NationStates Jolt Archive

Some people justify the Bush tax cuts by saying, since their inception, they've been responsible for the average 4% or so growth of the economy. Others rubbish the tax cuts for only enriching the rich who benefit from capital gains and stuff, and not helping the poor.

I’m confused. Could the economy have grown by similar rate, if not better, without those tax cuts? Who benefit from these tax cuts?

I'm thinking even if only rich people benefit from tax cuts that means good news for the poor. Because the wives and daugters, and in some rare cases husbands and sons, of CEOs and business tycoons will do more shopping and spending. And rich non-parsimony means shopping centers become busier requiring more hands (employees) which are mostly those of the poor. Is it a nice way to distribute benefits to the poor. Who said the best welfare system is job creation?

everyone benifits from the tax cuts, there is no such thing as a "tax cut for the wealthy" everyone got a tax cut.

I am a tax professional.

I don't think it could have functioned as well. The influx of capital from the tax cuts (and the deficit spending/Fed rate cuts) put a huge amount of monetary stimulus in to the economy, which provided the boost to consumers to accelerate the recovery from the post dot-com crash recession.

everyone benifits from the tax cuts, there is no such thing as a "tax cut for the wealthy" everyone got a tax cut.

I am a tax professional.

Are you saying tax relief on dividend and capital gain is also a form of tax relief for non-share holders? I don't mean tax cuts benefiting the poor eventually, but technically as also cuts for everyone. I would like to know more about this one to counter the postion of my friends.

I just don't think that the tax cuts really did the trick to an extent which justifies their cost to the budget.
That money will have to be paid back by someone in the relatively near future, with spending cuts being difficult in areas such as defense, corporate welfare and social security/welfare/health care. I guess you could stop government investment in infrastructure (:rolleyes:).

And every dollar the US Government makes in debt attracts interest. Germany has reached the stage now where the deficit needs to be eliminated, and pretty it ain't.

This is actually rather simplistic...Well done...

If only some people in Washington had half some sense to put it so simply.

However. I do not think that during an era of deficit we should be spending so much and not getting any income from taxes. It's not a matter of benefiting the rich or poor, a tax cut at this time just is not appropriate.

Are you saying tax relief on dividend and capital gain is also a form of tax relief for non-share holders? I don't mean tax cuts benefiting the poor eventually, but technically as also cuts for everyone. I would like to know more about this one to counter the postion of my friends.

The less tax collected on investments, the more attractive American investments become. This increases inflows in to American equities, which results in higher equity prices (making more money for shareholders and investors, which are about 50% of American households; the wealth effect drives up consumer spending, which is anotherr cycle). Higher equity prices also give companies more money to invest in means to grow their business, resulting in more hiring and capital expenditures, etc.

Are you saying tax relief on dividend and capital gain is also a form of tax relief for non-share holders? I don't mean tax cuts benefiting the poor eventually, but technically as also cuts for everyone. I would like to know more about this one to counter the postion of my friends.


It is just not true that only rich people have stocks, I would say that a lot of my clients that had to fill out a schedule D (the form for capitol gains and dividends) were on the low end of the pay scale, companies like AOL who pay thier employees less than $10 and hour often give out stocks to thier employees, also I have done taxes for many elderly people on a fixed income that recieve dividends.

I also would like to address the point that the tax rate schedules were lowered for everyone, that the child tax credit was raised by $400 per child, that the additional child tax credit phase out levels were raised, that the form 8880 rules were changed to let more people recieve tax credit from thier retirement savings, and that there were various changes to the Schedule C which helped out small business owners.

Other than the schedule C changes, most of the tax credits I talked about phase out for people over a certain income, so they are not helping the wealthy at all.

I just don't think that the tax cuts really did the trick to an extent which justifies their cost to the budget.

I guess you could stop government investment in infrastructure (:rolleyes:).

The US needed deficit spending in 2002/2003, but should have seriously begun curbing the deficit in 2004. We need to reduce it or eliminate it to counteract the trade deficit and shore up our liabilities. Eliminating pork would improve our situation; that $250 million bridge to nowhere in Alaska comes to mind...

I'd scale back some of the income cuts, but would cut the capital gains taxes to attract more investment in the US; that's almost guaranteed to increase tax revenue.

Some people justify the Bush tax cuts by saying, since their inception, they've been responsible for the average 4% or so growth of the economy. Others rubbish the tax cuts for only enriching the rich who benefit from capital gains and stuff, and not helping the poor.

I’m confused. Could the economy have grown by similar rate, if not better, without those tax cuts? Who benefit from these tax cuts?

I'm thinking even if only rich people benefit from tax cuts that means good news for the poor. Because the wives and daugters, and in some rare cases husbands and sons, of CEOs and business tycoons will do more shopping and spending. And rich non-parsimony means shopping centers become busier requiring more hands (employees) which are mostly those of the poor. Is it a nice way to distribute benefits to the poor. Who said the best welfare system is job creation?
Bush Sr. called this kinda stuff, "Voodoo economics". The "trickle down theory" just doesn't work, especially when the "rich" people spend their windfalls by opening new companies in foreign lands and taking foreign vactions or buying expensive "imported" goods, etc.

My guess is that the American economy has grown due to an influx of illegal aliens, and a declining US dollar, among other variables.

Ok can't remember preciesely when the tax cuts took effect...but here is the comparitive data from the Congressional Budget Office.

Year Revenues (In Billions of USD)
2000 2,025.2
2001 1,991.2
2002 1,853.2
2003 1,782.3
2004 1,880.1

Bush Sr. called this kinda stuff, "Voodoo economics". The "trickle down theory" just doesn't work, especially when the "rich" people spend their windfalls by opening new companies in foreign lands and taking foreign vactions or buying expensive "imported" goods, etc.


Umm, why would they build factories in foreign lands if the taxes are lower here? And can't they go overseas with their business anyway? And it doesn't always follow that foreign goods are better than American ones. BTW, many of these expensive goods come from countries where they have poverty that we as Americans can only dream of.

