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Krugman, W, malaise, and GOP's American Way. Ole.
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coloradoatheist
Veteran Member
Here is one from an economic adviser to Obama. it found a 1% increase in taxes lead to a 2 or 3% decrease in GDP growth.
http://www.nber.org/digest/mar08/w13264.html
coloradoatheist
Veteran Member
Not supply side.
Also add Australia and Canada to the list of not supply siding and growing faster than the US.
fromderinside
Mazzie Daius
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Sorry for the late reply. Krugman implies politics like economics is mostly rational. Politics is almost entirely emotional riding on whatever trends exist at the time (spirit of the times). Its a bit tricky to develop a political discipline that is either rational or based on evidence while that is economic's primary claim to fame.
Politically what we see going on now is a contraction from acceptance as we begin to reorganize into a more bunker arrangement (balkanize) in tune with our feelings of fear and doubt. No doubt fear is a large component of economics and no doubt fear is economically measurable. Unfortunately all we have in politics is history and as you know ihistory only appears to repeat itself.
Krugman's objectifying politics in historical terms is much less reliable than Silver's statistical approach. Neither however really combine individual, psychological, and group, soicialogical, rules of the road in the ways that Adams derived economics does.
Keep up the good work. I'm enjoying your stuff.
Not much of an answer, but, its all I have in my gun right now.
fromderinside
Mazzie Daius
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So what you're saying is find an economy that rewarded the top percentage of capital holders better than the US. I agree none.
On the other hand if you meant which lifted the most boats the most during that period Denmark is a clear leader there followed by most of western Europe. Even Canada did better than the US.
So if this is actually a discussion about economics (and politics since its my thread) then we need a definition of terms that actually measures what's in the largest share of the population's pocket otherwise we're just talking about tracking the few, the rich, and the powerful and that isn't economics.*
*withdraws serrated knife slowly while twisting it.
My rebuttal is that undiferentiated growth does not in any way predict improvement in human living conditions and so is a bullshit method of rating an economic system. This is my rebuttal to you and if you are not perceptive enough to understand it, that indeed is unfortunate for you. I kind of suspected as much. China has been "growing" faster than we have and...they have to shut down their Capital city at times because of AIR POLLUTION. Your idea of a healthy economy is dangerous to human life.
So what yardstick should we use? It needs to be precise, no wishy-washy measures.
Jason Harvestdancer
Contributor
All of that has no bearing on the difference between supply side and free market. I accept your concession and apology.
laughing dog
Contributor
Since that was not the topic of discussion, are you babbling or deflecting from the topic?
Cheerful Charlie
Contributor
The latest GOP economic fisacos to come. Both Ben Carson and Ted Cruz are beating the drum for flat taxes. Cruz wants a 10% flat tax and a VAT tax. The new phrase de jure is "dynamic scoring", AKA "rosy scenario" big promises of massive job groweth, GDP growth etc. Cruz uses this phrase to promise us the same sort of big promises Sam Brownback offered up in Kansas. Back in the Reagan era, this sort of thinking was labelled "wishful thinking" by David Stockman. Cruz seems to be catching up with Trump in some polls, so I am hoping more expert scrutiny will be levelled at Cruz's policies. So far there seems to be agreement that Cruz will give us $758 billion or so in future deficits but this estimate seems to take his "dynamic scoring" day dreams at face value, uncritically.
SimpleDon
Veteran Member
Economic issues are why the belly is or isn't full.
Yes, I agree. We have a representative democracy and we elect representatives who best cater to our beliefs. I have a daunting task ahead of me because I am proposing that we must change those mistaken beliefs.
And high on that list of beliefs to change is that we must operate out of fear. This is one of the things that is most ridiculous about the proposition that our future is best left in the hands of conservatives. They by definition are delineated by fear. First by fear of change and then by fear of external threats, both real and imagined.
You can create conservatives by spreading fear. You can control the fearful for a time by giving into the fear by building the wall or by giving an ever increasing amount of the nation's income to the already rich, but what e ou those don't work what are we left with? Usually by doubling down, building a higher wall or in the case of the OP, giving even more money to the rich, or by spreading even more fear by saying that it was those damn democrats again, the damned liberals.
Conservatives by their very nature are unsuited to leadership, to government elected positions. They are correct that most of our society and our economy are good and run within the laws and the traditions established long ago. But the problems that we do have are where society and the economy aren't working. And that these are the problems that conservatives are ill-equipped to handle.
