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04-14-2010, 08:59 AM
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Sorry
Quote:
Originally Posted by Villages Kahuna
Well, not quite, Cashman. I'll address these in reverse order. - I suspect you might be referring to me as a "fiscal liberal" (if not, forget this). I am a fiscal conservative. That is, I believe that government spends too much and however much it spends, expenditures should be no greater than tax revenues--no deficit spending! We must begin to spend less than we take in and begin to pay down the enormous national debt.
What I am however is a fiscal realist. While I understand the economic theories, I also understand the numbers themselves. As you know, as much as I would hope it's not the case, I'm convinced that to solve the problems of deficit spending and ballooning national debt, it will take both drastic spending cuts as well as substantially increased taxes. Both will substantially change the American way of life. The arithmetic simply doesn't work any other way.
- But I disagree with you on the thought that reducing taxes always leaves more resources with producers and always results in more jobs and government revenues.
First, reducing taxes on the producers doesn't increase spending, demand, the need for more production, more jobs and then more tax revenues. For that to work, the reduced taxes must put money in consumers pockets, not the producers.
But even that doesn't work too well anymore. That theory worked well for 30-40 years when the U.S. savings rate was near zero. Then any money from reduced personal taxes went immediately to fund more spending, starting the cycle mentioned above. But economists are almost unanimous in noting that there has been a structural change in the U.S. economy. The core savings rate is now about 4%, up from zero. Almost all economists believe this change to be permanent.
The effect of an increased savings rate is that tax savings are now being applied most often to the reduction of debts and/or savings--not spending. Paying off debt or saving doesn't create one new job, increases in GDP or increased tax revenue.
Paying off debt and saving doesn't produce any new spending, jobs and increased tax revenues. The theory will still work, but on a much more watered down basis. Until taxes are cut substantially more than the 4% core savings rate, there is almost no new spending and very few new jobs are created, and certainly no increased tax revenues.
I did the arithmetic on this idea in another post. In order to have personal tax cuts have a positive effect on spending, jobs and new tax revenues, the cuts would have to be of a size that would make an already critical level of deficit spending an almost fatal blow to our economy. An 8% cut in personal taxes, as an example, would increase the annual deficit from $1.4 trillion to almost $1.7 trillion!
George Bush found out that the old, oft-repeated theories didn't work with the tax rebates in 2007. The effect on employment and increased tax revenue was nil because almost all the recipients of the rebates paid off debt or saved the money. Even if personal taxes were reduced again now, there would be little if any increased economic activity and employment because the money would be directed to debt reduction and savings.
So Cashman, when you say "the arithmetic is simple", I'd suggest you actually DO the arithmetic. You may change your mind and not just keep repeating all those old maxims and adages which you claim are "basic facts" but are decidedly not. |
No fiscal conservative talks like you do. I disagree with everything you say about taxes. Your understanding of economics is tainted by your ideology.
I may agree that a VAT will work because all individuals will pay it therefore generating more revenues.
Of course I would want spending cuts first and Income taxes either eliminated or cut very low which will not happen if Liberals have anything to say about it.
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