past the point where they've realized that facts and reason do not support their partisan prejudices. Therefore, rather than address the substance of opposing arguments, they studiously avoid that substance while switching from legitimate discussion to cheap illegitimate debating tactics like ad hominem attacks, straw men, "burden of proof" fallacies, unsupported assertions, substituting volume and vitriol for substance, false dichotomies and other nonsense in their desperate bid to deny the obvious.

    I'm going to give this discussion one last shot, though, just to see if there is anyone out there who can respond to the content of what I've posted rather than waving the white flag like VFish and danny have...

    One of the most pernicious of the tactics used by the TCWPFT crowd has been ripping factoids out of any context in order create a false causation by confounding causality with mere correlation. I'll provide a humorous example here:

    "Do you want to be attacked by a tiger? Of course not! So you need to buy one of my Amulets of Tiger Protection (ATP) that render people invulnerable to tiger attacks. My parents bought one for me when I was born and I'm living proof that they work. In fact, my amulet is so powerful that tigers won't even dare TRY to attack me. I know my amulet works because I have NEVER been attacked by a tiger, not even once. so there is a 100% correlation between my wearing the amulet and avoidance of tiger attacks! In fact, I'll go you one better: I've tested my amulet on several occasions by standing in full view of a tiger less than 50 yards away from me and the tiger did not even try to attack me. I have dozens of credible eyewitnesses who swear to the facts above, including zoologists and big cat trainers from circuses. So obviously, the only explanation is that my ATP is too powerful for tigers. Amulets are $50.00 each."

    So, we have a few factoids that seem to prove the effectiveness of the amulet:

    1) 100% correlation between wearing the amulet and no tiger attacks.

    2) Seeming empirical testing of amulet in front of a live tiger again with no attack made.

    At this point, TCWPFTers will run out to buy their amulets but the rest of us will start doing some fact checking to put the ATP claims in their proper context before handing over our money. When we do we find that the claimant is from Minneapolis and that he tested the amulet solely in North American zoos. From this, we further find that tigers are not native to North America, that zoo-kept tigers are separated from zoo-goers by fences and large pits and that healthy tigers generally do not attack humans unless somehow provoked. Further, 99.99999999% of Americans do not own ATPs and yet there have been no recorded tiger attacks on human in North America that do not involve someone somehow entering the tiger cage at a zoo.

    Once we put the claims in their proper context, of course, more robust explanations for the supposed efficacy of the amulet are quickly arrived at. These anti-amulet explanations are more robust because they correlate better with ALL known facts and observations and the context those facts and observations inhabit.

    ----------------

    The same is true for the more serious topic of economics. TCWPFTers try to just provide tax rates and tax revenue figures alone with no context because they cannot explain HOW tax cuts would produce more revenue and they cannot even show any special correlation between the two that cannot be explained better by more robust observations and reasoning.

    The TCWPFTers cannot explain how tax cuts alone automatically pay for themselves unless tax rates are above 90%. wingtips tried to argue that tax cuts boosted productivity but the data show no such boost. Another argument has been that tax cuts boost overall economic activity by boosting spending as taxpayers have more $$$ in their pockets. The problem with this is that GDP most closely tracks the Fed funds rate with a 6-12 month lag, not changes in tax policy because while tax cuts might provide a tiny short-term pop in activity, that blip will quickly be swamped by price and production adjustments and therefore create lower rates of growth as the short-term pop winds down.

    As the following graph shows, from 1953 through 2006, having the highest marginal tax rates above 90% generally did choke off GDP growth to below optimal. But then so did tax rates below 40%.

    http://bp2.blogger.com/_yBU2IH33oeM...Growth+Rates,+Graph+1+-+Top+Marginal+Rate.jpg

    The graph also implies that our income tax rates have below the optimum for many years now and may include a hint as to why Dem presidents have historically presided over higher real GDP growth per capital than Reeps.

    The capital gains tax situation, btw, is as follows:

    http://bp3.blogger.com/_yBU2IH33oeM...rowth+Rates,+Graph+3+-+Capital+Gains+Rate.jpg

    Sadly, I don't think any conclusions can be drawn here as we have never had capital gains tax rates above 90% but it does imply that so far capital gains rate changes haven't had much effect on GDP.

    About the only solace TCWPFTers can take from this is that it is also invalid for anyone to argue that raising taxes above 60% causes economic growth.

    Also, TCWPFTers cannot account for the facts that historically, tax receipts do not correlate well with changes in tax rates alone. Tax revenues almost doubled in the 1980s, rising 99.6%. However, they had likewise doubled during EVERY SINGLE DECADE SINCE THE GREAT DEPRESSION! They went up 502.4% during the 1940s, 134.5% during the 1950s, 108.5% during the 1960s, and 168.2% during the 1970s. At 96.2 percent, they nearly doubled in the 1990s as well. Furthermore, the receipts from individual income taxes (the only receipts directly affected by Reagan's tax cuts) went up only 91.3% during the 1980s. Meanwhile, receipts from Social Insurance, which is directly affected by the FICA tax rate, went up 140.8%. This large increase was largely due to the fact that the FICA tax rate went up 25% from 6.13% to 7.65% of payroll. Hence, the claim that the doubling of TOTAL revenues proves the effectiveness of tax cuts is including revenues which resulted from a tax hike to prove the effectiveness of a tax cut.

    In Bush's case, his tax cuts were made at the same time the Fed was busily lowering interest rates to historically low levels to boost the economy. Bush also engaged in massive Keynesian government deficit spending. Given the non-correlation of tax policy to tax receipts and the well-documented correlation between changes in the Fed funds rate and GDP as well as the documented rebirth of LBOs as a business strategy in response to not only tax policy but to lack of more profitable alternatives, the rational conclusion is that the twin stimulative factors of rate cuts and government deficit spending are responsible for causing the economic growth and stock market behavior that increased tax receipts while tax cuts cannot explain claim that credit.

    In short, the evidence here and elsewhere shows that once tax cuts are placed into the overall economic context in which they took place, the argument that they and not other factors like lower rates, government deficit spending, or hidden tax hikes, etc. are repsonsible for increased tax revenues is discredited. Let's see if anyone cares to respond to content with facts and reason or whether they'll just duck, dodge and distract as usual.
     

Share This Page