The ultimate vindication of Republican supply-side economics

[Widdekind]

The EOE, MV=PQ is an aggregate of all markets. Within that are individual markets

GDP = PQ_Oil + PQ_Television + PQ_HealthInsurance + PQ_other_markets.

Micro-economics studies, among other things, the performance of the individual markets like PQ_Oil. PQ is the equilibrium point of the supply and demand simultanious equations. Within that PQ_Oil is BP, Chevron, Texaco, Arco, Exxon, etc. They provide substitutes.

innovative entrepreneurism can create new markets, for new-and-novel goods & services:

MV = PQ ---> PQ + PQ_new

as such, entrepreneurism can deflate Prices, for constant spending (Money-supply); or keep Prices constant, for increasing spending (Money-supply)

 

[EdwardBaiamonte]

Government "revenues" only increased from 2003, perhaps reflecting massive Military appropriations for the Iraq war ?

1) appropriations don't increase revenue, 2) 2003 supply side tax cuts did preceed largest revenue gain in American History. Gain was from supply side tax cuts and over heated, inflated economy.

 

[Widdekind]

Government "revenues" only increased from 2003, perhaps reflecting massive Military appropriations for the Iraq war ?

1) appropriations don't increase revenue, 2) 2003 supply side tax cuts did preceed largest revenue gain in American History. Gain was from supply side tax cuts and over heated, inflated economy.

you mean legally? how could "appropriations" not increase "revenue" practically-speaking ?

war-spending boosted the economy ?

 

[EdwardBaiamonte]

how could "appropriations" not increase "revenue" practically-speaking ?

revenue comes from taxing, not spending

war-spending boosted the economy ?

war spending slows the economy since it requires taxes

 

[Widdekind]

how could "appropriations" not increase "revenue" practically-speaking ?

revenue comes from taxing, not spending

war-spending boosted the economy ?

war spending slows the economy since it requires taxes

(1) "appropriate" means "take", de facto "Tax" ?

(2) war Taxes "burden" the sectors of the economy Taxed; they benefit the sectors of the economy, into which Tax dollars are diverted

 

[EdwardBaiamonte]

(2) war Taxes "burden" the sectors of the economy Taxed;

yes slow it down or recess it

they benefit the sectors of the economy, into which Tax dollars are diverted

yes so agree the affect is neutral on the over all economy?? Actually it is negative since the liberal spending is bubble spending while private spending is sustainable and so grows the economy.

Making sense now?

 

[itfitzme]

Government "revenues" only increased from 2003, perhaps reflecting massive Military appropriations for the Iraq war ?

1) appropriations don't increase revenue, 2) 2003 supply side tax cuts did preceed largest revenue gain in American History. Gain was from supply side tax cuts and over heated, inflated economy.

you mean legally? how could "appropriations" not increase "revenue" practically-speaking ?

war-spending boosted the economy ?

revenue comes from taxing, not spending

war spending slows the economy since it requires taxes

(1) "appropriate" means "take", de facto "Tax" ?

(2) war Taxes "burden" the sectors of the economy Taxed; they benefit the sectors of the economy, into which Tax dollars are diverted

(2) war Taxes "burden" the sectors of the economy Taxed;

yes slow it down or recess it

they benefit the sectors of the economy, into which Tax dollars are diverted

yes so agree the affect is neutral on the over all economy?? Actually it is negative since the liberal spending is bubble spending while private spending is sustainable and so grows the economy.

Making sense now?

No, you started out fine, the totally flubbed it. As soon as you threw in the term "liberal" is was obvious to be incorrect.

This, "perhaps reflecting massive Military appropriations for the Iraq war ?" kind of confused me. My first thought is simply that appropriates are money spent, thus a direct increase in outlays, not necessarily an increase in revenues. Whether revenues are increased to account for them is secondary and not guaranteed. And, without some evidence, we cannot guarantee that increased military spending caused any increase in GDP at any particular time.

