Economists/Financial People: Need Help Debunking This.

[smirkymonkey]

I have a friend in Ireland who keeps sending me e-mails and attachments (usually from well paid Corporate/Financial economists w/ large brokerage firms) saying that the Bush tax cuts have been good for the US Economy.

I have been arguing with him back and forth about why they aren't citing widening gap between rich and poor/middle class, deficit spending, how the cuts are primarily for non-earned income and mostly benefit the wealthy and how supply-side economic "theory" is unsound and how it didn't work in the Reagan era either.

Yet, he insists that he hears in the news and on the radio (no links of course) how "left-wing European economists" are touting the Bush tax cuts and what a stimulus they are to our economy. Before I go back and tell him he's full of shit again, can any of you give me a good argument why this is not so?

Thanks for your help!

[John Q. Citizen]

1. Ask if he's

seen the stock market latlely?

Bush: First President since hoover to have a net job loss in his four year term

[leftyandproud]

2. believe it or not..

equality is not important to many people...For people who care only about economic growth, the "gap" between different income groups takes a back seat to everything else. It only seems to bother a small portion of the population.

[lapfog_1]

3. I'm not an economist

The Bush tax cuts did provide for a short term market recovery,
however, that has mostly evaporated due to a couple of successive
oil shocks plus the recovery did NOT (perhaps for the first time)
create new jobs in the sectors affected by the down turn.

It is not clear at all that the Bush tax cuts have done anything
for the long term good of the economy... plus there is now a
growing deficit... the deficit requires the US to borrow money
from the markets, thus driving down the money supply (which was
supposed to increase by way of those tax cuts). Eventually,
deficits will drive up interest rates... and inflation. And that
will not be good for the economy.

[FloridaPat]

4. Hard to debunk something when all you have it what he heard on

the radio. Same crap we're getting here. All one has to do is look around, which is very hard to do from Europe.

[Inland]

5. Geez.

1) Deficits, and tax cuts, do stimulate the economy by creating greater demand for goods and services, much in the same way your household can spend more if it takes out a loan.

2) But the essential premise of economics is that everything has a cost, and for deficit spending, it is the interest on the debt--now the third largest item in our budget after the military and social security benefits.

3) Given the cost of deficit spending, one would want the biggest stimulus for each dollar of deficit. Bush's tax cuts to the wealthy is combined with increased defense spending, which have less stimulative effect than just about any other type of increased spending or tax cut you could want. For example, a social security tax (tax on wages) was rejected by Bush and would have been much more stimulative. A tax rebate was also rejected. Fact is, a decently intelligent stimulus program would have been too fair for Bush. That's why he was for a huge tax break for the rich in 1998, long before the recession. It wasn't meant for stimulus. It was meant for looting the treasury of the surplus for the rich.

3) Moreover, most times the economy shouldn't be receiving stimulus at all. The stimulus of deficit spending when the economy is not in recession causes inflation. Bush's deficits are going to continue on forever, even if he is not successful in making them permanent. That will cause the Fed to restrict money supply to hold inflation down, thus putting the brakes on the economy even as we run up debt.

4) Long term, the US simply consumes more than its income. We fund our lifestyles by borrowing and selling. That's why our trade deficit keeps growing. Bush sells another 450 Billion in US treasuries every year to this problem. Sooner or later, people are going to stop buying US debt. Why? Because you can only want so much of a good thing. Then what do we do?

5) Left wingers like deficits because they think freeing themselves from the realities of economics allows for unlimited spending on government programs. Right wingers like deficits because they think freeing themselves from the realities of economics allows for unlimited tax cuts. It is because idiots like Reagan, Bush and Bush II have lead the country into a belief that deficits don't matter, there is no limit on how big they get. Carter got slammed for having a $79 Billion deficit in his last year.

If the president tell the country that deficits don't matter, the country is glad enough to believe it. But its a lie.

[smirkymonkey]

9. Thanks - all good points.

I know how it should work in theory, but I think the reality of the situation is bordering on disaster - thanks to the looting of the Bush administraion and those who helped put them in power.

[TreasonousBastard]

6. The mind boggles.

Apparently, you have sent all of the appropriate answers to the supply-side bullshit that these anonymous "left-wing" economists have been allegedly spouting, and it has done no good.

Methinks that there is not a spate of lefty ecominists touting the tax cuts, but perhaps some wishful thinking on the part of your correspondant fueled by some Irish variant of our talk radio.

Everyone is looking for tax cuts, and it seeems to be popular for the weaker minds of Europe to look to our "tax free" society as a model for the world.

The answer is not in theoretical rebuttals to supply-sidism, as it has been thouroughly rebutted and only the idiotic or the criminal defend it. The answer is that the US economy is NOT in good shape:

Our federal debt threatens the entire world, not just us.

Our middle class is living off of credit cards, real incomes are declining, and job growth is nonexistent

Our current account balance and trade deficit is enormous, and growing, and is threatening our survival.

We have stopped any and all attempts at environmental stewardship and protection, leaving future generations with a wasteland-- a wasteland that they will still be paying for with the current debt.

What little GDP and job growth have been almost entirely due to increased government spending-- without, of course, corresponding increased tax revenues.

The tax cuts have been almost entirely on corporate and unearned income, leaving what taxes are being paid to income earners. If you inherit a hundred million dollars it is apparently obscene to tax that, but if you make $25,000 you must pay your taxes.

State and local taxes have sharply increased since the amount of federal revenue they have been getting has been slowed down. So, even if you do get a federal tax break, your local property tax may go up more than you saved.

