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That's the theory, but thats not what really happens.
What we found from the first tax cuts that peopler paid down debt but didn't eliminate it. So their credit card balances went from $15,000 to $12,000. They still have hefty payments. (just a random hypothetical)
Therefore, that money, if spent in the economy, could have helped. But that's not what happened. Therefore (RSR, repeat after me) tax cuts DO NOT work every time.
Government spending is inherently wasteful because they do not make economic decisions based upon profit or loss. There is no feedback signal like private businesses have. Governments also tend to have centralized decision-making bureaucracies, which cannot make important decisions as quickly as a decentralized system of millions of people acting in their own self-interest. (Not that private companies are totally immune to this; excessive bureaucracy has been the downfall of many big companies, but at least they are punished by the market unlike government) Finally, governments make economic decisions based on what will get politicians the most votes, rather than on hard economic reality. If government could make the correct economic decisions, then centrally planned socialism would work.
A few other points:
* Government statistics should always be taken with a grain of salt. The feds have repeatedly changed the way inflation and unemployment are measured for example. If we were measuring things the way we did a few decades ago, inflation would be around 8% now, and unemployment would probably be somewhere around 12%. This isn't something new or unique to the Bush administration of course.
The problem has become bad enough that economist John Williams actually runs a subscription-based website which gives adjusted numbers for inflation, GDP, monetary expansion, unemployment, etc.
www.shadowstats.com
* Tax cuts are good because a smaller government leaves more money in the hands of the free market. The key point here is smaller government though, and the real number to look at isn't tax rates, it's government % share of the economy. Let's say we cut taxes but maintain or increase spending. The resources that the government is hogging have to come from somewhere. And that "somewhere" is currently borrowing and money printing.
So we haven't really reduced the heavy yoke of government; we've just shifted it around. Looking at inflation, well it's basically a stealth flat tax. And we were running the printing presses (so to speak) red hot from 2001-2005. (Note: the banks are given the priviledge of creating the bulk of the money supply, coordinated by the fed. Thus we see a tidal wave of cheap money which lead to the housing boom, which has taken a nose dive in recent months and will create a spectacular crash in the months ahead) In fact the fed had to quit reporting the M3 money supply statistics. (Supposedly this is to cut costs--ha! From an organization that creates it's budget out of thin air.)
Then you've got borrowing. "But Baron, borrowing isn't necessarily bad; as long as we have a big strong economy in the future to pay for it!". Well, no. When the government borrows money, it isn't hopping into Doc Brown's time traveling DeLorean to travel into the year 2036, when we're all richer and can more easily afford to pay 2006's tax bills. No, the money the government soaks up via bonds represents resources that could have gone towards say...corporate bonds. Or whatever alternative investment people would have chosen in the private economy. The steel, gasoline, labor, etc. gobbled up by leviathan could have stayed in private hands and improved our standard of living.
Anyway, this should not be taken as a swipe at republicans specifically; democrats have proven themselves bad too. I am not arguing one party or another, I am arguing bad policy vs. good policy, regardless of who's in charge.
* Jude Waninski was a fan of tax cuts, but even he pointed out that some tax cuts are better than others at producing a supply-side effect. Namely, taxes that punish capital formation (capital gains tax) are the worst and should be cut to zero. In his book "The Way The World Works", he also points out that just looking at simple tax rates can be deceptive. Japan may appear to have high taxes, but they also have loopholes big enough to drive a truck through.
Unfortunately he mostly overlooked the role of inflation and borrowing as stealth taxes. Although in his defense, inflation would not be nearly as big of an issue under his ideal monetary system, a sort of quasi-gold standard similar to Bretton Woods.
possible.....what did the banks do with all that cash?
oh yea revenue...paid taxes on it.... then loaned it to a developer that built housing and hired people to do it....then they spent that money and bought more shit...(just a random hypothetical)
You go back and check, nearly every news story has the same slant; "the recent job numbers surprised experts" or "the recent increase in government reveues surprised experts".
My favorits is "the Labor Dept reported and unexpected decrease in unemployment numbers"
It has been going on for the last four years. Every month the good economic news keeps coming in, and the "experts" continued to be surprised.
Perhaps the liberal media should hire some real experts who know basic economic principals.
But what you're missing is that most of that money is cash being brought back in that they paid to the firms who were paid by the credit card companies when the consumers used the CC.
And the interest on the credit cards doesn't play a factor because the consumers pay interest regardless of whether Bush cut taxes...if anything, the firms have a little less projected money because the money was used to pay down the debt and therefore the money paid in interest will decrease slightly.
does anything go well in your world?
Yay, a nice, well thought out Economic post. Some points though. The government still wants to utility maximize and get the best for its money. Can't it do that at high efficiency through bid contracting of private firms?
Also I disagree with you about inflation being an important issue really. Inflation only works as a tax on currency, so money held as deposits is usually pretty safe unless you have large/unpredictable inflation.
That is not true. Tax cuts only help in certain circumstances, and in 2001 - 2003, there weren't good circumstances.
You need to review some economics. The Laffer Curve, and the opinion of nearly every economist on the planet, differs with the idea that tax cuts are good for any economy whatsoever.
Now, if tax revenues are getting so high, why can't we pay down the national debt? Because Bush and the GOP congress spend money like drunken sailors. Bush and the GOP Congress are anything BUT Conservative.