BTW, in fairness, certain social government programs like Nationalized Health Insurance and the EIC can benefit the so-called "supply side" as well, since it places less of a burden on companies to pay enormous labor costs, which frees up their capital to do other things. Of course this requires higher taxes, so it's debatable whether or not the economy as a whole would benefit. Tarriffs almost always hurt poorer people, since a tarriff is essentially a Sales tax, which is regressive in nature.

The US needed deficit spending in 2002/2003, but should have seriously begun curbing the deficit in 2004. We need to reduce it or eliminate it to counteract the trade deficit and shore up our liabilities. Eliminating pork would improve our situation; that $250 million bridge to nowhere in Alaska comes to mind...

I'd scale back some of the income cuts, but would cut the capital gains taxes to attract more investment in the US; that's almost guaranteed to increase tax revenue.

I'm not a big believer in Keyensian manipulation, so I'm not sure if even the deficit of 2002/03 was warranted, but that's just my opinion. I certainly agree that we ought to be paying enough tax to cover our deficit right now, if that is possible.

I tend to be opposed to substantial cuts of investment income, unless it is to prevent so-called "double taxation." As far as I am concerned, a 15% rate for corporate gains sounds about right, since they are already taxed on profits, but there should be at least some tax on the "expectations" profit, IMO. Perhaps it would be better if we repealed the tax on corporations and kept the tax on CGs, but that might translate into an uncertain revenue source.

I would also increase the excise tax on gasoline to parity with government funding of the road system. I did some research, and just the bill they just passed in congress were spread out on all gasoline used in the US, it would come out to about 36 cents a gallon (with states probably another 15 cents at least) and maybe that would make bridges built in remote fishing villages a thing of the past. Also institute a tax on carbon dioxide and other emissions. As far as I am concerned, these taxes are making people pay for a resource that is currently either free-for all or unfairly distributed amongst the public by badly written regulations, and if taxing someone for their use of a resource we all need means a reduction long-term on doing things that are good for the economy (such as making money or spending it), than it should be encouraged.

everyone benifits from the tax cuts, there is no such thing as a "tax cut for the wealthy" everyone got a tax cut.

I am a tax professional.
FSL?

Year Revenues (In Billions of USD)
2000 2,025.2
2001 1,991.2
2002 1,853.2
2003 1,782.3
2004 1,880.1

Calculated as a percentage of unadjusted GDP:

20.63%
19.66%
17.70%
16.25%
16.02%

I relied on your figures; I assumed that they weren't adjusted as well.

Year Revenues (In Billions of USD)
2000 2,025.2
2001 1,991.2
2002 1,853.2
2003 1,782.3
2004 1,880.1
So between 2000 to 2003, $US 242,900,000,000 were lost in income. Say what you will, but that is a lot of money.
What was the case for privatising Social Security again? They were estimating...hmm...$US 59,400,000,000 to keep covering everyone into the 22nd century.

So I summarise - about one quarter of the yearly income lost due to the tax cuts would be enough to cover everyone who won't be covered by normal social security in 2052. Yet it is in a "huge crisis".
And at the same time Bush argues to make the cuts permanent.
That's ridiculous.

I'm just curious, what percentage of the budget annually goes towards interest on the national debt(United States)?

I'm just curious, what percentage of the budget annually goes towards interest on the national debt(United States)?
A little info site (http://www.kowaldesign.com/budget/)
At the moment it is about 10% I believe.

A little info site (http://www.kowaldesign.com/budget/)
At the moment it is about 10% I believe.


While tax cuts might get the politician reelected, that 10% of the budget could be well spent. If any President would work to curb the debt and free up that 10% it would help the country tremendously.


Or just keep cutting taxes, whatever works.

While tax cuts might get the politician reelected, that 10% of the budget could be well spent. If any President would work to curb the debt and free up that 10% it would help the country tremendously.
You can say that again.
Those 10% are afterall 10% of everyone's income tax - $US 352,350,252,507.90...or in other words, $US 1183.55 for every citizen of the United States.

Umm, why would they build factories in foreign lands if the taxes are lower here?
Because labour costs are lower there.


And can't they go overseas with their business anyway?They can, and will, and the tax cuts have nothing to do with it. What the tax cuts do though is make it so that much less of the increased profit they see because the American society is good enough to let them build their factories elsewhere and sell to America ever goes into American society.


And it doesn't always follow that foreign goods are better than American ones. BTW, many of these expensive goods come from countries where they have poverty that we as Americans can only dream of.Irrelevant.

Trickle-down doesn't work for a simple reason: A man with three million dollars doesn't purchase three thousand times more than a man with 1000 dollars. He probably doesn't purchase three thousand toaster ovens, as an example.

Wealth is only generated when money moves. Profit slows this generation down, because instead of having to pay for simply the cost of producing the product or service, a little "extra" needs to be paid. You can think of profit as the friction in the economic machine. There needs to be a little there, otherwise everything slips and nothing gets done. However, if there's too much, then your machine becomes inefficient, running slowly for the amount of work put in.

FSL?
:confused:

The reason trickle-down doesn't work is the hourly wage.

If I work in a shop I will be paid as little as they can get away with. That will not change whether they are barely breaking even or running record profits. The trickle goes sideways as the rich spend cash that goes to other rich people.

What the tax cuts do though is make it so that much less of the increased profit they see because the American society is good enough to let them build their factories elsewhere and sell to America ever goes into American society.


SO really you're arguing against free trade, not lower taxes.

But actually, free trade increases wealth in our country, because goods are provided to American businesses and individuals at lower cost (this is not purely a Republican idea; Clinton's financial advisor would agree with me). This results in a de-facto raise for everyone, and in particular the poor, because as you said yourself, consumption percentages are higher at lower levels of income. Also free trade increases the creation of wealth because, as you said yourself, money moves faster through the economy.