Regardless, sometimes, government spending effects the economy with a multiplier effect. Sometimes, government spending crowds out investment. Neither can be applied, without evidence, at any particular time. Just because something happens in theory doesn't mean it necessarily happens or that it happens to any significant level

I am really surprised by your assessment too, considering that government military contracts are a boon to state economies where they exist. It is hardly neutral.

The Clinton admin had tax cuts and increases. I don't care to look them up, or care why, just that they are both there. But it went both ways.

There is this MMT theory, so simple as to be unquestionably correct, that government surpluses result in a decrease in savings, while government deficits increase saving. The conclusion is, and worthy of consideration, that the Clinton surplus eventually resulted in a recession.

Once you got to "Actually it is negative since the liberal spending is bubble spending while private spending is sustainable and so grows the economy", you lost it.

There is nothing to support that government spending is not sustainable or that private spending is. If private spending was sustainable in all cases at all times, then we wouldn't have the recession of Dec 2007. It is purely a balance sheet recession where private spending is not sustainable. Unfortunately, there is no way to determine if the GDP is simply growing or if it is a bubble.

Your going to have to do better then that. Like I said, you cannot build an economic theory based on a political ideology.

And we cannot assess either the actual revenues and outlays or the effect unless it is in real dollars and per capita. Any other consideration is useless. And when looked at from a per capita basis, there is little evidence "that did precede largest revenue gain in American History".

First off, they were combined with increased outlays, completely eliminating any conclusion of it being tax cuts alone. Second, in real dollar, per capita terms, they were not the largest. They were modest at best and barely reached the level of revenues during the Clinton admin. At the very least, since efficiency and standard of living were increasing, they should have been higher.

(Oh, as a percentage of the GDP, in real dollars per worker and per capita would be better. Try that, see what you get.

 

[Foxfyre]

...the Bush tax cuts benefitted only the rich and created massive deficits... Whatever the reason was, treasury revenues did substantially increase after the Bush tax cuts went into effect... The government spent more than the revenues that were deposited into the treasury. That created the deficits.

United States Government Revenue History - Charts

... the Bush tax cuts, whomever they were for, did create the deficits during the Bush administration, as much as the increased spending did... as government spending is on the order of 18 to 25% of the GDP, it is clear that government spending is a constant part of stimulating the GDP.

prima facie, Bush was elected in 2000, swiftly cutting Taxes, and reducing Government "revenues". No budget deficit occurred in 2001; but, in the wake of 9/11, Government spending increased, into the "teeth" of falling "revenues". Bush "picked the worst time for a Tax cut" (or, Terrorists picked the best time to force increased spending). Government "revenues" only increased from 2003, perhaps reflecting massive Military appropriations for the Iraq war ? "Bush deficits" derived from decreasing Government "revenues", after Tax-cuts; combined with increasing Government expenditures, due to Terrorism ("Acts of [the avatars of] God"). Note that the "Clinton surplus" derived entirely from increasing Taxes "on the rich" (by popular perception), with zero decreases in spending "on the poor" (by popular perception); "Clinton surpluses" represented "no compromise, gimme my Entitlements" Taxation (by popular perception?). Are such "surpluses" of "revenue" (for the "service" of "not shooting paying Tax-payers"?) "good" politics ("i made them cover all the costs of my welfare (plus some too)") ?

The 2001 tax bill established reductions in rates that would be phased in over a number of years. The 2003 tax bill accelerated that process--made it immediate in fact--and, as EdwardB pointed out, produced tremendous treasury revenues. All other enonomic indicators are in addition to but otherwise irrelevent to that fact.

Whatever the revenues were spent on, and however much was spent, is irrelevent to the simple truth that those tax cuts did not produce the deficits for which the left accuses them of producing.

Unless you can show that there would have been significantly more revenues had there been no tax reform--and honest history won't be on your side so good luck with that--the tax cuts cannot be blamed for a bad economy, for deficits, or for irresponsible spending of any kind.

 

[itfitzme]

...the Bush tax cuts benefitted only the rich and created massive deficits... Whatever the reason was, treasury revenues did substantially increase after the Bush tax cuts went into effect... The government spent more than the revenues that were deposited into the treasury. That created the deficits.