How about we cut spending while this revenue growth continues and then we can pay down the debt? Sound like a plan?
Why can't the fake Conservatives (GOP) see this?
Guess who wants to expand the education beaurocracy at the federal level
It was Carter that worked at making DOEd cabinet level, but Reagan failed to follow through and kill it. Big mistake.Both parties do. The republicans control the House, Senate, and Presidency...and during their tenure, the Department of Education has seen big increases in it's budget. Which is sad, because Republicans used to be in favor of abolishing it (when they were out of power, conveniently enough). In many ways, Bush is really just LBJ 2.0.
WRONG,,taxes merely determine where money will go, to the private sector, or public sector. The govt doesnt produce anything,
also, the main reason the Repubs dont cut spending is because they barely have a majority, and often some of them are quite liberal. Bush wanted to revise Social security, which would help reduce the deficit, but guess who opposed it. When they signed the prescription bill, guess who said it wasnt enough, CLUE, my sig line.
Guess who wants to expand the education beaurocracy at the federal level
The Republicans now a days bear almost no resemblence to Goldwater. My guess is that he would be ashamed of what the GOP has become.
That's one of the stupidest posts I've read on this board.
The GOP doesn't cut spending because they barely have a majority? That shouldn't mean SHIT. Stand by your principles or leave Washington. Oh wait, thats the whole point. None of the bastards in Washington, whether Republican or Democrat, stick to honest principles.
Secondly, Bush's social security program WAS in theory a very expensive plan for the Federal government because they would of had to fill the empty Social Security trust fund.
Thirdly, you state "Guess who wants to expand the education beaurocracy at the federal level" GEORGE W. BUSH DOES. All this "No Child Left Behind" law states is a ton of mandates from the FEDERAL LEVEL. Teddy Kennedy helped on the bill, BUT IT WAS THE EDUCATION POLICY THAT BUSH RAN ON IN 2000.
Talk about stupid posts, read your again.
Libs are so angry over this booming economy. They were ranting how the Bush tax cuts would destroy the economy, high gas prices would plunge the US into a recession, people would be thrown out of work, ect, ect, ect.
The Bush haters will never admit his tax cuts have taken us out of the Clinton recession, helped created millions of new jobs, overcame the 9-11 attacks (the Dow is up nearly 4,000 points from its post 9-11 mark) and has created wealth for workers via their 401K plans.
Can you say "Dow 12,000"?
We did go into a recession after the tax cuts.
I wouldn't exactly say that the Economy is booming as it is just about the level it was when Bush took office.
Nobody is angry because they think the economy is doing well.
You know that famous liberal economist Paul Krugman literally wrote the book for Economics 101.
You also have to look behind the numbers. There are liberal explanations for everything. Here's on example: a reason to be surprised by low unemployment is because people out of work have stopped looking for jobs and therefore are counted towards unemployment.
Now I've never had whatever Economics 101 is (what do they teach in there, micro, macro, both?) but I know that the increase in revenue is not surprising given our government spending. You know that government spending will always increase the GDP, it is one of the major factors in calculating it. I say it's too early to proclaim these tax cuts effective, especially while financing a war.
Now here's a question for you, so you can help me learn whatever they do teach in Econ 101. Economic growth is measured through the GDP. Both governmental spending and tax cuts increase the GDP. The government will spend all the tax revenue (and more!) while not everybody will spend the money they recieve from their tax cuts, so therefore the government maximizes the effectiveness of the money, and on the other hand giving it to citizens will have a higher opportunity cost. Can you tell me why tax cuts are a more effective means for raising the GDP than governmental spending?
Talk about stupid posts, read your again.
Libs are so angry over this booming economy. They were ranting how the Bush tax cuts would destroy the economy, high gas prices would plunge the US into a recession, people would be thrown out of work, ect, ect, ect.
The Bush haters will never admit his tax cuts have taken us out of the Clinton recession, helped created millions of new jobs, overcame the 9-11 attacks (the Dow is up nearly 4,000 points from its post 9-11 mark) and has created wealth for workers via their 401K plans.
Can you say "Dow 12,000"?
The economy was slowing before the 2000 election. Remember how Dems bellowed how "Bush is talking down the economy"?
The tax cuts lifted the economy out of recession and has provided the booming economy.
Libs are very angry. The Dems have invested their political future in the failure of the US econony and the war on terror.
The only way Dems gain is when Amercia loses
Your name is a reference to a tool of mathematics which is commonly used in macroeconomic dynamic optimization? If you can set up and solve hamiltonians (in any field in which they are used) you could probably read and understand a Ph.D. level macro text. An intro text would be a breeze.
So where is the name from? Just wondering.
And people not looking for jobs are NILF - not in labor force - and do not count toward the unemployment number.
You talk about economics 101 so much, but you don't even know what the proper definition of a recession is. A recession is two quarters in a row of negative growth. We didn't experience that until 2002. So, you are wrong.
I don't want to nitpick, but someone might bring up that this isn't entirely true in the circumstances we are discussing. The standard definition of a recession is two quarters in a row of negative growth, but the definition is slightly flexible and after the tax cuts I do not believe we experienced two consecutive quarters of negative growth. The quarters of negative growth were not consecutive, but considering other factors the NEBR decided that it was actually a recession. However, you are still correct about there not being a recession when Bush came into office.