Trickle-down doesn't work for a simple reason: A man with three million dollars doesn't purchase three thousand times more than a man with 1000 dollars. He probably doesn't purchase three thousand toaster ovens, as an example.

Wealth is only generated when money moves. Profit slows this generation down, because instead of having to pay for simply the cost of producing the product or service, a little "extra" needs to be paid.

That's true, if the rich were to take their excess money out of the banks and stocks, and stuff it under their mattress. The fact is, rich peple don't stuff their money under their matress, unless they're stupid. They invest it in stocks, bonds, CDs, and possibly in venture capital. All of these measures help the economy because the money goes into investment, which in turn creates jobs and lowers the price of goods as competition is increased.

Virtually all economists agree that the trickle-down (or up) effect works. If you're a Keynsian, it might take years or decades. If you're a neo-liberal, the time frame is much shorter. IMO, mobility of capital and labor is a key factor in determining how well the so-called trickle down effect works. It works better when there are very few restrictions on capital and labor, and protectionism is not employed. It works less well when capital and labor are tied up by government regulation, and tarrifs and subsidies are commonplace.

You can think of profit as the friction in the economic machine. There needs to be a little there, otherwise everything slips and nothing gets done. However, if there's too much, then your machine becomes inefficient, running slowly for the amount of work put in.

The answer to this is simple: competition. If the profit for a product or service is too high, inevitably people will recognize it and go to another brand. In a purely competitive market (agriculture is often used as an example) the only profit that exists in the long run is something called "normal profit." Most companies try to create a little monopoly power in a market, by advertising or increasing the quality of the product. But the choice is still left up to the end consumer, and if the end-consumer is poor, he or she willl inevitably choose the product that is lowest in price.

The reason trickle-down doesn't work is the hourly wage.

If I work in a shop I will be paid as little as they can get away with. That will not change whether they are barely breaking even or running record profits. The trickle goes sideways as the rich spend cash that goes to other rich people.

So get another job that pays better. If they were to cut your taxes instead, or increase your entitlements, your wages would also be cut, and you would be encouraged to take advantage of that entitlement or tax cut. The question is (as it always is), how long does it take for this to happen, but it always eventually happens.

Honestly, taxes don't burn me as much as entitlements, subsidies, and excessive government regulation. The reason for this is taxes are for the most part universal, while entitlements and regualtion are often created to help out this interest group or that interest group. I am pro-capitalism, not pro-business. All to often corporations seek protection in the wings of government, when their industry underperforms. A gross example of this is the FDA, which was created nominally to help increase the safety of drugs, but in actuality has cost lives and increased drug prices dramatically, as drugs are held up for years in red tape while these life-saving drugs could be out on the market, saving the lives of patients. The reality is, increased regulation is actively lobbied for by the pharmaceutical companies, because that limits entrants to the market and creates an oligopolistic scenario, which in turn increases profit margin. Inevitably we will probably see a bailout of the pensions of the airline and auto-manufacturing industries as well, because we don't want the poor, inefficient companies to go under.

Umm, why would they build factories in foreign lands if the taxes are lower here?

Because even though the taxes were lowered, they are still lower in other countries. Just because it went from 25% to 20%, doesn't mean that it's now better than that country with a 10% rate (not actual number)

BTW, many of these expensive goods come from countries where they have poverty that we as Americans can only dream of.

I think I understand what you were intending to say, but consider rewording that.


I tend to be opposed to substantial cuts of investment income, unless it is to prevent so-called "double taxation." As far as I am concerned, a 15% rate for corporate gains sounds about right, since they are already taxed on profits, but there should be at least some tax on the "expectations" profit, IMO. Perhaps it would be better if we repealed the tax on corporations and kept the tax on CGs, but that might translate into an uncertain revenue source.

Just remember that no matter what taxes you apply to corporations and other businesses they will never pay them. They will only pass the cost onto either 1) the final customer; 2)the Employee via less pay and/or benefits; and 3) the share holder via lower dividends...or some combination thereof

FSL?
What does this mean? No scarsam...I honestly don't know.

Calculated as a percentage of unadjusted GDP:

20.63%
19.66%
17.70%
16.25%
16.02%

I relied on your figures; I assumed that they weren't adjusted as well.

Actually you're a little low...

2000 20.9
2001 19.8
2002 17.8
2003 16.4
2004 16.3

I'm using figures straight from the Congressional Budget Office. I've no idea whether they're adjusted or not.

After the tech bubble burst, 9/11, two wars, etc. I think it's amazing we recovered to quickly and if you give no credit to tax cuts then you're obviously partisan.

Trickle-down doesn't work for a simple reason: A man with three million dollars doesn't purchase three thousand times more than a man with 1000 dollars. He probably doesn't purchase three thousand toaster ovens, as an example.



I bet he invests alot more than average joe over there. People don't keep their money under mattresses anymore.

Because even though the taxes were lowered, they are still lower in other countries. Just because it went from 25% to 20%, doesn't mean that it's now better than that country with a 10% rate (not actual number)

True enough, but there is probably some countries out there with a 23% rate, and if that were the only factor, or if the cost is offset by more regulation, they might still be encouraged to buid here. The key here is to reduce the opportunity cost, not eliminate it.

Just remember that no matter what taxes you apply to corporations and other businesses they will never pay them. They will only pass the cost onto either 1) the final customer; 2)the Employee via less pay and/or benefits; and 3) the share holder via lower dividends...or some combination thereof

Yep, because that is all a company is made up of: it's employees, its shareholders, and it's customers. It can't very well create money out of thin air.

Because labour costs are lower there.


and environmental rules more lax

and safety rules more lax

What needs to be done in the US is to abolish those minimum wage laws, and work safety regulations, and those abominable environmental laws.

voila! employment up, poverty and drugs and complaints down. Yay!

