How do Tax Cuts hurt the economy?

[CrusaderFrank]

I've seen this stupid "Tax cuts hurt the economy" nonsense posted by every Lib here and want someone to tell me how that's supposed to work.

Do people not know that the US economy and the Federal government are 2 different things?

 

[PLYMCO_PILGRIM]

[ame=http://www.youtube.com/watch?v=K8E_zMLCRNg]YouTube - Cricket Sound[/ame]

 

[Toro]

Tax cuts don't usually hurt the economy, at least not that I know of. However, they don't always help the economy either, at least in the short-term.

When people are busy saving money and not spending because they are afraid they are going to lose their jobs, tax cuts will have almost no effect because the extra money goes directly to repairing the balance sheets of individuals, which is pointless in a recession. All it does is transfer debt from the private sector to the public sector.

Over the long-term, tax cuts are usually - but not always - beneficial for the economy. However, any tax cut that is not matched by a spending cut is no different than a spending increase without a rise in taxes. You get a near-term pop in the economy because of deficit financing.

 

[PLYMCO_PILGRIM]

Good Post Toro.


This thread will get no traction, people dont like the truth when it conflicts with their ideology....especially when they are progressives like many liberals on this forum.

 

[Oddball]

When people are busy saving money and not spending because they are afraid they are going to lose their jobs, tax cuts will have almost no effect because the extra money goes directly to repairing the balance sheets of individuals, which is pointless in a recession.

Repairing balance sheets puts businesses in better position to borrow. Businessmen wouldn't borrow without some kind of idea that they could repay and still profit, which in turn would tend to spur productive growth.

Pointless?...I think not.

 

[boedicca]

It all depends upon the time horizon. We have sectors of the economy that are addicted to pork and people who are addicted to entitlements. Cutting them off (because tax cuts without spending cuts are not going to work), will result in a period of pain. The benefit is not in the "instant gratification" category. Over time, relatively quickly, if the private sector is confident that spending and taxes won't get rejacked up, it ill make investments leading to growth and jobs.

 

[uscitizen]

Umm what happens when the govt has less money coming in?
Borrow more or reduce spending?
Reducing spending directly relates to jobs and the economy.
Where do you think all that money winds up that the government spends?

 

[boedicca]

Where do you think all that money winds up that the government spends?

Consumption, fraud, and waste - which have very poor multipliers for spurring economic activity when compared to private investment in real businesses.

 

[Oddball]

Umm what happens when the govt has less money coming in?
Borrow more or reduce spending?
Reducing spending directly relates to jobs and the economy.
Where do you think all that money winds up that the government spends?

Where do you think Big Daddy Big Gubmint gets the money in the first place?

 

[uscitizen]

Where do you think all that money winds up that the government spends?

Consumption, fraud, and waste - which have very poor multipliers for spurring economic activity when compared to private investment in real businesses.

Well they had to buy something to waste didn't they?
Or hire someone?

I am not claiming it is efficient or anything, just that the govt spending is directly linked to the economy. a trillion or so spent in the USA has to have a wee bit of an effect I would think.

even the trillion spent on Iraq has an economic impact in the USA. Just not nearly as big of an impact as if it had been all spent here.

 

[NYcarbineer]

When tax cuts are not accompanied by proportionate spending cuts to account for the loss of revenue, deficits occur. The deficits add to the national debt, which must be serviced by interest payments out of tax revenues.

Interest on the debt is now a permanent inescapable tax that we have to pay before we pay for anything else.

 

[Liability]

I've seen this stupid "Tax cuts hurt the economy" nonsense posted by every Lib here and want someone to tell me how that's supposed to work.

Do people not know that the US economy and the Federal government are 2 different things?

U.S. Government =/= U.S. Economy.

There.

I think I've got it, now.

 

[Liability]

When tax cuts are not accompanied by proportionate spending cuts to account for the loss of revenue, deficits occur. The deficits add to the national debt, which must be serviced by interest payments out of tax revenues.

Interest on the debt is now a permanent inescapable tax that we have to pay before we pay for anything else.

Carby, you old carbuncle! You FAVOR spending cuts?

Wow. Who'da thunked it?!?

 

[editec]

I've seen this stupid "Tax cuts hurt the economy" nonsense posted by every Lib here and want someone to tell me how that's supposed to work.

Do people not know that the US economy and the Federal government are 2 different things?