Many essential programs, like educational grants, Small Business Administration loans and other programs to help people get ahead and/or incubate small businesses have been effectively shelved or capped.

Regulation of workplace safety, food safety, and so many other things has been severely curtailed.

The only true growth businesses we have are military suppliers and prisons.

These are just some the trends here, and if your Irish friend would prefer to live in the type of place this is becoming just to save a few bucks on taxes, offer to switch places.

[smirkymonkey]

10. I think you might have hit the nail on the head w/ regard

to his motivation "Everyone is looking for tax cuts, and it seeems to be popular for the weaker minds of Europe to look to our "tax free" society as a model for the world."

You also made some excellent points - I am bookmarking this thread so that I have some ammunition next time.

[Warpy]

7. The theory went this way:

Giving the rich and the corporate extra money to throw around would be good for everybody as they'd use it to expand industry and hire more people.

Alas, they've forgotten that the money pump works from the bottom up, not the top down. Throwing money at the wealthy didn't increase consumer demand for goods and services, as the wealthy already are up to their limit on those, so no new jobs were created. What that money did was prop up the stock market and drive up the auction prices of old wines, fine art and antiques. The largesse to corporations gave them all the bright idea of moving even more of their facilities offshore so they could improve paper profits and give upper management nice bonuses.

As more and more people are out of work, there's less and less demand for goods and services, which means more people get sacked every day. It's a vicious cycle, and it's likely to get much worse before it gets any better, as supply side theory has become dogma, and dogma is hard to shake.

I'm very afraid it will take another depression, and I'm very afraid that is exactly what we're headed for.

[smirkymonkey]

11. Unfortunately, we may go "Third World" before they

come to their senses.

Is there something I am missing, or does it make sense to others that when you dry up disposable income, you have no market for your product.

Corporations can't run on the generosity of the upper classes forever and the people overseas who are now creating these goods and services can't afford to pay "market price" for the goods those very same companies are producing. Therefore, it makes sense that, in time, this shortfall in consumer spending will come back to bite these greedy corporations in the ass.

Does that make sense, or is their some fault in that reasoning. It seems pretty simple to me.

[TreasonousBastard]

13. Henry Ford is alleged to have said...

"I have to pay my workers well so they can afford to buy my cars."

...or something like that.

You are absolutely right that economies are primarily demand-driven, and without goods and services for the population there really is no point in having an economy. If the population doesn't want or can't afford goods and services, the companies selling stuff have nothing to do.

The argument that the wealthy need more money to build factories is pure bullshit. There is no problem with currency contraction or lack of capital as we saw in the Depression. There's plenty of capital around, and there's lot's of construction and inventory building where a demand is seen. And there's shitpots of money looking for something to do besides speculate in the markets. That's part of what's feeding the office and home building boom in some areas.

Part of the problem is that many public companies insist on unreasonable growth and profit numbers. This had led to the problem of a McDonald's in everyone's living room and a Wal-Mart on every corner. Try going more than two miles in any direction around here without bumping into a Subway or Dunkin Donuts. Really! I once thought of a project of walking from North Jersey to Cape May and seeing if I could actually stop and rest at a Dunkin Donuts every few miles.

Inflation and population growth should ensure some growth in all sectors, but too many companies feel they have to beat those numbers, and if they can't increase store sales, they just increase the number of stores. There's plenty of investment capital for that kind of growth.

But it's backfiring now, and even McDonald's is closing stores that aren't cutting it. They ran into the Demand problem-- you need customers to have a business. Clothing and drygoods chains went through this shakeout a while ago.

Take the bottom half of the population, median household income being somewhere around $50,000, and give them a huge tax break, including cutting FICA and Medicare taxes. They'll spend damn near every penny of it, and watch the economy grow.

Impractical, and it has other downsides, but it's the kind of thing that works.

[smirkymonkey]

8. Thanks all! You have each made some good points

about the stock market, the disregard for the plight of the poor and underprivileged and the fact that, in usual republican fashion, short term gains were sought at the expense of the overall economic picture.

I think most people, especially those who have a horse in this race, tend to disregard the big picture, which I believe will hurt us in the long run.

Personally, I think it's a house of cards. There is so much corruption out there. There is no telling when it might all come crashing down.

[Robert Oak]

12. fire off my URLS

in my sig...

tons of info on taxes and the budget deficit...

no, good for paid corporate sponsors of Bush, bad for us...
good for Halliburton, bad for us.

[German-Lefty]

14. I'm in Germany and haven't heard anything like that

from either our sellout left wing government or the right wing opposition. By the way none of the European governments are allowed to do what bushy does, because of the EU stability pact. Thou shalt not run a deficit of more than 3% GDP.

I think the consensus here is that Bush is a moron. Some people suggest appeasing the moron more than others.

If he had a link I'd be intrested in seeing it.

[smirkymonkey]

15. He said one of the articles was from

the UK Guardian, by some Lehman Bros. "economist" that was filling in for William Keegan.

Wait, I found it - it was John Llewellyn from Sunday's paper, August 15th. Here's the link, although this was only one of the Economists he actaully named.

http://observer.guardian.co.uk/business/story/0,,1283213,00.html

[Dark]

16. Here's a good rebuttal about Bush's claims about the economy:

From the Center for American Progress (A Liberal Think Tank). They back up their info and theories with data from the US government. Tell him to refute this:

http://www.americanprogress.org/atf/cf/{E9245FE4-9A2B-43C7-A521-5D6FF2E06E03}/JOBRECOV.PDF