United States Government Revenue History - Charts

... the Bush tax cuts, whomever they were for, did create the deficits during the Bush administration, as much as the increased spending did... as government spending is on the order of 18 to 25% of the GDP, it is clear that government spending is a constant part of stimulating the GDP.

prima facie, Bush was elected in 2000, swiftly cutting Taxes, and reducing Government "revenues". No budget deficit occurred in 2001; but, in the wake of 9/11, Government spending increased, into the "teeth" of falling "revenues". Bush "picked the worst time for a Tax cut" (or, Terrorists picked the best time to force increased spending). Government "revenues" only increased from 2003, perhaps reflecting massive Military appropriations for the Iraq war ? "Bush deficits" derived from decreasing Government "revenues", after Tax-cuts; combined with increasing Government expenditures, due to Terrorism ("Acts of [the avatars of] God"). Note that the "Clinton surplus" derived entirely from increasing Taxes "on the rich" (by popular perception), with zero decreases in spending "on the poor" (by popular perception); "Clinton surpluses" represented "no compromise, gimme my Entitlements" Taxation (by popular perception?). Are such "surpluses" of "revenue" (for the "service" of "not shooting paying Tax-payers"?) "good" politics ("i made them cover all the costs of my welfare (plus some too)") ?

The 2001 tax bill established reductions in rates that would be phased in over a number of years. The 2003 tax bill accelerated that process--made it immediate in fact--and, as EdwardB pointed out, produced tremendous treasury revenues. All other enonomic indicators are in addition to but otherwise irrelevent to that fact.

Whatever the revenues were spent on, and however much was spent, is irrelevent to the simple truth that those tax cuts did not produce the deficits for which the left accuses them of producing.

Unless you can show that there would have been significantly more revenues had there been no tax reform--and honest history won't be on your side so good luck with that--the tax cuts cannot be blamed for a bad economy, for deficits, or for irresponsible spending of any kind.

Unless you can show that there would have been no effect on GDP had there been no deficit spending--And honest history and reason won't be on your side, so good luck with that -- the tax cuts and the deficit spending can both simultaneously be considered as good for the economy. And at the same time, both tax cuts combined with spending cause the deficit.

This is the problem with the wingnuts, on either side of the question. The fact is that tax cuts and increased revenue have been consistently done at the same time. And there is a good reason for it, because there is insufficient evidence to conclude the magnitude that each has in the economy given the extraordinary complexity of it all.

The damn shame of it is that wingnuts continue to look at the wrong things in the wrong way such that the true underlying issues remain undressed.

 

[Foxfyre]

prima facie, Bush was elected in 2000, swiftly cutting Taxes, and reducing Government "revenues". No budget deficit occurred in 2001; but, in the wake of 9/11, Government spending increased, into the "teeth" of falling "revenues". Bush "picked the worst time for a Tax cut" (or, Terrorists picked the best time to force increased spending). Government "revenues" only increased from 2003, perhaps reflecting massive Military appropriations for the Iraq war ? "Bush deficits" derived from decreasing Government "revenues", after Tax-cuts; combined with increasing Government expenditures, due to Terrorism ("Acts of [the avatars of] God"). Note that the "Clinton surplus" derived entirely from increasing Taxes "on the rich" (by popular perception), with zero decreases in spending "on the poor" (by popular perception); "Clinton surpluses" represented "no compromise, gimme my Entitlements" Taxation (by popular perception?). Are such "surpluses" of "revenue" (for the "service" of "not shooting paying Tax-payers"?) "good" politics ("i made them cover all the costs of my welfare (plus some too)") ?

The 2001 tax bill established reductions in rates that would be phased in over a number of years. The 2003 tax bill accelerated that process--made it immediate in fact--and, as EdwardB pointed out, produced tremendous treasury revenues. All other enonomic indicators are in addition to but otherwise irrelevent to that fact.

Whatever the revenues were spent on, and however much was spent, is irrelevent to the simple truth that those tax cuts did not produce the deficits for which the left accuses them of producing.

