During this presidential election, we've had both candidates, Democrat Barack Obama and Republican John McCain, claim that they will cut taxes. At the same time, independent economists claim that Obama's tax cut plan is better than McCain's tax cut plan, and the question is, why? This goes to the fundamental differences between Democrats and Republicans as it pertains to economic policy.
Republican Ideology
Republicans believe in supply-side economics and the free market system. The concept behind "supply-side" is that if the wealthiest of Americans, along with businesses and corporations, get massive tax cuts, they'll have more money to spend creating jobs and investing in the American economy. At the same time, a free market system requires no intervention from government.
Reality: Wealthy Americans and large corporations aren't investing and creating jobs for the American economy. They're, in fact, investing and creating jobs primarily outside of the US. Garment/clothing, auto, and customer service industry are a few of the industries that are investing and outsourcing jobs outside of the nation.
This is why your laptop comes from China and your call to customer support for that laptop goes to someone in India.
Reality: While it was sold to us as a way to achieve lower prices on goods, we have to recognize specifically what we take away from the economy. Every job that is lost is also a loss to tax revenue. Every job that is lost is also a loss of a paying customer. Lose enough jobs, we create a market that can't support business by buying things. Businesses start closing down and more jobs are loss. It's a cycle that will not end.
I won't go into the social ramifications of job loss, but I am sure many of us can remember the rough times in history.
Reality: A free market system bars government regulation. That means that the US government, under Republicans, aren't going to do anything about job loss outside of exacerbate the problem with more upper-class and corporate tax cuts. That means the rich get richer and the poor get poorer.
While this seems a way to compete with other nations to attract business, their own tax cuts nullifies anything the US can do to keep jobs or create jobs in the US. Throw in the allure of cheap labor (near-slave labor in some nations) and there's no way in hell any business would invest in the US economy unless citizens accept extremely low wage jobs beyond the massive tax cuts businesses would receive.
I'll discuss why the Democratic ideology of demand-side economics and government intervention is the right thing to do tomorrow. But, if you can think of the inverse of the Republican ideology, you'll already have an idea of why it works and you won't even need to come back.
Here are some pieces that I wrote that may help you understand more:
Feb. 10, 2008 - Why Bush’s $150B stimulus package won’t work!
June 17, 2008 - My pissed off response to a Yahoo Question
Sep. 23, 2008 - Reagan destroyed America (and how Obama can fix it)
http://usanthony.blogspot.com/2008/10/why-mccains-economic-policy-is-wrong.html