"Why the GOP Won't Admit Supply-Side Econ Has Failed"

[applegrove]

Why the GOP Won't Admit Supply-Side Econ Has Failed

By MARK THOMA, The Fiscal Times

http://www.thefiscaltimes.com/Columns/2012/12/04/Why-the-GOP-Wont-Admit-Supply-Side-Econ-Has-Failed.aspx#page1

"SNIP............................................


The Bush tax cuts were a test of these claims about supply-side economic policies. To justify the tax cuts the nation was, in effect, given a business prospectus from the Republican Party. We were promised that cutting taxes on the wealthy would result in much higher economic growth and broadly shared prosperity. For those who wondered how we would pay for such a large cut to the government’s revenue stream, the Republican prospectus had a remarkable claim. The tax cuts wouldn’t cost us anything. Growth would be so strong that the tax cuts would more than pay for themselves. Even those who admitted that the tax cuts might not be fully self-financing still made strong claims about faster economic growth offsetting much of the lost revenue from the tax cuts.

The reality, of course, has been quite different. There is little evidence that the Bush tax cuts, or any other tax cuts directed at the so-called job creators, have had a noticeable effect on economic growth. And the promise of broadly shared prosperity has not been realized. Most of the gains from economic growth in recent decades have gone to the top of the income distribution while the inflation adjusted wages of the working class have been relatively flat. Furthermore, the tax cuts have not paid for themselves as promised, and it hasn’t even been close. The Bush tax cuts have already cost us trillions in revenue, and if they are extended for high income tax payers, they will cost us roughly another trillion over the next decade.

The failure of Republicans to deliver on their promise that tax cuts would be mostly self-financing is a large factor in the deterioration in our long-run fiscal outlook, and it is putting considerable pressure on programs such as Social Security. In fact, the Bush tax cuts can be thought of as a loan from the Social Security Trust Fund that was supposed to be paid back with the revenues from higher economic growth, a loan that is presently in default.

To see this, recall that the government began intentionally collecting a surplus from the Social Security program beginning in 1983 in order to prefund the retirement needs of baby boomers. The idea was to run a surplus for several decades while the baby-boomers were still working to get ready for the deficit years the system would experience after they retired.


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[JEFF9K]

1. 0.00%

0.00% is the success rate of Reaganomics/Trickle down/Free trade ... Read about it in Naomi's Klein's excellent book The Shock Doctrine. Republican support for it, however, yields huge campaign donations from billionaires!

[mike_c]

2. why the FUCK are we talking about raising taxes on the rich by a few percent...?

It should be clear to everyone by now that lowering the highest tax rates-- on individuals or corporations-- simply allows them to sequester more wealth and increases economic disparity. Why aren't we calling for the polar opposite? Increase the top tax rates back to the 90% plus range and use taxation to force wealth back into the hands of the working classes, where it can actually do some good. THAT should be our starting position, and by "our" I mean progressives of every stripe, democratic or otherwise.

The notion that cutting taxes at the top does anything but further enrich the already wealthy at the expense of the poor is demonstrably false. It is an utterly failed policy experiment. If it had any validity at all we would be awash in jobs and economic growth today, when the wealthy and businesses enjoy the lowest taxes in generations. Rather than ease up a little, we should be clamoring to chuck that failed experiment onto history's waste pile of bad ideas.

Tax the rich until they are no longer rich. Give tax incentives to corporations only when they transfer wealth OUT of corporate hands and back to their workers or their communities. Not one dime of tax subsidy to increase their profits.

[applegrove]

3. I would not go that far. I think the Clinton rates were good.

[mike_c]

4. why not?

The only evidence we currently have is that going in the direction of decreasing taxes on the wealthy and corporations is ultimately harmful to the economy. We've tried the experiment in that direction. It didn't work.

On the other hand, we've also tried the experiment in the other direction. Some of the best economic growth the U.S. has ever experienced, including the birth of a robust middle class, occurred when top tax rates exceeded 90 percent. Why not go back to that?

[applegrove]

6. Because America built things for the world then. America did not compete

with pathetic communist bloc countries, America did not compete with a Europe trying to rebuild after WWIII, America did not compete with Asian countries who were poor and less developed, they did not compete with Latin American countries who had tin pot dictatorships. America was the really the great market in the world at the time. With nobody else making cars they sold everywhere. Everything sold everywhere. Now the world is a more even place with many countries able to manufacture, etc. There were huge profits to be made. Much more so than today. And the unions made sure the middle class got some of that. These days you want American corporations to become the biggest in the world as the world is carved up. That way, in the years to come, profit will return to Americans as America has punched above its weight because it is such a developed market and a head start on everybody else. I'm not saying don't tax corporations. I'm not saying don't tax the rich. But there simply is not as much money to be made in America so you can't tax as much.

[Johonny]

5. because it has worked for the people the GOP represent

that the GOP doesn't give a * about the average American, the working American, the poor American doesn't matter. They don't represent them and do not care about them. They do and have represented the richest in America and the economy is working for them. Thus the GOP will not change. Why too many Americans vote for people that refuse to care about them is the real question.