Unless you can show that there would have been significantly more revenues had there been no tax reform--and honest history won't be on your side so good luck with that--the tax cuts cannot be blamed for a bad economy, for deficits, or for irresponsible spending of any kind.

Unless you can show that there would have been no effect on GDP had there been no deficit spending--And honest history and reason won't be on your side, so good luck with that -- the tax cuts and the deficit spending can both simultaneously be considered as good for the economy. And at the same time, both tax cuts combined with spending cause the deficit.

This is the problem with the wingnuts, on either side of the question. The fact is that tax cuts and increased revenue have been consistently done at the same time. And there is a good reason for it, because there is insufficient evidence to conclude the magnitude that each has in the economy given the extraordinary complexity of it all.

The damn shame of it is that wingnuts continue to look at the wrong things in the wrong way such that the true underlying issues remain undressed.

Okay let's take this really slow. I'll type one slooooooow letter at a time:

Taxes are revenues lawfully collected by a government from those who own property, earn income of various kinds, utilize certain services, or gain through investments, winnings, gifts, or inheritances of various kinds including monies that draw interest.

GDP is the total market value of all final goods and services produced in the country in a given yea. It includes all of private and public consumption, government outlays, investments and exports less imports.

Government spending is exchanging or obligating the people's money to maintain the government, to purchase good and/or services, or to benefit individuals or businesses or other entities in some material way.

A Deficit is the amount spent less the amount received when spending exceeds the revenues collected.

The ONLY part of all this this that is shown in the little graph I furnished is the amount of taxes/revenues received. It shows that following the tax cuts/reform of 2001 and 2003, tax revenues soared. Neither I nor the graph made the case that it was the tax cuts, at least alone, that produced those revenues. I did not make any case that other components such as GDP, including government spending, were not a factor in the economy or the cause of deficts.

Taxes as government revenues are a stand alone concept all by themselves and can be considered all by themselves.

The point to be made and understood for those with the brains to comprehend it is that the 2001 and 2003 tax cuts/reform did NOT create the deficits that some on the Left are determined to believe and promote that they did.

You take in more than you spend, you have a surplus.
You spend more than you take in, you have a deficit.

You don't need to understand anything about the economy, GDP, tax policy, or government spending to understand those two simple things.

 

[itfitzme]

You don't need to understand anything about the economy, GDP, tax policy, or government spending to understand those two simple things.

I couldn't have said it better. You don't need to understand anything.

 

[itfitzme]

The EOE, MV=PQ is an aggregate of all markets. Within that are individual markets

GDP = PQ_Oil + PQ_Television + PQ_HealthInsurance + PQ_other_markets.

Micro-economics studies, among other things, the performance of the individual markets like PQ_Oil. PQ is the equilibrium point of the supply and demand simultanious equations. Within that PQ_Oil is BP, Chevron, Texaco, Arco, Exxon, etc. They provide substitutes.

innovative entrepreneurism can create new markets, for new-and-novel goods & services:

MV = PQ ---> PQ + PQ_new

as such, entrepreneurism can deflate Prices, for constant spending (Money-supply); or keep Prices constant, for increasing spending (Money-supply)

That's an interesting catch. Makes monetary policy all the more needed.

 

[Monetarist]

The claim is made "tax cuts cannot be blamed for a bad economy" What can be blamed? A lack of debt-paying power, buying power, hiring power - caused by contraction of money supply, or, more specifically, of shrinking of total loan-created checking deposits with which we pay debt, buy goods and hire labor. So how come this drain of purchasing power, of aggregate demand which makes businesses profitable and keeps them employing people? Here is the answer. All of our money is bank loans. Each loan must be paid back principal plus interest. Eventually every pulse of injected purchasing power is followed by an even bigger contraction - causing DEFLATION. (Not inflation - just check the price of a house, or of buying a boarded up factory, or a privatized government utility company of your very own.) The financial sector is not recirculating the interest paid on the debt that is owed it. They are not lending it to entrepreneurs for new American enterprise. Why not? Because sitting on those dollars during a deflation increases wealth more than risking them in a real-economy investment when aggregate demand is shrinking. It pays not to invest. It pays to hoard dollars. That is why Quantitative Easing dollars never found their way to investment in domestic production. This is not Austrian-School and its not Keynes. This analysis was offered by Irving Fisher to explain the Great Depression.