I don't think anyone disputes that if all else was held constant and we reduced taxes the economy would be better off. The real question to me is what happens when tax reduction results in other things that are detrimental to the economy. For example, is it still a good idea even weighed against a higher federal debt?

What the tax cuts do though is make it so that much less of the increased profit they see because the American society is good enough to let them build their factories elsewhere and sell to America ever goes into American society.


SO really you're arguing against free trade, not lower taxes.

But actually, free trade increases wealth in our country, because goods are provided to American businesses and individuals at lower cost (this is not purely a Republican idea; Clinton's financial advisor would agree with me). This results in a de-facto raise for everyone, and in particular the poor, because as you said yourself, consumption percentages are higher at lower levels of income. Also free trade increases the creation of wealth because, as you said yourself, money moves faster through the economy.

It also puts American workers in direct competition with labor whose value has been artificially decreased below the cost of production. You see, people in the Nike sweatshops don't work for said non-union sweatshops for 12-15 hour days in what are effectively death trap fire hazards because they are happy capitalists. They do so firstly because the multi is often the only game in town (meaning that the sweatshop has an effective monopoly on jobs), and secondly because companies like Nike have a history of locking the workers in to make sure they can't get out.

As for why they don't unionize, it's because companies like Nike have a history of going to the local generalismo and saying: "We will pay you off millions of dollars per year. You can have all the blow, all the whores, and all the cars you want, and all you have to do for us in exchange is to send out a paramilitary team any time one of those little brown brothers starts getting uppity and agitating for unionization." Meanwhile, they also go to the legislature, provided there is any, and say "We'll make you a deal: We're going to come in and set up shop. We're also going to provide you with enough money to ensure that you never get kicked out of office. In exchange, you have to agree to pass a law prohibiting unionization of the workers, and an agreement to authorize any force your generalismos use to put down those workers . . . oh, and by the way, keep in mind that if a law ever were passed legalizing unionization, we're just going to pick up stakes and pitch our tent in country X across the border, which will put your nation in even worse poverty than they are right now."

Now, you might argue that Americans pay better than average wages. While this is true, it is nevertheless the case that arguing that because the prevailing wage is $.1 I am justified in working my laborers to death for $.2 an hour is suspiciously like those old claims by the South that slavery was a preferable form of labor to capitalism because, after all, Southerners took better care of their slaves than Northerners did their Irish. Moreover, it is economically ineffective: the ideal wage is not just one that maximizes profit, but one that allows your workers to purchase your goods. How exactly do Malaysians buy Nike's at a prevailing wage of about a dollar per day? They don't. Thus, the system merely perpetuates an unsustainable system whereby money is pumped out of the U.S. to buy cheaply-produced foreign-made goods.


Trickle-down doesn't work for a simple reason: A man with three million dollars doesn't purchase three thousand times more than a man with 1000 dollars. He probably doesn't purchase three thousand toaster ovens, as an example.

Wealth is only generated when money moves. Profit slows this generation down, because instead of having to pay for simply the cost of producing the product or service, a little "extra" needs to be paid.

That's true, if the rich were to take their excess money out of the banks and stocks, and stuff it under their mattress. The fact is, rich peple don't stuff their money under their matress, unless they're stupid. They invest it in stocks, bonds, CDs, and possibly in venture capital. All of these measures help the economy because the money goes into investment, which in turn creates jobs and lowers the price of goods as competition is increased.

Virtually all economists agree that the trickle-down (or up) effect works. If you're a Keynsian, it might take years or decades. If you're a neo-liberal, the time frame is much shorter. IMO, mobility of capital and labor is a key factor in determining how well the so-called trickle down effect works. It works better when there are very few restrictions on capital and labor, and protectionism is not employed. It works less well when capital and labor are tied up by government regulation, and tarrifs and subsidies are commonplace.


I believe the technical term for this is "bullcrap." Put simply, the main claim of trickle-down theorists like Laffer is that by reducing the tax load, you will increase the rate of the economy to such a degree that you effectively increase overall tax revenue above and beyond the old tax load. Yet when they tried this in both 1982 and 2001, this hasn't happened: we've instead found ourselves awash in red ink. Moreover, the greatest economic expansion in history occured after a marginal tax increase in 1993. This is not to say that increasing taxes was responsible for creating the 90's boom, but it cannot be denied that trickle-down theorists were effectively predicting the end of the world with Clinton's tax policy, yet the inverse occured.

In short, in the brief history of trickle-down economics, we have never seen one instance where in the aggregate and on the whole, it has done what its proponents said it would do, and in fact it has usually done exactly what its detractors claimed would happen. Now, perhaps what you mean when you say "Virtually all economists agree that the trickle-down (or up) effect works" is that all economists who come out of conservative think tanks like the RAND Institute and Heritage Foundation think that it works. In this case, it would be true, but that is not a reflection on the overall truth value of whether or not trickle-down economics works. It's a case where a highly biased and self-selected group have used propaganda to convince the American public that its previously-held beliefs about how the economy should work actually (and incorrectly) square with empirical data.


You can think of profit as the friction in the economic machine. There needs to be a little there, otherwise everything slips and nothing gets done. However, if there's too much, then your machine becomes inefficient, running slowly for the amount of work put in.

The answer to this is simple: competition. If the profit for a product or service is too high, inevitably people will recognize it and go to another brand. In a purely competitive market (agriculture is often used as an example) the only profit that exists in the long run is something called "normal profit." Most companies try to create a little monopoly power in a market, by advertising or increasing the quality of the product. But the choice is still left up to the end consumer, and if the end-consumer is poor, he or she willl inevitably choose the product that is lowest in price.


While we're in Fantasyland, I was wondering if competition could also get me a pony.

