How do Tax Cuts hurt the economy?

[Mr Natural]

If a tax cut puts more money in your pocket, chances are you'll spend more.

If you spend more, demand for products and services increases thereby driving up prices.

Tax cuts are inflationary.

 

[Vegas Pat]

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.

Tax cuts aren't good or bad depending on whether or not spending is reduced.
Anytime gov't lets people keep more of their own money, it's a good thing. More money in private hands increases the pool of real saved capital which is essential for real economic growth.
Deficit spending increases the money supply 'out of thin air'. This monetary inflation, coupled with credit expansion by the federal reserve is what causes the distortions in the market which creates bubble situations. Not to mention it causes the devaluation of the monetary unit which we see in rising prices and things like evaporating 401k's.

It is the monetary policy of easy credit and inflation of the money supply which at the root of all economic booms and busts. Lower tax rates is just less of our wealth that will be redistributed from potential economic growth opportunities to those privileged few at the expense of everyone else.

 

[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

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.

Show me when in the last 30 years that's happened.

Interest rates should be back at 15% if that were true.

 

[antagon]

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

the only relationship between asset value and tax cuts in an underfinanced government model like ours in the US is inflation.

do you really think businesses endeavor to trade less because of taxes, more when there's a tax cut? i could understand businesses investing more profits in capital as a tax shelter.

the post-reagan tax-cut economy boost is something mostly appreciated by market investors and the like. it seems to increase the share of that activity in the economy. stocks, while great fun and good money for some, are not really a dominant factor in the economy.

not like the government does. the public sector is a big one which puts more wealth into the economy than the stock market, by far. it better facilitates commerce, hires more, spends more and is more stable. uncle sam doesnt run a tight ship, but you've almost entirely written off the value of the public sector in the economy, then proposed a lesser component in its place.

good ol' mainstreet capitalism and investments in real biz, not large, public firms, account for the majority of jobs and the majority of wealth in the US. there's little virtue in wide sweeping cuts. history dictates as much. targeted tax cuts which bolster specific deductions, however, seem to help real-world people save or build businesses.

 

[antagon]

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 see a direct connection. those tax cuts came with massive increases in spending: off the books, straight to market spending on the wars, to boot. that public finance style, AKA voodoo economics, explains the basement interest rate policy which precipitated the crisis more than any other factor related to government. funny how reagan's policies worked in a mirror image with the S&L crisis.

editec nailed it: interest rate boom, *pop*, interest rate bust.

 

[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

the only relationship between asset value and tax cuts in an underfinanced government model like ours in the US is inflation.

do you really think businesses endeavor to trade less because of taxes, more when there's a tax cut? i could understand businesses investing more profits in capital as a tax shelter.

the post-reagan tax-cut economy boost is something mostly appreciated by market investors and the like. it seems to increase the share of that activity in the economy. stocks, while great fun and good money for some, are not really a dominant factor in the economy.

not like the government does. the public sector is a big one which puts more wealth into the economy than the stock market, by far. it better facilitates commerce, hires more, spends more and is more stable. uncle sam doesnt run a tight ship, but you've almost entirely written off the value of the public sector in the economy, then proposed a lesser component in its place.

good ol' mainstreet capitalism and investments in real biz, not large, public firms, account for the majority of jobs and the majority of wealth in the US. there's little virtue in wide sweeping cuts. history dictates as much. targeted tax cuts which bolster specific deductions, however, seem to help real-world people save or build businesses.

This is why people should work in the private sector before posting about economics.

You have no understanding at all about how an economy works and your love of government spending shows you were poorly educated.

The public sector does not "puts more wealth into the economy than the stock market" at all let alone "by far"

it's almost as if you are speaking a foreign language.

F

 

[uscitizen]

How do tax cuts hurt the economy?

Well how would a pay cut hurt your economy?

 

[Old Rocks]

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?

OK, tell me again how the Bush tax cuts made this a great economy

 

[Oddball]

How do tax cuts hurt the economy?

Well how would a pay cut hurt your economy?

How would pulling a tick off of your neck help your general level of health?

 

[antagon]

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

the only relationship between asset value and tax cuts in an underfinanced government model like ours in the US is inflation.

do you really think businesses endeavor to trade less because of taxes, more when there's a tax cut? i could understand businesses investing more profits in capital as a tax shelter.

the post-reagan tax-cut economy boost is something mostly appreciated by market investors and the like. it seems to increase the share of that activity in the economy. stocks, while great fun and good money for some, are not really a dominant factor in the economy.

not like the government does. the public sector is a big one which puts more wealth into the economy than the stock market, by far. it better facilitates commerce, hires more, spends more and is more stable. uncle sam doesnt run a tight ship, but you've almost entirely written off the value of the public sector in the economy, then proposed a lesser component in its place.

good ol' mainstreet capitalism and investments in real biz, not large, public firms, account for the majority of jobs and the majority of wealth in the US. there's little virtue in wide sweeping cuts. history dictates as much. targeted tax cuts which bolster specific deductions, however, seem to help real-world people save or build businesses.