 

[Widdekind]

The claim is made "tax cuts cannot be blamed for a bad economy"

Taxes "take" Money out of economies

the only thing worse, for an economy, than Government... is crime & thievery, against which Governments are instituted, to "protect & serve" markets

 

[DSGE]

The claim is made "tax cuts cannot be blamed for a bad economy" What can be blamed? A lack of debt-paying power, buying power, hiring power - caused by contraction of money supply, or, more specifically, of shrinking of total loan-created checking deposits with which we pay debt, buy goods and hire labor. So how come this drain of purchasing power, of aggregate demand which makes businesses profitable and keeps them employing people? Here is the answer. All of our money is bank loans. Each loan must be paid back principal plus interest. Eventually every pulse of injected purchasing power is followed by an even bigger contraction - causing DEFLATION. (Not inflation - just check the price of a house, or of buying a boarded up factory, or a privatized government utility company of your very own.) The financial sector is not recirculating the interest paid on the debt that is owed it. They are not lending it to entrepreneurs for new American enterprise. Why not? Because sitting on those dollars during a deflation increases wealth more than risking them in a real-economy investment when aggregate demand is shrinking. It pays not to invest. It pays to hoard dollars. That is why Quantitative Easing dollars never found their way to investment in domestic production. This is not Austrian-School and its not Keynes. This analysis was offered by Irving Fisher to explain the Great Depression.

YES! Another Monetarist. Welcome.

 

[Toddsterpatriot]

The claim is made "tax cuts cannot be blamed for a bad economy" What can be blamed? A lack of debt-paying power, buying power, hiring power - caused by contraction of money supply, or, more specifically, of shrinking of total loan-created checking deposits with which we pay debt, buy goods and hire labor. So how come this drain of purchasing power, of aggregate demand which makes businesses profitable and keeps them employing people? Here is the answer. All of our money is bank loans. Each loan must be paid back principal plus interest. Eventually every pulse of injected purchasing power is followed by an even bigger contraction - causing DEFLATION. (Not inflation - just check the price of a house, or of buying a boarded up factory, or a privatized government utility company of your very own.) The financial sector is not recirculating the interest paid on the debt that is owed it. They are not lending it to entrepreneurs for new American enterprise. Why not? Because sitting on those dollars during a deflation increases wealth more than risking them in a real-economy investment when aggregate demand is shrinking. It pays not to invest. It pays to hoard dollars. That is why Quantitative Easing dollars never found their way to investment in domestic production. This is not Austrian-School and its not Keynes. This analysis was offered by Irving Fisher to explain the Great Depression.

The financial sector is not recirculating the interest paid on the debt that is owed it. They are not lending it to entrepreneurs for new American enterprise. Why not?

Because too many Americans didn't pay back the last loans the banks made.
Because too many politicians want to sue the banks for the last loans the banks made.
Because banks have to meet higher capital requirements.

 

[Foxfyre]

The claim is made "tax cuts cannot be blamed for a bad economy"

Taxes "take" Money out of economies

the only thing worse, for an economy, than Government... is crime & thievery, against which Governments are instituted, to "protect & serve" markets

The taxes collected by government for the essential functions of government as the Founders intended probably would not have any significant effect on the economy. But you are correct. Every dollar confiscated in taxes by the government is a dollar not available to save that creates a pool from which other can borrow, is not a dollar available to invest in new businesses, new products, new R & D, is a dollar not available to pay in wages and benefits.

Despite his obsession with broad gray cut and pasted expanses of text and numbers and equations, repeated again and again, Init is correct about one thing. Some money spent by the government can affect the economy positively. The part that he isn't willing to even look at is that the right kinds of tax cuts at the right time can also affect the economy positively, and they can even affect behavior so that revenues increase instead of decrease.

Revenues did not decrease after the Bush tax legislation of 2001 and 2003, so it is simple logic that it was not that tax legislation that erased the Clinton surplus or created the Bush deficits. It was the very simple fact that the Bush administration/Congress spent more than they took in. That created the deficits.