In the real world, what happens is not that "people will recognize it and go to another brand", because in the real world a purely competitive market never has and never will exist. Instead, especially to use your agriculture example, megacorps like Tyson Food, which already have what is effectively a horizontally-integrated monopoly on food production in this country, lobby Congress to subsidize their profiteering with corporate welfare. Some of this comes in the form of direct handouts (usually given in the name of helping "the hard-working farmers of America", leaving out of course the mention that Con-Agra or ADM isn't what most Americans have in mind when they think of a hard-working American farmer), and some in indirect ways, such as the suspension of property or income taxes and turning a blind eye to environmental problems being created by industrial farms and flesh factories. Thus, these countries are able to turn around and slash their prices, which keeps themselves artificially competitive while at the same time they increase their profit margins comensurately--all at the cost of the average American farmer, who would be the most likely candidate to offer the "alternatives" your pure market wants to tout will happen.


The reason trickle-down doesn't work is the hourly wage.

If I work in a shop I will be paid as little as they can get away with. That will not change whether they are barely breaking even or running record profits. The trickle goes sideways as the rich spend cash that goes to other rich people.

So get another job that pays better. If they were to cut your taxes instead, or increase your entitlements, your wages would also be cut, and you would be encouraged to take advantage of that entitlement or tax cut. The question is (as it always is), how long does it take for this to happen, but it always eventually happens.

And how exactly do you do that when a) you are tied down to the land your family has owned for a hundred years, or b) when you've just immigrated to the country, or c) when there is only one major business in town, or d) when health or age considerations restrict your ability to move about the country, or e) when you don't have the money to pull up stakes and move to a hot job market in another state.

The fact that right off the top of my head, I was able to come up five cases (which aren't that uncommon) when your system doesn't work suggests that it needs to be taken back to the drawing board.


Honestly, taxes don't burn me as much as entitlements, subsidies, and excessive government regulation. The reason for this is taxes are for the most part universal, while entitlements and regualtion are often created to help out this interest group or that interest group. I am pro-capitalism, not pro-business. All to often corporations seek protection in the wings of government, when their industry underperforms. A gross example of this is the FDA, which was created nominally to help increase the safety of drugs, but in actuality has cost lives and increased drug prices dramatically, as drugs are held up for years in red tape while these life-saving drugs could be out on the market, saving the lives of patients. The reality is, increased regulation is actively lobbied for by the pharmaceutical companies, because that limits entrants to the market and creates an oligopolistic scenario, which in turn increases profit margin. Inevitably we will probably see a bailout of the pensions of the airline and auto-manufacturing industries as well, because we don't want the poor, inefficient companies to go under.

Entirely true, but you neglect to mention that 1) these actions are taken for the capitalist rationale that it secures economic advantage and self-interest for the companies to do so, and 2) that in the history of the world, there has never been a capitalist system that has escaped this problem.

The first is a question of intent and logical definition. Capitalism roots its ideas in the notion that people seek what is in their best interest, and pursue rational means to do so. Establishing a quid pro quo arrangement with politicians to secure an oligopoly or monopoly in exchange for secure political position is one in which both sides attain what is in their best interest through rational means. So how exactly does this violate the spirit of capitalism? By your fiat, or some other reason that I'm not seeing?

The second question is one of historical verification. People often accuse communists of having a pie-in-the-sky view of human nature, because never ("people" in this case are actually going too far, since there are societies today that are working Marxist systems; there is a province in India, for instance, that follows Marxist organization) in history has anyone managed to turn Marx's ideas into a working governmental system. Yet the same is true of capitalism: every time we've tried it, we've succeeding in having an invisible hand operating for only a very short time, basically until the first person or company manages to stake a decided hold on the top of the hill of any particular industry. So given that the two have roughly even records of actually showing up and working for extended periods of time in historical settings (about zero in either case), how is your claims to the efficacy of the invisible hand any less absurd than those wacky Marxists?

....

....very good...I bow to thee

(I wrote a b.a. thesis on csr)

Tax cuts are almost always a good thing, and are probably responsible for a degree of the economic recovery (I don't care too much for Keynesian theories, though). The only question lies in what income brackets should have got what amounts of the cut. The rich really ought to recieve at least an equal percentage of their income back as the poor, seeing as they pay greater percentages in the first place. Might as well make it a proportional tax cut, which makes the remaining tax system more progressive by simple mathematics.

My parents are upper middle class, and we get a couple hundred dollars back each year. Worse off familes get less. A couple hundred dollars is not going to help you or the economy that much at all. Every person I know could blow a hundred or two in under an hour in a mall, that amount of money back really means very little. Plus, it's not like every person is going to go on a shopping spree when they get their tax cut money, if they're at all smart anyway, so it's not like businesses would have a temporary boost or anything.

However, if someone were really rich, say a corperate business owner, they could get a few million dollars.

You know how there's 80% of the wealth in 10% of the population? About 80% of the tax cut money goes to 10% of the population too. At the poor and middle class end of the spectrum, which is most of the spectrum really, not that much money gets distributed. At the ridiculously rich end of the spectrum, you might as well shovel all of the US gold right in to their houses, yachts, and helicopters.

Don't tell me a bunch of rich people who are only rich due to business and the exploitation of workers are really going to help the economy. The only way in business to even get that high up is to be greedy and corrupt, that's been true since the second industrial revolution.

My parents are upper middle class, and we get a couple hundred dollars back each year. Worse off familes get less. A couple hundred dollars is not going to help you or the economy that much at all. Every person I know could blow a hundred or two in under an hour in a mall, that amount of money back really means very little. Plus, it's not like every person is going to go on a shopping spree when they get their tax cut money, if they're at all smart anyway, so it's not like businesses would have a temporary boost or anything.
The amount you get in refund depends on how much you have had withheld and what refundable credits you are eligible for. My tax refund this year sits at about $5. I have adjusted my withholding to be just about the same as the tax that I will owe. Why? Because I want my money now, I can use the extra every month, I see no point in letting the government "hold my money" when I could be investing it and making money.

I have seen people who have had nothing withheld get thousands back, because of refundable credits like the Earned Income Credit. For example someone who makes $25,000 can get up to $2000 back, after not paying any taxes and not having any withheld, add in other refundable credits like the additional child tax credit and they can get much more.