Conservatives serve a purpose, they are the anchor that we have to drag along, saying that we are changing too much too fast. But they are not leaders.
This is another mistaken belief that we have to change, that we can't use the state to solve our problems. If not the state, who should we turn to? Is there some mechanism of the so called free market that will protect us better from the actions of mad men?
How many police will be enough? We already have twice as many police per capita as the next worse police state, Germany. We seem to be caught in yet another conservative talking point vortex where more police are the answer as long as we deploy them as inefficiently as possible. By scattering them into 17,000 different agencies guaranteeing that they are used primarily in the wrong locations at the wrong times with the wrong experience and training, and with the maximum amount of administrative overhead as possible.
I don't deny that most economists disagree with my economics, Post Keynesian, and to a lesser degree, Krugman's New Keynesian. . But it isn't hard to see why. Keynesian economics was a huge blow to the very wealthy. Keynes realized that the economy had changed in fundamental ways as it changed from an agricultural based economy to an industrial based one. That it had changed from a supply lead economy, one limited by the supply of land suitable for agriculture to an economy limited by the demand for goods and services.
Capitalism is very good at many things, reacting to consumer preference or even changing it. But it is probably best at allocating scarce resources. And in the agrarian economy of the classical economists the scarcest resource was the land, owned by the wealthy.
But in an industrial economy there is no resource that is scarce and controlled exclusively by the wealthy. The entire point of the neoclassical economics developed by Marshall et.al. was to prove that financial capital, money, was a scarce resource that was controlled obviously by the very rich. That money, capital, was the land of the industrial economy, the scarce resource that had to be nurtured and carefully allocated by the economy. But almost immediately neoclassical economics was attacked by other economists as being a house of cards, more in details than overall, to the point that by the 1930's it was not seriously considered, especially in light of the Great Depression, which wasn't possible under neoclassical economics.
Keynes set out to rescue the neoclassical economics set down by his mentor Marshall. But he soon realized that Marshall hadn't gotten some of the details wrong, that instead he had missed everything because Marshall didn't realize this fundamental change. Not only wasn't money the land of the industrial economy, it wasn't even that important. That the economy was no longer limited by the supply side, the land in the agrarian economy, but by the demand side. Keynes didn't fully understand why this was, but the people who continued after him now understand that in a modern fiat money system like we have the supply of money grows and contracts in the economy with the demand for goods and services. Therefore the supply, the building of the production facilities, also grows based on the demand for the product. It is only important in that the supply can only increase and that it can do it only in the middle term of some years. Decreasing of the supply is only through bankruptcy.
And this as I said, didn't sit well with the wealthy. And it is the wealthy who fund economics research and who hire the economists produced by academic economics. They started and funded the hunt for a more pleasing economics for the wealthy. And they found it by resurrecting Marshall's discredited economics and splicing it to the non wealthy insulting portions of Keynesian economics. Thus we have today economic policies that say that we can trim the economy by the use of monetary means, lowering and raising interest rates for example, but the only fiscal policy that can be used to provide a big change is to lower taxes on the rich. Under no conditions can we ever raise taxes on the rich. This is in 3/4 agreement with Keynes.
This wealth pleasing economics was dubbed "neoclassical synthesis economics," the synthesis being with Keynesian economics. It swept through the academic circles. Here was an economics that only lied enough to keep the wealthy donors happy. But one of the lies was that the economy is still supply lead and that the wealthy are still the most important people along with their stock markets and bonds. But unfortunately for us this is not true, that now investment choices are made by professional management in the corporations and not by wealthy investors buying and selling stocks. And with everything based on lies there comes a time when it backs up and bites us in the ass. In this case it is the all in supply side economics that has done it.
And we have now taught three generations of economists and government policy makers that 'Keynesian' is a swear word, that the economy is still supply lead, that the money that we can produce as much of as the economy needs and wants is somehow a scarce resource.
It is important that you understand that I don't believe that Keynes was infallible or that he mapped out the rules for following in current times. What he provided was a dim, barely realized outline for future research.
This is fun but I am having a problem sorting out an argument against Krugman's column in all of this. It is not Krugman that has proposed that we continue to follow the economic policies known as supply side economics. It is all of the Republican presidential candidates that have. It doesn't have to be a politically good issue for Krugman to point out that it is doubling down on failed economic policies.
I am pretty certain that if none of the Republican presidential candidates weren't proposing tax cuts for the very rich he would not have brought this up.