The leftists argue that government spending has kept pace pretty much in line with the growth of the economy. In other words, government spending as a percentage of the GDP has not significantly increased in recent years. If you look at their charts and graphs, they make a convincing case for that.

What they don't want to talk about though is that current economic policy is adding $5 billion a day to the national debt that sooner or later we are going to have to pay. A national debt of $15 trillion plus and growing at an alarming rate.

Would raising taxes help? There is no evidence for such being the case in recessionary times. Besides we have a federal government that hasn't cut spending for a very long time but rather sees new treasury revenues as just more money they can spend and/or borrow against.

 

[itfitzme]

The claim is made "tax cuts cannot be blamed for a bad economy"

Taxes "take" Money out of economies

the only thing worse, for an economy, than Government... is crime & thievery, against which Governments are instituted, to "protect & serve" markets

The taxes collected by government for the essential functions of government as the Founders intended probably would not have any significant effect on the economy. But you are correct. Every dollar confiscated in taxes by the government is a dollar not available to save that creates a pool from which other can borrow, is not a dollar available to invest in new businesses, new products, new R & D, is a dollar not available to pay in wages and benefits.

Despite his obsession with broad gray cut and pasted expanses of text and numbers and equations, repeated again and again, Init is correct about one thing. Some money spent by the government can affect the economy positively. The part that he isn't willing to even look at is that the right kinds of tax cuts at the right time can also affect the economy positively, and they can even affect behavior so that revenues increase instead of decrease.

Revenues did not decrease after the Bush tax legislation of 2001 and 2003, so it is simple logic that it was not that tax legislation that erased the Clinton surplus or created the Bush deficits. It was the very simple fact that the Bush administration/Congress spent more than they took in. That created the deficits.

The leftists argue that government spending has kept pace pretty much in line with the growth of the economy. In other words, government spending as a percentage of the GDP has not significantly increased in recent years. If you look at their charts and graphs, they make a convincing case for that.

What they don't want to talk about though is that current economic policy is adding $5 billion a day to the national debt that sooner or later we are going to have to pay. A national debt of $15 trillion plus and growing at an alarming rate.

Would raising taxes help? There is no evidence for such being the case in recessionary times. Besides we have a federal government that hasn't cut spending for a very long time but rather sees new treasury revenues as just more money they can spend and/or borrow against.

One has to wonder who you are talking about with "the leftists" and the "Init".

So far as I can tell, there are no "leftists" about the forum, you haven't proved and identifiable quotes to substantiate what the "leftists" say.

The problem is the half-Keynsian theory that ignores the other half and force the expenses as causal to the deficit when deficit is the difference between outlays and revenues. And while there is an increase in outlays, then there is no abilty to conclude that the tax cuts caused the increase in revenues.

The fact of the matter is, it isn't "simple logic" as you would like to believe because the logic you are applying is over simiplified and myopic.

Here is some stuff I tracked down on fiscal multipliers.

http://www.imf.org/external/pubs/ft/spn/2009/spn0911.pdf

http://academic.kellogg.edu/mckayg/macro/presentations/MacroPresentation11top5revised.ppt

Does fiscal stimulus work in a monetary union? Evidence from US regions | vox - Research-based policy analysis and commentary from leading economists

http://www.columbia.edu/~en2198/papers/fiscal.pdf

http://emlab.berkeley.edu/~auerbach/measuringtheoutput.pdf

To say "Revenues did not decrease after the Bush tax legislation of 2001 and 2003, so it is simple logic that it was not that tax legislation that erased the Clinton surplus or created the Bush deficits" is simply myopic.

Revenues are a function of taxes and GDP output. GDP output is a function of taxes and outlays. The deficit is a function of revenues and outlays. It is a closed loop system. To what magnitude is the effect depends on the economic conditions of the times.

This is the "simple logic". Any thing less is over simplified.