However, if someone were really rich, say a corperate business owner, they could get a few million dollars.
Again it all depends on how much you pay in estimated payments (have withheld) most of the refundable credits are either phased out or completely gone by the time you make $200,000.

You know how there's 80% of the wealth in 10% of the population? About 80% of the tax cut money goes to 10% of the population too. At the poor and middle class end of the spectrum, which is most of the spectrum really, not that much money gets distributed. At the ridiculously rich end of the spectrum, you might as well shovel all of the US gold right in to their houses, yachts, and helicopters.
uh... no. It just doesn't work that way, everyone got an equal percent cut on the tax rate schedules, and then the poor/middle class got an even better deal with changes to the tax credits.

Don't tell me a bunch of rich people who are only rich due to business and the exploitation of workers are really going to help the economy. The only way in business to even get that high up is to be greedy and corrupt, that's been true since the second industrial revolution.
Maybe they just work really hard. I know a few people who have more than 2 million dollars, who started out with nothing, who worked thier butt off, and who still work very hard. They are not greedy, or corrupt. They don't exploit anyone.

I don't think it could have functioned as well. The influx of capital from the tax cuts (and the deficit spending/Fed rate cuts) put a huge amount of monetary stimulus in to the economy, which provided the boost to consumers to accelerate the recovery from the post dot-com crash recession.I was about to disagree with your use of the word 'huge', but then I noticed you included deficit spending and low interest rates. Yeah, that's stimulated the economy, but it's not "real" growth as eventually creditors will want their money back. Whether or not they actually get their money back doesn't matter. The fact is that today's investments will not pay off quite as well as expected because they're made based on the numbers that can be seen, and it looks like people have more money than they really do. This will cause the next recession. The same process caused the last one. It wouldn't happen without Fed or some similar entity interfering in the marketplace, in this case, by artificially lowering the interest rate below the market's "natural" rate of interest.

everyone benifits from the tax cuts, there is no such thing as a "tax cut for the wealthy" everyone got a tax cut.

I am a tax professional.To make such a blanket statement would mean that everyone would benefit if taxes were cut to 0, pushing you into a new line of work. I would actually agree with that, but I wonder if you do.

Okay okay, some people would not benefit, not immediately anyway. Case in point: tax professionals.


EDIT: I should add that a cut in tax rates accompanied with increased defecit spending is no tax cut at all. The government is still extracting wealth from the peaceful economy, just in a different fashion.

This is actually rather simplistic...Well done...

If only some people in Washington had half some sense to put it so simply.

However. I do not think that during an era of deficit we should be spending so much and not getting any income from taxes. It's not a matter of benefiting the rich or poor, a tax cut at this time just is not appropriate.Tax cuts are always appropriate. As are spending cuts.

The US needed deficit spending in 2002/2003, but should have seriously begun curbing the deficit in 2004. We need to reduce it or eliminate it to counteract the trade deficit and shore up our liabilities. Eliminating pork would improve our situation; that $250 million bridge to nowhere in Alaska comes to mind...You know what comes to my mind? A pointless $300 billion middle eastern genocide.

To make such a blanket statement would mean that everyone would benefit if taxes were cut to 0, pushing you into a new line of work. I would actually agree with that, but I wonder if you do.
I would agree with that. I wouldn't mind switching up what I do, if it meant that the government was out of my hair. I don't do taxes because I want the government to get money, I do them to help people get the largest legal refund possible.

Okay okay, some people would not benefit, not immediately anyway. Case in point: tax professionals. most of us could just switch over to financial planning postitions. We like that better anyway, you have more control of that situation.

So between 2000 to 2003, $US 242,900,000,000 were lost in income. Say what you will, but that is a lot of money.
What was the case for privatising Social Security again? They were estimating...hmm...$US 59,400,000,000 to keep covering everyone into the 22nd century.

So I summarise - about one quarter of the yearly income lost due to the tax cuts would be enough to cover everyone who won't be covered by normal social security in 2052. Yet it is in a "huge crisis".
And at the same time Bush argues to make the cuts permanent.
That's ridiculous.You're assuming that tax rates correspond to tax revenue in a linear fashion. They do not.

I would agree with that. I wouldn't mind switching up what I do, if it meant that the government was out of my hair. I don't do taxes because I want the government to get money, I do them to help people get the largest legal refund possible. You sir, are a great human being.

You sir, are a great human being.
I am female but thanks anyway ;)

Wealth is only generated when money moves. Profit slows this generation down, because instead of having to pay for simply the cost of producing the product or service, a little "extra" needs to be paid. You can think of profit as the friction in the economic machine. There needs to be a little there, otherwise everything slips and nothing gets done. However, if there's too much, then your machine becomes inefficient, running slowly for the amount of work put in.You are dead wrong. Wealth is generated when goods are produced. You could compare the wealth of two men who each live alone on their own separate islands. If one of them lives quite well, while the other one starves to death, you could reasonably say that he is wealthier. But his wealth is not a result of moving money. Indeed, he has no use for money at all. His wealth is entirely the result of his own labor and perhaps the generosity of God or nature (assuming he started with nothing). The same is true of all wealth no matter how advanced the economy.

Profit is not economic friction. It is precisely the opposite. Without profit motive, nothing would ever happen. Strictly speaking, nobody would bother doing anything if they did not expect to benefit from their actions somehow. Profit steers investment from ventures that will not please consumers to those that do.

The real friction in an economy is government and its related parasites, the entities that don't need to worry about earning a profit.

I am female but thanks anyway ;)
Oh, cool. :cool:

Sorry about that then.

The reason trickle-down doesn't work is the hourly wage.