This is why people should work in the private sector before posting about economics.

You have no understanding at all about how an economy works and your love of government spending shows you were poorly educated.

The public sector does not "puts more wealth into the economy than the stock market" at all let alone "by far"

it's almost as if you are speaking a foreign language.

F

actually frank, your 'worth of stuff analysis' is the real joke. i dont know where you'd need to work or what education you need to get a clue, but you should get one before you yap about how businesses function in an economy.

the government constitutes about 33% of the economy and finance is, what, 5-6%? there's maybe a trillion in that, that is +/- $1,000,000,000,000 difference.... 'by far' by my standard. i put 250k miles on public roads last year (doing my taxes and in a bad mood). i didnt rack up any mileage on wallstreet. we did some gubmint contracts, worked for servicepeople around our local AFB, did section 8 compliance work - among our share of deals last year.

without riding the gubmint's jewels, there is little comparative value in terms of mainstreet benefits from sales of stocks where small business ownership is concerned. the concerns of big, public businesses are almost the antithesis of smaller firms, and these smaller companies really drive our economy and put people to work.

 

[CrusaderFrank]

the only relationship between asset value and tax cuts in an underfinanced government model like ours in the US is inflation.

do you really think businesses endeavor to trade less because of taxes, more when there's a tax cut? i could understand businesses investing more profits in capital as a tax shelter.

the post-reagan tax-cut economy boost is something mostly appreciated by market investors and the like. it seems to increase the share of that activity in the economy. stocks, while great fun and good money for some, are not really a dominant factor in the economy.

not like the government does. the public sector is a big one which puts more wealth into the economy than the stock market, by far. it better facilitates commerce, hires more, spends more and is more stable. uncle sam doesnt run a tight ship, but you've almost entirely written off the value of the public sector in the economy, then proposed a lesser component in its place.

good ol' mainstreet capitalism and investments in real biz, not large, public firms, account for the majority of jobs and the majority of wealth in the US. there's little virtue in wide sweeping cuts. history dictates as much. targeted tax cuts which bolster specific deductions, however, seem to help real-world people save or build businesses.

This is why people should work in the private sector before posting about economics.

You have no understanding at all about how an economy works and your love of government spending shows you were poorly educated.

The public sector does not "puts more wealth into the economy than the stock market" at all let alone "by far"

it's almost as if you are speaking a foreign language.

F

actually frank, your 'worth of stuff analysis' is the real joke. i dont know where you'd need to work or what education you need to get a clue, but you should get one before you yap about how businesses function in an economy.

the government constitutes about 33% of the economy and finance is, what, 5-6%? there's maybe a trillion in that, that is +/- $1,000,000,000,000 difference.... 'by far' by my standard. i put 250k miles on public roads last year (doing my taxes and in a bad mood). i didnt rack up any mileage on wallstreet. we did some gubmint contracts, worked for servicepeople around our local AFB, did section 8 compliance work - among our share of deals last year.

without riding the gubmint's jewels, there is little comparative value in terms of mainstreet benefits from sales of stocks where small business ownership is concerned. the concerns of big, public businesses are almost the antithesis of smaller firms, and these smaller companies really drive our economy and put people to work.

Section 8 Compliance? Now you're talking my language!

You miss the point, it's not about public stock offerings, it's about human nature and American entrepreneurship. American small business are the biggest wealth and job creators and they need a sane stable, constrained public sector. We don't have that noe and that's what we need to get back to

 

[Toro]

Show me when in the last 30 years that's happened.

Interest rates should be back at 15% if that were true.

How very Keynesian of you.

This is the "deficits don't matter" argument that so wrongly permeated the Republican Party and much of the Right for the last 30 years, at least until now anyways when it has become politically expedient to posture otherwise.

Want proof?

Here is a picture of corporate credit spreads

Corporate credit spreads began to rise in the 1960s, 1970s and 1980s as government spending and deficits grew larger. Spreads fell in the 1990s as the deficit narrowed and the budget went into surplus. With the government borrowing less, there is less crowding out of demand for capital to the private sector. This lowers interest rates paid for borrowing by the private sector. This is the penalty government borrowing extracts on the private sector.

As Keynes noted, when there is excess capacity in the economy, rates will stay low. That is implicit in your argument. But when capacity tightens, rates will move higher as capital becomes dearer.

 

[Neubarth]

Show me when in the last 30 years that's happened.

Interest rates should be back at 15% if that were true.

How very Keynesian of you.

This is the "deficits don't matter" argument that so wrongly permeated the Republican Party and much of the Right for the last 30 years, at least until now anyways when it has become politically expedient to posture otherwise.

