Supply-Side Economics

[finnbow]

Originally Posted by whell

No, its not (your and others attempts to mis-characterize it not withstanding).

OK, name a single time when massive GOP tax cuts were accompanied with massive spending cuts of the same scale (or even significant spending cuts). In short, corresponding spending cuts have never been a feature of supply-side theory or practice, but massive deficits have always been.

[whell]

Originally Posted by finnbow

OK, name a single time when massive GOP tax cuts were accompanied with massive spending cuts of the same scale.

Your question is flawed, since the purpose of a tax cut in the supply side context is not to produce a spending reduction. The purpose of a tax cut in the supply side context is to make the cost of capital cheaper, thus encouraging more activity relative the converting capital and stimulate economic growth.

I'm repeating myself here, but:
The central premise of supply side economics is that the more an activity — such as production — is taxed, the less of it is generated. Likewise, the less an activity is taxed, the more of it is generated. Since you get more conversion of capital when the cost of converting capital (production) is lowered, the tax revenue generated by that process should increase.

If you want to critique supply side practitioners for implementing tax reductions while failing to control spending, feel free. But since supply side is an economic theory aimed at increasing economic activity, you can't fault the theory when its practitioners fail to follow basic budgeting principles.

But then, you'd also have to show a president who managed spending and debt appropriately. The last US President who didn't add to the ballooning national debt during his tenure was Calvin Coolidge. I suspect political types from both parties could learn a thing or two about managing the budget from ol' Calvin.

[finnbow]

Originally Posted by whell

Your question is flawed, since the purpose of a tax cut in the supply side context is not to produce a spending reduction. The purpose of a tax cut in the supply side context is to make the cost of capital cheaper...

If so, supply-side has been an abject failure and can never reach this objective. It has always led to massive increases in debt which raises interest rates, thereby increasing the cost of capital.

In the words of Reagan's own Budget Director "The Republican Party has totally abdicated its job in our democracy, which is to act as the guardian of fiscal discipline and responsibility. They're on an anti-tax jihad -- one that benefits the prosperous classes" and his Vice President describing supply-side as "voodoo economics."

In summary, supply-side is an inherently flawed economic theory that has never worked and simply can't work. Reagan proved it doesn't work. Dubya proved that again. Kansas Governor Brownback proved it yet again. And Trump's latest effort put the icing on the cake. Per the scientific method, a theory only gains credence when an hypothesis is borne out in an experiment and subsequently repeated. Supply-side has never once proven to work. In fact, in every instance it has done exactly the opposite of what its proponents say it will do (i.e., pay for itself). Simply put, it is flawed economic theory.

[donquixote99]

It's a brilliant theory. It allows those cutting taxes to claim they have a plan to help the economy, when their actual goal is just to cut taxes, economy be damned.

[whell]

Originally Posted by finnbow

If so, supply-side has been an abject failure and can never reach this objective. It has always led to massive increases in debt which raises interest rates, thereby increasing the cost of capital.

Uh, no.
https://www.cnbc.com/2016/11/17/200-...one-chart.html

The other issue you have with your statement about rates is that they are subject to manipulation. On the other hand, even if the Fed chose to raise rates, they'd still be quite low compared to historical averages.

You don't seem to understand that increases in SPENDING lead to debt. It happened in the '80's and its happening now. Tax revenues increased nearly every year in the 80's, but due to Congress's unchecked appetite for spending - and the President's willingness to let it go on - spending outpaced the increases in revenue. Tax revenues also increased for your hero Barry, but he still is the clear winner when it comes to adding to the debt because of....wait for it....SPENDING!

[Dondilion]

Originally Posted by donquixote99

It's a brilliant theory. It allows those cutting taxes to claim they have a plan to help the economy, when their actual goal is just to cut taxes, economy be damned.

"their actual goal is just to cut taxes": So correct!

[Chicks]

https://www.washingtonpost.com/opini...226_story.html

The primary reason the deficit in coming years will now be higher than had been expected is the reduction in tax revenue from last year’s tax cuts, not an increase in spending. This year, revenue is expected to fall below 17 percent of gross domestic product — the lowest it has been in the past 50 years with the exception of the aftermath of the past two recessions.

Sorry, Whell, you are the one who just doesn’t get it.

[whell]

Originally Posted by Chicks

https://www.washingtonpost.com/opini...226_story.html

The primary reason the deficit in coming years will now be higher than had been expected is the reduction in tax revenue from last year’s tax cuts, not an increase in spending. This year, revenue is expected to fall below 17 percent of gross domestic product — the lowest it has been in the past 50 years with the exception of the aftermath of the past two recessions.

Sorry, Whell, you are the one who just doesn’t get it.

I think not. I think actually you can't understand what you read. First, you site an "opinion" column as your source for your conclusion. I'll leave aside the fact that this "opinion" comes from WaPo, and it specifically a response to a Hoover Institute study about entitlement funding and not written as a broader commentary specifically about government spending or revenue policy.

The specific quote that you site is not sourced: we don't know from where the author draws his/her data to support that statement. I suspect it comes from the CBO. The CBO info is an "estimate" based on projections from reductions in revenue versus as static model. The foresight can therefore not be based on actual receipts.

In other words, the story isn't written yet. For example:

Government receipts totaled $3,315 billion in FY 2017. This was $48 billion higher than in FY 2016, an increase of 1.5 percent, below expectations from both the Budget and the MSR. As a percentage of GDP, receipts equaled 17.3 percent, 0.4 percentage point lower than in FY 2016 and 0.1 percentage point below the average over the last 40 years. The dollar increase in receipts for FY 2017 can be attributed to higher social insurance and retirement receipts and net individual income taxes, partially offset by lower deposits of earnings by the Federal Reserve.

Outlays grew in FY 2017, but by less than expected in the Budget and the MSR, and decreased slightly as a percentage of GDP. Outlays were $3,981 billion, $128 billion above those in FY 2016, a 3.3 percent increase. As a percentage of GDP, outlays were 20.7 percent, 0.1 percentage point lower than in the prior year, but above the 40-year average of 20.5 percent.

That was the result of the fiscal 2017 budget, which was laid out in 2016. Revenues less than expected, but in actuality Uncle Sam spent less than what was budgeted. The CBO didn't accurately predict this result. We also know that the CBO's predictive ability isn't that great, particularly with multi-year projections.

[finnbow]

Originally Posted by whell

I think not. I think actually you can't understand what you read. First, you site an "opinion" column as your source for your conclusion...

You overlook the fact that they're all renowned and accomplished economists and all former chairs of the White House Council of Economic Advisers and that they have access to real data and real experts, not to mention decades of experience.

Conversely, there isn't a single credible economist alive who believes that the recent supply-side tax cuts will actually grow our way out of the deficit. The more you dig in supporting supply-side theory, the more ignorant and delusional you look. There has never been a real world example of it working and, in fact, every attempt at it has been a dismal failure. If you're so fond of this discredited theory, move to what should be your land of milk and honey - Kansas.

[Chicks]

Originally Posted by finnbow

You overlook the fact that they're all renowned and accomplished economists and all former chairs of the White House Council of Economic Advisers and that they have access to real data and real experts, not to mention decades of experience.

Remember, we’re talking to a Donny sycophant here, proof that he’s not terribly bright. He’s so dull that he offered a Koch brothers funded “research” paper as “proof” that global warming is a lefty fantasy, lol. He’s not playing with a full deck, obviously.