If I work in a shop I will be paid as little as they can get away with. That will not change whether they are barely breaking even or running record profits. The trickle goes sideways as the rich spend cash that goes to other rich people.Trickle-down isn't so much a theory as an attempt to explain to people that what goes around comes around. But hourly wages do change. A few years ago, after laying off half the employees of the course of about 3 months (including me), my current employer (got re-hired) cut wages by 5% across the board. Today, they have more employees than ever before and are struggling like mad to get more people in the door. Do you know what that means? They're forced to offer higher wages. Now like most employers, they demand employees keep their mouths shut about that stuff so I can't say exactly what they're offering, but its pretty clear that the new guys are happy with what they're getting. And business isn't just booming for my company, so guys who think they can get a better deal elsewhere are looking. And so, wages must be adjusted accordingly, or the company will lose the guys they need the most and eventually will not be profitable.

Yeah, I thought instead of trying to explain economics to you, I'd just present an example.

and environmental rules more lax

and safety rules more lax

What needs to be done in the US is to abolish those minimum wage laws, and work safety regulations, and those abominable environmental laws.

voila! employment up, poverty and drugs and complaints down. Yay!
I agree with your apparent sarcasm.

It also puts American workers in direct competition with labor whose value has been artificially decreased below the cost of production. You see, people in the Nike sweatshops don't work for said non-union sweatshops for 12-15 hour days in what are effectively death trap fire hazards because they are happy capitalists. They do so firstly because the multi is often the only game in town (meaning that the sweatshop has an effective monopoly on jobs), and secondly because companies like Nike have a history of locking the workers in to make sure they can't get out.

As for why they don't unionize, it's because companies like Nike have a history of going to the local generalismo and saying: "We will pay you off millions of dollars per year. You can have all the blow, all the whores, and all the cars you want, and all you have to do for us in exchange is to send out a paramilitary team any time one of those little brown brothers starts getting uppity and agitating for unionization." Meanwhile, they also go to the legislature, provided there is any, and say "We'll make you a deal: We're going to come in and set up shop. We're also going to provide you with enough money to ensure that you never get kicked out of office. In exchange, you have to agree to pass a law prohibiting unionization of the workers, and an agreement to authorize any force your generalismos use to put down those workers . . . oh, and by the way, keep in mind that if a law ever were passed legalizing unionization, we're just going to pick up stakes and pitch our tent in country X across the border, which will put your nation in even worse poverty than they are right now."

Now, you might argue that Americans pay better than average wages. While this is true, it is nevertheless the case that arguing that because the prevailing wage is $.1 I am justified in working my laborers to death for $.2 an hour is suspiciously like those old claims by the South that slavery was a preferable form of labor to capitalism because, after all, Southerners took better care of their slaves than Northerners did their Irish. Moreover, it is economically ineffective: the ideal wage is not just one that maximizes profit, but one that allows your workers to purchase your goods. How exactly do Malaysians buy Nike's at a prevailing wage of about a dollar per day? They don't. Thus, the system merely perpetuates an unsustainable system whereby money is pumped out of the U.S. to buy cheaply-produced foreign-made goods.

So why would Malaysians work there (aside of your alarmist inference that they lock them in; I would need to see some credible evidence on that)? If that $2/day didn't make their lives better than subsistence farming, wouldn't they go back to that? The fact is, the cost of living is much lower in these countries than it is in America or Europe. 20 cents could buy a decent (by Malaysian standards) meal there, wheras 20 cents here would buy you a cheap piece of candy. So when you pinch pennies, 2 dollars isn't all that bad. And as you say, they pay significantly higher wages than do other people. That's not just money they're putting in the hands of the Malaysian people. That's power, and they will eventually be able to use that power to participate in the political process and get fair treatment.

I believe the technical term for this is "bullcrap." Put simply, the main claim of trickle-down theorists like Laffer is that by reducing the tax load, you will increase the rate of the economy to such a degree that you effectively increase overall tax revenue above and beyond the old tax load. Yet when they tried this in both 1982 and 2001, this hasn't happened: we've instead found ourselves awash in red ink. Moreover, the greatest economic expansion in history occured after a marginal tax increase in 1993. This is not to say that increasing taxes was responsible for creating the 90's boom, but it cannot be denied that trickle-down theorists were effectively predicting the end of the world with Clinton's tax policy, yet the inverse occured.

The whole point behind Laffer is that, regardless of whether you have %100 tax rate for everyody, or a 0% tax rate for everybody, your tax revenue will be zero because there is no incentive to work. It does NOT mean that cutting taxes will always yield more revenue, or that raising taxes will always lower revenue (that's just silly). The problem is maintaining the innovative edge of all people over the long haul, and the point made by laffer was that at certain points in the tax structure, the opportuinity to make money was very low, which would crimp investment over the long run.

None of that has anything to do with trickle down economics. Trickle-down economics DOES work, because if it didn't, the poor would still be literally living like the serfs in mideval times. I heard this special where a journalist went to the poorest part of Brooklyn, and everyone there had cable TV.

Also, I wouldn't try to prove the point that socialism is better than capitalism by invoking Clinton. With the exception of Reagan, Clinton was one of the most neo-liberalist presidents we've had since pre-New-Deal.

In short, in the brief history of trickle-down economics, we have never seen one instance where in the aggregate and on the whole, it has done what its proponents said it would do, and in fact it has usually done exactly what its detractors claimed would happen. Now, perhaps what you mean when you say "Virtually all economists agree that the trickle-down (or up) effect works" is that all economists who come out of conservative think tanks like the RAND Institute and Heritage Foundation think that it works. In this case, it would be true, but that is not a reflection on the overall truth value of whether or not trickle-down economics works. It's a case where a highly biased and self-selected group have used propaganda to convince the American public that its previously-held beliefs about how the economy should work actually (and incorrectly) square with empirical data.

