orb@whuxl.UUCP (SEVENER) (11/11/85)
Again, it seems that some conservatives have little understanding of either their own pet theories, or the economic system they are always so eager to defend. Tom Hill argues: > >= tim >= Tom Hill > > have some quotes from a New York Times Business Day article, Sept. 18,1984: > > "The key supply-side tenet is that lowering marginal tax rates > > will have a substantial incentive effect on work and investment, > > fostering long-term, noninflationary growth. In addition, the > > theory holds, this growth will eventually shrink the budget > > deficits." > > ie. Put the money back in the hands of the people and they will both spend > more and save more. > Tom, this does *not* say they will *spend more*, it says they will *work more* and save more. The unemployment rate has declined from the record 10.5% rate (most since the Great Depression) it attained in the '82 Recession. But it still stands at a very high 7% rate- the highest it has ever been for a so called "recovery". How can people "work more" if they cannot even find a job to begin with? Of that decline in the unemployment rate, a majority of the increase in jobs has been in service-sector, "McDonalds" type jobs. Not the sort of jobs to build a long-term career upon. A number of studies of industrial areas hardhit by layoffs and unemployment during the '82 recession have shown that most of the steelworkers and others laidoff who have found jobs have found subsistence, minimum wage type jobs like McDonalds, to replace the lucrative and secure factory jobs they once held. Their income has dropped precipitously. Hence the 75% of the middle class that has dropped into poverty between 1979 and 1983. > > My understanding of the savings rate is this (you have already admitted that > you know nothing so please listen) the marginal savings rate is equal to > 1 - the marginal propensity to spend. So, after you have paid all your > bills the amount of the money you have left over to do with as you wish > is either spent or saved. If 98% is spent then the savings rate would be > 2%. > > The 1981 tax cuts put more of those marginal dollars into the hands of the > taxpayers. Say you normally saved (or invested) $300 dollars out of > $10000 for a savings rate of 3%. Now say that you get more money to spend > (through tax cuts) and now have $12,000 instead of just $10,000. If you > now save $350 your savings rate have decreased even though your *ACTUAL* > savings have increased. Could this be the case with your observation that > the savings rate has decreased since 1981? Let the people keep their hard > earned money and make the politicians account for their ineptness. 1)I have seen no evidence that the absolute level of private savings has increased. Can you present some evidence for this assertion? 2)It is econometric firms on Wall Street who have expressed concern about the steady decline of the private savings rate lately, since our country's savings rate is already one of the lowest in the industrialized world. There is concern that such a low savings rate will be unable to supply funds needed for future investments if it continues 3)Francisco Modigliano, the recent Nobel Prize winner in Economics has argued that the *private savings rate* is unimportant if corporations increase their savings commensurately (which he says they have) tim sevener whuxn!orb