I can tell you how that works.

ARe you really interested in understanding how tax breaks can be (note it really depends on the specifics of the taxes and economy at the time) detrimental to society, or will you just tell me I don't understand economics if I take the time to really answer your (apparently) rhetorical question?

I ask before I respond, because I'd rather not waste my time, and annoy you by telling you something you'd rather not hear, anyway.

 

[NYcarbineer]

When tax cuts are not accompanied by proportionate spending cuts to account for the loss of revenue, deficits occur. The deficits add to the national debt, which must be serviced by interest payments out of tax revenues.

Interest on the debt is now a permanent inescapable tax that we have to pay before we pay for anything else.

Carby, you old carbuncle! You FAVOR spending cuts?

Wow. Who'da thunked it?!?

I favor a balanced budget and I favor making the people pay for the government they get when they get it.

 

[PLYMCO_PILGRIM]

When tax cuts are not accompanied by proportionate spending cuts to account for the loss of revenue, deficits occur. The deficits add to the national debt, which must be serviced by interest payments out of tax revenues.

Interest on the debt is now a permanent inescapable tax that we have to pay before we pay for anything else.

Carby, you old carbuncle! You FAVOR spending cuts?

Wow. Who'da thunked it?!?

I favor a balanced budget and I favor making the people pay for the government they get when they get it.

Me too...i finally agree with you on something. Considering I dont want to give any money to the government I'd like to shrink its sized drastically.

 

[del]

I've seen this stupid "Tax cuts hurt the economy" nonsense posted by every Lib here and want someone to tell me how that's supposed to work.

Do people not know that the US economy and the Federal government are 2 different things?

IMO, they hurt the economy when there isn't a matching spending cut.

this forces the govt to borrow more money which increases the deficit and debt and also removes money from the pool available for borrowing by private enterprise.

 

[CrusaderFrank]

OK, I'm only going to do this once.

Tax cuts make everyones stuff more valuable. If you own a business and receive a real tax cut, an income tax cut and a capital gains cut, the stuff you own becomes more valuable to you. So then most business people will now go out and buy and sell more of the stuff because they get mo' money from it net after tax. There's more activity, people take money out of their savings and/or will go to the bank or investors for more capital because they can put that capital to work buying and selling the stuff that just became more valuable. Then they have to hire more people to find more stuff and keep track of the stuff they already own.

Tax cuts BOOST the economy because everybody's stuff is more valuable. As the economy grows the gubbamint collects more revenue from the additional activity.

Vote for me in 2012 and I'll make your stuff more valuable

 

[editec]

I've seen this stupid "Tax cuts hurt the economy" nonsense posted by every Lib here and want someone to tell me how that's supposed to work.

Do people not know that the US economy and the Federal government are 2 different things?

I can tell you how they MAY hurt the economy. (note I said may, right?)

If a government gives tax breaks to people who don't really need them multiple problems can arise...

1. bubbles in financial markets that eventually pop, thus making that money that had been circulating (or that was thought of as unrealized gains) to completely evaporate

2. Government deficiet spending reduces the real value of money

3. Interest on the debt saddled to future generations limits their options.

To SOME extent (obviously this isn't the only problem, but it's part of it) the economy we're dealing with now has something to do with the enormous tax cuts Bush II gave his class.

I don't expect you to believe that, of course, because you're pretty obviously an antigovernment idealogue, but there's plenty of evidence to support that theory right in front of you if you're willing to take the time to read it without bias.

 

[Toro]

OK, I'm only going to do this once.

Tax cuts make everyones stuff more valuable. If you own a business and receive a real tax cut, an income tax cut and a capital gains cut, the stuff you own becomes more valuable to you. So then most business people will now go out and buy and sell more of the stuff because they get mo' money from it net after tax. There's more activity, people take money out of their savings and/or will go to the bank or investors for more capital because they can put that capital to work buying and selling the stuff that just became more valuable. Then they have to hire more people to find more stuff and keep track of the stuff they already own.

Tax cuts BOOST the economy because everybody's stuff is more valuable. As the economy grows the gubbamint collects more revenue from the additional activity.

Vote for me in 2012 and I'll make your stuff more valuable

If the tax cuts increase the deficit, it increases the interest rate at which you discount the value of your business's cash flow. Thus, the value of increased cash flow can be offset by the decrease in value from the increase in the discount rate to value the cash flows.