I'm a libertarian, but, again, even Keynesians (who were the foundation for the populists of the Western World like Roosevelt) believed in trickle-down economics. The fact that people like Sam Walton started out with virtually nothing proves that trickle-down economics works. The fact that we have and enjoy anything at all related to something that a rich person produced, proves that trickle-down economics works. Some people say it happens over a few months or years, and some say longer. But every economist, except the most deluded Marxists, would have to believe in the concept of trickle down economics. Does it work better when you have a well-deducated public and a socially free society, where government doesn't try to control business, whether over or at the bequest of those businesses? You bet. but that's just another reason to believe in capitalism; freedom is just more fun, and more interesting, and more diverse, and interactive.

In the real world, what happens is not that "people will recognize it and go to another brand", because in the real world a purely competitive market never has and never will exist. Instead, especially to use your agriculture example, megacorps like Tyson Food, which already have what is effectively a horizontally-integrated monopoly on food production in this country, lobby Congress to subsidize their profiteering with corporate welfare. Some of this comes in the form of direct handouts (usually given in the name of helping "the hard-working farmers of America", leaving out of course the mention that Con-Agra or ADM isn't what most Americans have in mind when they think of a hard-working American farmer), and some in indirect ways, such as the suspension of property or income taxes and turning a blind eye to environmental problems being created by industrial farms and flesh factories. Thus, these countries are able to turn around and slash their prices, which keeps themselves artificially competitive while at the same time they increase their profit margins comensurately--all at the cost of the average American farmer, who would be the most likely candidate to offer the "alternatives" your pure market wants to tout will happen.

No, I agree with you there. All too often our government gives money to support big business. I catagorically oppose subsidizing our agricultural industry (I'm blasting the Republicans on this too, they're the ones who are supporting this kind of thing in our country.) I also think that free trade is going to wipe out farm subsidies. Europe is under immense pressure right now to get rid of their subsidized farms (which is a much bigger problem there than here). Now I would point out that, under Communism, environmental protection was basically non-existent because a) the industries couldn't afford it, and b) the industry was RUN by government, creating a much, much bigger conflict of interest than it would under capitalism. These are all arguments to move AWAY from the socialist system, not toward.

And how exactly do you do that when a) you are tied down to the land your family has owned for a hundred years, or b) when you've just immigrated to the country, or c) when there is only one major business in town, or d) when health or age considerations restrict your ability to move about the country, or e) when you don't have the money to pull up stakes and move to a hot job market in another state.

The fact that right off the top of my head, I was able to come up five cases (which aren't that uncommon) when your system doesn't work suggests that it needs to be taken back to the drawing board.

All of these questions can be answered with things that capitalism has created, such as buses, trains, cars, and planes. While I don't deny that unions are a necessary evil in Malaysia and Indeonesia; they just slow growth and drive up the cost of everything in a modern capitalist society.

Entirely true, but you neglect to mention that 1) these actions are taken for the capitalist rationale that it secures economic advantage and self-interest for the companies to do so, and 2) that in the history of the world, there has never been a capitalist system that has escaped this problem

The first is a question of intent and logical definition. Capitalism roots its ideas in the notion that people seek what is in their best interest, and pursue rational means to do so. Establishing a quid pro quo arrangement with politicians to secure an oligopoly or monopoly in exchange for secure political position is one in which both sides attain what is in their best interest through rational means. So how exactly does this violate the spirit of capitalism? By your fiat, or some other reason that I'm not seeing?.

So you want to solve this problem by making all these industries completely dependent on subsidies and command-and-control planning? You don't think there will be a conflict of interest there? Or perhaps you think that human nature will somehow magically change when we get rid of private property? I might point out that this problem hits the countries the hardest where they have glomed on to the notion that communism and socialism may actually have something constructive to say in solving the problems of the world (e.g. western Europe). Our government over here doged at least part of the bullet by simply being too slow to do anything rash during the New Deal and Communist eras. These subsidies, as I have already said, will come down, because the markets will demand it in the global economy.

The second question is one of historical verification. People often accuse communists of having a pie-in-the-sky view of human nature, because never ("people" in this case are actually going too far, since there are societies today that are working Marxist systems; there is a province in India, for instance, that follows Marxist organization) in history has anyone managed to turn Marx's ideas into a working governmental system. Yet the same is true of capitalism: every time we've tried it, we've succeeding in having an invisible hand operating for only a very short time, basically until the first person or company manages to stake a decided hold on the top of the hill of any particular industry. So given that the two have roughly even records of actually showing up and working for extended periods of time in historical settings (about zero in either case), how is your claims to the efficacy of the invisible hand any less absurd than those wacky Marxists?

In the first place, capitalism has been around in some form for virtually all of civilization, whereas Marxism, when it existed at all, was either imposed by a tyrant or practiced by small enclaves of religious fanatics. Whereas societies that have been characterized by capitalism are rich and free, societies that are characterized by socialism are poor and downtrodden. You mentioned a province in India that practices Marxism. what I would like to know is, are the people there free, and have there been any pilgrimages or immigrations to this happy place?

The key here is choice. I am a capitalist because I choose to use the system that I live in. Assuming that you don't live in North Korea, Cuba, Venezuela, the backwoods of China or parts of sub-saharan Africa, you too are a capitalist, because even though your words intone of a happier days ahead where you can lord it over the wealth of others (with your fellow workers, of course) your actions show that you really aren't interested in living in any attempt at practical application at all. What we have in places like the US, Canada, Japan, Singapore, Hong Kong, Europe and parts of China, is attempts at practical application of capitalism. Is there poverty in these places? Sure, but not the kind of desparate poverty you find in the other places. I understand that some of these countries may have different kinds of wealth, but I always smile when they come to the rest of us, arms outstretched, wanting food, money, or shelter. We give them aid, hoping of course that they will see the error of their ways, and they never do.

I could forsee a time where some deluded people would attempt to unite willingly under Communism, and my response would be, more power too them. Just don't make ME live under what I see as a silly, misguided, unrealistic view of the world. Don't put up huge fences of barbed wire to prevent your people from leaving and joining the capitalist societies, and don't indulge in genocide to prove your point or control your people. This just serves to prove the point of the so-called misguided capitalists.