I continue to more directly answer you below it the next installment. My participation maybe continue to be a little spotty as it has been. I am once again in the hospital trying to not to die from pneumonia. But I have the rest of the responses to your post ready so any delay will be to future posts.
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SimpleDon
Veteran Member
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Respectfully, once again, you don't know what you are talking about. Supply side economics says that the economy is supply side lead, hence the name, and therefore the way to grow the economy faster and to provide more jobs is to increase the money available for investment by increasing the incomes of the very wealthy, because they are more inclined to invest a part of their income. This means that we must redistribute the nation's aggregate income to the rich from the incomes of everyone else, the poor and the middle class, from wages to profits.
The major way to accomplish this redistribution is to lower marginal tax rates paid by the rich and to increase the taxes paid by the poor and the middle class, sales taxes, earnings taxes, and payroll taxes. Meanwhile you must lower transfer payments, welfare, unemployment insurance payments, food stamps, Social Security payments, Medicare and Medicaid payments, etc. It is helpful if you can transfer programs from the more progressive tax supported federal government to the to the more regressive tax supported state governments.
So no, by singling out tax cuts as a part of supply side economics I am not concentrating on a "small one tangentially related" to supply side economics. I am responding to the OP with what is one of the main ways that the proponents of supply side economics proposed to redistribute income from to the already rich.
There are other ways that supply side economics accomplish this redistribution of income to the rich, from wages to profits. They also wanted to intentionally suppress the wages of the poor and the middle class by, suppressing unions, keeping the minimum wage low, encouraging globalization, increasing both legal and illegal immigration, maintaining the 40 hour work week, rewriting the overtime rules, etc., all of which we did.
Are there any of these that you don't believe suppress wages or that weren't part of the policies that changed starting in about 1980?
I suggest that you do some reading about supply side economics before you talk about it. Here is the opening paragraph of the Wikipedia entry for it.
As you read keep in mind that your statement that "Supply side isn't about tax cuts" leaves absolutely no role in supply side economics for Laffer and the Laffer curve, the foundation of supply side economics. . The theory is that since zero rates equates to zero revenues and 100% tax rates also will produce zero revenue because no one will work then the curve must have a peak. The Laffer curve is a plot showing that varying marginal tax rates affects government revenues and that on one side of the peak in the curve it is possible to lower tax rates, i.e. tax cuts, and to have government revenues go up. Unfortunately for the theory we always seem to be on the other side of the peak where lower tax rate and tax cuts result in lower government revenues.
Do you still maintain that supply side economics has nothing to do with tax cuts? And by extension that Laffer and his curves have no place in supply side economics?
Do you see a fallacy in Laffer's curve? Is it true that at 100% tax rate that no one would work?
Mantra #1 of the supply siders is "the primary problem is rarely demand — after all, poor nations have plenty of demand." Do you agree with this? There is a fallacy lurking here too.
Mantra #2 is "When you tax something you get less of it, and when you tax something less, you get more of it." Does this reflect your thinking? There is a fallacy there too.
And you are correct that deregulation, getting the government out of the economy, is part of supply side economics. It is the part that caused the Great Financial Crisis and Recession, that nearly destroyed the economy and the nation.
If deregulating and the failure to regulate the banks and the financial markets weren't responsible for the GFC&R of 2008 then what caused it?
As for the idea of getting the government out of the economy, we have, just about as far as possible. In fact, we have gone too far in many cases. The reason that capitalism is such a good basis for an economic system is also the reason that it is limited in application. The goal of capitalism is simplistic and easy to understand, to make money. But there are many endeavors where making money doesn't provide us with the outcomes that we need. Jurisprudence for example,
Meaningless. Marginal tax rates are still about one half of of what they were in 1980. The only sustained across the board increases in growth have followed tax increases since then. First by Bush I and then by Clinton. And much of that growth might be because of the asset bubble called the Internet business bubble of the 1990's.
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The one economic principle that I have yet to encounter any economist or school of economics disagree with is that the rich have a greater propensity to invest and save and that everyone else has a greater propensity to consume. This is to me common sense.
Do you agree with this principle?
Supply side economics is the idea that if more money is provided to the already rich they will increase the investments in businesses. It assumes that the economy is supply lead. That supply creates demand. If this is wrong then supply side economics wouldn't be able to provide more growth and more business investment than the previous Keynesian policies did.
Keynesian economics says that the economy isn't supply lead, that is the opposite, it is demand lead. That there is no investment in production facilities unless there is the unrealized demand for the product that will be produced.
