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Wall Street Journal goes full communist
- Thread starter ksen
- Start date
In what way is it strong compared to other articles?
Did it identify new tax cuts in the US between 1950 and 2010 that other economists had missed? Did it find new ways of cancelling out the widely varying economic conditions at the time of the tax cuts? Did he find some way of homogenizing the various tax cuts of the last 50 years into equalized packages (I mean, is it really apples to apples to compare when Kennedy cut the top marginal rate from 90% in 1960 to when Clinton cut capital gains taxes in the dot com bubble as if they have the same effect?)
Because I would think without substantially increasing the woefully small sample size and cancelling out the background noise that accompanies changes in the economic climate and the structural changes in the economy over many decades, any researcher would be reluctant to would make definitive claims about causes and effects for something as difficult to measure as this.
SimpleDon
Veteran Member
It really is quite simple. Neoliberal economics, supply side economics, trickle down economics, Reaganomics, Thatcherism, Hatcherism, etc., whatever you call it, is absolutely based on the concept that the 90% spend their money on consumption and the 10% invest their money. This is borne out in studies, the 1% for example, invest about 85% of their incomes while the 99% spend about 80% of their incomes on consumption.
It is straightforward from here, if your economy is short of investments, the supply side, then you lower taxes on the wealthy and raise taxes on everyone else, what we have been doing for the last thirty five years. If on the other hand you are short of demand and have too much money available for investment than you need then you raise taxes on the wealthy and lower the taxes on everyone else, what we need to do now after thirty five years of doing the opposite with no increase in investment in spite of an increase in money available to invest.
Please understand that I am using the word "investment" to mean money used by business to increase production or productivity in the economy growing and job increasing production of products for consumption, not in the broader meaning of the word of money making money from money. Investments in paper that doesn't grow the economy or increase jobs, stocks, treasury bills, derivatives, commodity futures, etc., you know, money like things.
It is straightforward from here, if your economy is short of investments, the supply side, then you lower taxes on the wealthy and raise taxes on everyone else, what we have been doing for the last thirty five years. If on the other hand you are short of demand and have too much money available for investment than you need then you raise taxes on the wealthy and lower the taxes on everyone else, what we need to do now after thirty five years of doing the opposite with no increase in investment in spite of an increase in money available to invest.
Please understand that I am using the word "investment" to mean money used by business to increase production or productivity in the economy growing and job increasing production of products for consumption, not in the broader meaning of the word of money making money from money. Investments in paper that doesn't grow the economy or increase jobs, stocks, treasury bills, derivatives, commodity futures, etc., you know, money like things.
So, all we need do is add in the assumption that the best way to grow the economy is to eliminate as much of that investment as we can by putting more money in the hands of the spenders. Damn, macroeconomics is easy.
SimpleDon
Veteran Member
But you don't really have to do this. The purpose of the tax cuts for the wealthy was to increase business investment. The intent of the tax cuts was to change the then economic conditions because the economy, according to the supply siders, was starved of money available for investment. The tax cuts did increase the amount of money available for investment by increasing income inequality but didn't increase investment. In fact the amount of business investment went down as a percentage of the whole economy.
In other words, there is no need to compensate for the existing economic conditions, because the promise of the supply siders was that the economic conditions would improve because of the tax cuts providing more money for investment. Economic conditions did improve but not because of the tax cuts. We know this because business investment actually declined.
Conditions did improve from the massive recession begun to break the wage price inflation spiral, in an unnecessarily draconian fashion, primarily because of the government deficit spending under Reagan. In order to take credit for the improved conditions the supply siders would have to present a completely different theory for the effectiveness of lowering taxes on the wealthy and increasing them on everyone else other than increasing the money available for investment. A theory to explain why they were wrong before and how increasing the income of the wealthy, the group of people who are most likely to invest their money, caused a demand lead economic recovery.
SimpleDon
Veteran Member
Only if you are short of demand and have too much supply. No simple, single prescription such as "just put it in the hands of the spenders" that you propose or the counter proposal of the Republicans to put it into the hands of the rich is going to work all of the time. In fact, the reason that the income distribution is intentionally changed is to change the economy. Doing anything for too long is guaranted to eventually cause problems. Just like we have now because we have increased income inequality for too long putting too much money into the hands of the investors. This is why we have suffered from repeated asset bubbles, in stocks, commodities, and finally in real estate, which when it burst plugged us into the worse recession since the Great Depression.
I think that macroeconomics is pretty easy to explain, if not to arrive at the explanation. But for most people an inability to understand it is willful, because at some point it will make a mockery of their personally held ideology. As it is currently doing to that of the wealthy, conservatives and the Republican party. But at some point we will have to follow your advice and increase wages to put money into the hands of the spenders. If this policy regime is allowed to go on for thirty five years like the supply side one has then macroeconomics will dictate a reversal to put money into the hands of the investors, thereby goring the workers, the liberals and the Democrats. And their understanding of macroeconomics will probably diminish.
laughing dog
Contributor
There is no way to know if the sample size is "woefully small" without reading the paper. And if you had read the paper, you would have the answers to your questions. All in all, it appears you are simply making stuff up.
The author is using well-established measures, but treating them in a new way. I found the methodology an interesting read and would be delighted to answer any questions you might have on the specifics.
How does the author account for the widely varying possible prevailing economic conditions at the time of a tax cut?
How does the author account for the widely varying nature of tax cuts?
For example, what does the author do to isolate the effects of the tax cut alone in the 1960s Kennedy tax cut (top marginal tax rate was 90% in the 1960s economy) to the 1990s Clinton capital gains rate tax cut in which occurred in the midst of the dot com bubble?
Wouldn't we expect wildly different types of tax cuts from wildly different starting points in wildly different economies to have different effects? Or does it all just taste like chicken?