Want proof?

Here is a picture of corporate credit spreads

Corporate credit spreads began to rise in the 1960s, 1970s and 1980s as government spending and deficits grew larger. Spreads fell in the 1990s as the deficit narrowed and the budget went into surplus. With the government borrowing less, there is less crowding out of demand for capital to the private sector. This lowers interest rates paid for borrowing by the private sector. This is the penalty government borrowing extracts on the private sector.

As Keynes noted, when there is excess capacity in the economy, rates will stay low. That is implicit in your argument. But when capacity tightens, rates will move higher as capital becomes dearer.

The solution to this Toro is for the US government to stop borrowing from the public and foreign nations. We just need to borrow from the FED, interest free.

 

[antagon]

This is why people should work in the private sector before posting about economics.

You have no understanding at all about how an economy works and your love of government spending shows you were poorly educated.

The public sector does not "puts more wealth into the economy than the stock market" at all let alone "by far"

it's almost as if you are speaking a foreign language.

F

actually frank, your 'worth of stuff analysis' is the real joke. i dont know where you'd need to work or what education you need to get a clue, but you should get one before you yap about how businesses function in an economy.

the government constitutes about 33% of the economy and finance is, what, 5-6%? there's maybe a trillion in that, that is +/- $1,000,000,000,000 difference.... 'by far' by my standard. i put 250k miles on public roads last year (doing my taxes and in a bad mood). i didnt rack up any mileage on wallstreet. we did some gubmint contracts, worked for servicepeople around our local AFB, did section 8 compliance work - among our share of deals last year.

without riding the gubmint's jewels, there is little comparative value in terms of mainstreet benefits from sales of stocks where small business ownership is concerned. the concerns of big, public businesses are almost the antithesis of smaller firms, and these smaller companies really drive our economy and put people to work.

Section 8 Compliance? Now you're talking my language!

You miss the point, it's not about public stock offerings, it's about human nature and American entrepreneurship. American small business are the biggest wealth and job creators and they need a sane stable, constrained public sector. We don't have that noe and that's what we need to get back to

i live by the economic sweetspot that is the middle class and small business 'sector'. this is where virtually all the money gets made, by the wealthy, middleclass and poor.

if your heart is in the right place, the rhetoric that you subscribe to doesnt cater to this band of the economy. if you put aside some of the nebulous psychology/human nature/joe the plumber presumptions politicians buy votes with, you could appreciate what is really going on.

first off, the size of the public sector does not have any direct relevance to running a small business, in fact, if my local and federal government 'constrained' itself by closing the base, even by reducing entitlements, tens of millions of dollars of commerce would be lost to businesses like mine, just in my city alone.

the government doesnt compete with my business for finance like it does these these big businesses that fund your brand of political hype. i emphasize public stocks, because you mentioned capital gains cuts, sweeping tax cuts and this idea of miniaturizing government, which has nothing to do with the majority of the economy. i do, indeed, submit the the economy may suffer through these measures. if you look at the economy through criteria beyond the GDP and the DOW avg, you could too.

real tax incentives offered through targeted deductions or, say, payroll tax relief will impact this economy positively. bush-style tax relief is not good economic sense. in a year i did well, the AMT in his 03 package fucked me. because of it, in '05 i 'overinvested' in my business per the tax code, and lacked any shelter for my exceptional sales that year. i could give a shit about the 3-4 points i saved when my ass was hanging out thousands on inputs which my business needed. me and a few other (hundreds of thousands) folks were tattooed (for billions).

you propose a tonic that would just permanently shift our economy a bit further in the direction of the financial sector... that is characterized by economic growth without commensurate employment, outsourcing and a larger trade deficit. look at the policy, look at the stats.

 

[antagon]

show me when in the last 30 years that's happened.

Interest rates should be back at 15% if that were true.

how very keynesian of you.

This is the "deficits don't matter" argument that so wrongly permeated the republican party and much of the right for the last 30 years, at least until now anyways when it has become politically expedient to posture otherwise.

Want proof?

Here is a picture of corporate credit spreads

corporate credit spreads began to rise in the 1960s, 1970s and 1980s as government spending and deficits grew larger. Spreads fell in the 1990s as the deficit narrowed and the budget went into surplus. with the government borrowing less, there is less crowding out of demand for capital to the private sector. This lowers interest rates paid for borrowing by the private sector. this is the penalty government borrowing extracts on the private sector.

As keynes noted, when there is excess capacity in the economy, rates will stay low. That is implicit in your argument. But when capacity tightens, rates will move higher as capital becomes dearer.

the solution to this toro is for the us government to stop borrowing from the public and foreign nations. We just need to borrow from the fed, interest free.

c r e d i t s t a g f l a t i o n