A supply side equivalent to this would be something like that there is no demand for additional product until the additional product is produced. It is hard to craft a non-humorous single sentence justifying supply side economics. Perhaps you have a better one?
If you apply supply side economic policies to an economy that is actually demand lead these will be the results,
- Increasing income inequality
- Slower or no growth
- Lower business investment
- Lower total employment in the economy
- Lower labor share, higher capital share, i.e. % of GDP paid in wages vs. % of GDP paid in profits
- Increases in the valuation of the stock markets
- Repeated asset bubbles building and bursting in stocks, commodities, gold, collectibles, real estate, etc.
- Increasing private debt
- Increasing government debt
- More individuals in a household having to work
- Delayed retirements
- Increased instability in the financial markets
- Moderation of inflationary pressures
All, except for lower employment, that we have seen since the supply side policies were imposed.
I am sorry, but I don't think that you asked that of me. I saw the question, though.
In the period that you named I believe that the growth in the US would be about in the middle of the pack of the developed countries. But it really isn't a meaningful question. The proponents of supply side economics is promised that the economy under their regime would produce growth higher than under the previous Keynesian regime in this country. Did you think that they promised the lower growth that we got or that their policies could reduce our growth to the average of other developed countries?
We have the most progressive taxation in the world because we have the worse income inequality in the developed world. The rich pay about the same dollar amount of income taxes as they before 1980 because they earn about two to three times more than they did in 1980 in real dollars. This is because we intentionally boosted the incomes of the rich, largely by increasing profits. Corporate profits have doubled as a percentage of GDP while wages as a percentage of GDP have dropped by the same percentage of GDP as profits have increased. This is the direct result of the supply side economic policies.
This huge increase in the income inequality in the US wasn't the goal of the supply side economic policies, it was the required conditions for supply side economics to work, to produce widespread prosperity for us all because of the surge in the amount of money available for investment that increasing the incomes of the rich would provide. A widespread prosperity that never came.
Of course, the laws and regulations affect business creation and growth. It is the government's job to define the economy and how it works. To define the rules under which businesses compete. To keep a single company from dominating a single market, a monopoly. To keep businesses in the same market from colluding with each other to fix prices. To impose what economists call externalities, costs on the exchange external to it that wouldn't normally be reflected in the price. Things like the costs of pollution controls to minimize the damage to the environment from manufacturing the product or taxes to pay for the schools and the roads. Government rules and regulations define the restrictions on the working conditions of the labor force making the product, the employer can't use slave labor or children, they have to run a safe workplace, to limit the number of hours worked in the week, etc.
What I am saying is that the vast majority of the government rules and regulations, say 98%, are for the benefit of businesses and society as a whole. This is why we here in this forum had so much trouble naming specific regulations that killed jobs for example. There are regulations that are badly written and those written to boost one competitor over another or to preserve antiquated ways of doing things. But this doesn't mean that we don't need regulations, it means that we must try to write better ones.
These regulations protect business who want to behave in a responsible manner from those who don't. The price competitive nature of capitalism can cause companies to behave in a manner that they wouldn't want to otherwise just to compete with other not so responsible competitors.
And yes, as the economy gets more complex we need more complex regulations. And there is no question that there are businessmen who believe that they can sell lower cost and more profitable items if they don't have to pay for schools and roads, and if they can employ children working 70 hours a week or if they don't have to clean up the water and the air that their production would otherwise pollute. But this doesn't mean that we have to let them do these things.
There is and there has never been a natural economy that runs without some form of external control from the first time that a tribal chief decided who would hunt and how the food would be divided. Governments and the economy have grown up together, each helping the other, each becoming more complex as the other did.
Assuming that you meant wormhole, not what you said. Spell check can be a bitch, right?
Then you can never judge any macroeconomic policies if you don't compare the actual results with the promised results. If your pet economic policies didn't work out as promised then all you have to do is throw up your hands and say that they didn't work out because of some unknown factor that changed that we can't but guess what they were or how they operated to prevent the glorious outcomes that we predicted, that is, prosperity for all. This is not very well accepted in the academic world were it is assumed that there is little about the economy that is mysterious and unknown. It shouldn't be acceptable in the world outside of the academic world.
But this ignores the problems that your favored policies imposed on the economy. High income and wealth inequality, high private and public debt, an increase in the instability of the financial markets, increased poverty and a decrease in the size of the middle class, all were at least in part caused by the supply side economic policies. If there were some unknown, mysterious economic factors that occurred that caused these there is no reason to continue the supply side economic policies that can only make those things worse? Is there?