 

[EdwardBaiamonte]

Regardless, sometimes, government spending effects the economy with a multiplier effect.

mostly liberal BS. Private spending is far more likely to have a sustained multiplier effect. Think how pathetic and short sighted BO's cash for clunkers looks now.

I am really surprised by your assessment too, considering that government military contracts are a boon to state economies where they exist. It is hardly neutral.

taxes to let military contracts are not a boon so on balance you have a negative.

There is nothing to support that government spending is not sustainable or that private spending is.

there is only one liberal government thats spends, while there are 300 million people who spend what they earn. Think about that.

If private spending was sustainable in all cases at all times, then we wouldn't have the recession of Dec 2007.

what???????When liberal government spends $4 trillion and regulates key sectors of the economy they can overwhelm private good sense

Unfortunately, there is no way to determine if the GDP is simply growing or if it is a bubble.

if a huge sector of the economy, like housing, is growing because of one temporary liberal government policy then it is likely a bubble. If GDP is growing because of the private decisions of 300 million people spending money their own hard earned money it is likely not a bubble.

Your going to have to do better then that. Like I said, you cannot build an economic theory based on a political ideology.

wrong wrong wrong. Friedman did exactly that. His economic theories and political theories were based on what he knew of human nature: someone who earns a dollar will spend it better than a fool liberal bureaucrat guessing in Washington.

And we cannot assess either the actual revenues and outlays or the effect unless it is in real dollars and per capita. Any other consideration is useless. And when looked at from a per capita basis, there is little evidence "that did precede largest revenue gain in American History".

I will always agree that precise scientific experiments are impossible in macro economics

First off, they were combined with increased outlays, completely eliminating any conclusion of it being tax cuts alone. Second, in real dollar, per capita terms, they were not the largest. They were modest at best and barely reached the level of revenues during the Clinton admin. At the very least, since efficiency and standard of living were increasing, they should have been higher.

(Oh, as a percentage of the GDP, in real dollars per worker and per capita would be better. Try that, see what you get.

not to mention we were in the runup to a huge liberal housing recession

 

[Monetarist]

The claim has been made: "Taxes "take" Money out of economies." Of course they do. And if we look at flows taxation and spending by all sectors we must accept the desirable possibility that a government could tax and spend just to the point where there is neither surplus nor a deficit that must be covered by borrowing. And, governments never sit on a surplus for long -- some politicians will "serve" some constituent by seeing to it that the surplus gets spent. THE REAL SITTERS ON MONEY ARE SPECULATORS WHEN THE EXPECT DEFLATION. It only benefits them to "abstain" from both consumption and investment.

The claim has been made that, " Every dollar confiscated in taxes by the government is a dollar not available to save that creates a pool from which other can borrow, is not a dollar available to invest in new businesses, new products, new R & D, is a dollar not available to pay in wages and benefits." Governments do two things with revenues. They pay interest or they spend it. They don't hoard it. Most Americans are deep in debt. A few are among the creditors, domestic and foreign. But these creditors will not find it worthwhile to invest in the US domestic economy in a deflation. In deflation there is insufficient aggregate demand to make new businesses and expanded businesses profitable, except for the venture that can promise a return that outperforms the windfall deflation premium of just holding the cash.

The claim has been made that, " Some money spent by the government can affect the economy positively. ... they can even affect behavior so that revenues increase instead of decrease." We lack buying power, hiring power, and debt-paying power due to deflation set up by 1) net interest drain 2) tight Fed discount window monetary policy 3) outright loan calls and refusal to lend up to what legal reserves would permit. Government spending can increase buying power, hiring power, debt-paying power, but eventually principal and interest must be withdrawn. With all three domestic economy sectors -- household, public goods and domestic production -- today they operate on lent money and each sector must pay back more money than they put in. And the loans are not going to increase productivity, to increase the size of the US production "economic pie." Government deficit spending lasts only long enough to buy votes -- you pay later. But tax cuts also buy votes -- more dollars to keep hoarding! -- but what is not taxed by government is borrowed by government or else paid for by the consumer. Loans are less than the sum of principal and interest and the difference is made up by transfer of equity, of collateral, to the creditors, to the speculators who bet on deflation and want deflation.