orb@whuxl.UUCP (SEVENER) (10/30/85)
One of the key arguments for Reagan's enormous tax giveaway to
the rich and corporations in 1981 was based on "Supply-side
economics"- namely that giving the rich tax bonanzas would lead
them to save and invest in productive enterprises that would
"increase supply" and therefore trickle down to the poor.
After 4 years one could probably say this policy should have had
enough time to have some effect. What has been the effect on
the savings rate? Has it been the upsurge postulated by
Laugher and his silly curve? Just last week the government
issued a report that the savings rates was less than 2% -the
lowest rate it has been in 40 years. Moreover the proportion
of consumer debt has skyrocketed. It has been consumer spending
which has fueled the economic recovery - not investments.
While consumer debt is at record high levels, the government itself
is of course saddled with a doubling of its debt in the last 5 years
(to pay for Reagan's spending spree on new nukes and such) to the
point where all of Reagan's touted cuts in domestic spending for
people's needs has been overshadowed by simply the increase in
the amount of interest owed on the national debt.
Moreover, an earlier report projected that increases in workers
take-home pay would continue to drop as it has been dropping for
a couple years.
How can supply-side economics work if its major premise (that
tax giveaways would lead to an increase in the savings rate)
does not prove to be valid?
To the extent it has worked at all it would seem to be more
explicable in terms of Classical Keynesian theory of the effects of
deficits rather than any increase in savings rate or consequent
investment and improved supply.
tim sevener whuxn!orbtw8023@pyuxii.UUCP (T Wheeler) (10/31/85)
The great theorist explains all again. Phooey, Sevener, you seem to have Tip O'neil's party line rhetoric down pat. First, supply side economics DOES depend on consumer spending, not the savings rate. Second, when are you going to admit that social spending far outweighs military spending? Who has consistently pushed greater and greater social spending? The House of Representatives, that's who. Who controls the House. Tip O'spendit, that's who. I don't know about some folks, but over the past four years, I have been making more, spending more, and saving more percentagewise than ever before. Perhaps it could be that I tore up those damn credit cards and can now spend real money. I have a feeling that if more people did the same, they would be in better shape too. T. C. Wheeler
dlo@drutx.UUCP (OlsonDL) (11/01/85)
[] From: orb@whuxl.UUCP (SEVENER) >One of the key arguments for Reagan's enormous tax giveaway to >the rich and corporations in 1981 was based on "Supply-side >economics"- namely that giving the rich tax bonanzas would lead >them to save and invest in productive enterprises that would >"increase supply" and therefore trickle down to the poor. > >[some stuff about the Reagan budget and defense spending on nukes] > >How can supply-side economics work if its major premise (that >tax giveaways would lead to an increase in the savings rate) >does not prove to be valid? > >To the extent it has worked at all it would seem to be more >explicable in terms of Classical Keynesian theory of the effects of >deficits rather than any increase in savings rate or consequent >investment and improved supply. You've presented a rather impressive collection of straw men. 1) "tax givaway" is a self contradiction. Tax cuts and tax breaks do not GIVE AWAY anything; they only TAKE AWAY less. It's like if a burglar stole your stereo but left your TV, he didn't give you a TV; he took your stereo. 2) A corporation is NOT a source of wealth. But, the money for corproate taxes must come from someplace. A corporate tax is just another hidden tax that *all* of us pay -- mainly in the form if higher prices. Oh, they may sign the check, but the money for it comes right out of our pockets. Besides, since the rich and poor alike pay the same price for the same item, a higher percentage of the poor's income goes to the payment of these taxes; it is, therefore, a regressive tax. 3) Spending bills are originated in the House of Representatives, not the White House. 4) The United States has the largest budget in the world, followed by the Soviet Union. Guess what comes third. Canada? China? Japan? Nope. It is a department in the federal govt called Health and Human Services, formerly HEW. Pick ANY country in the world outside of the US and USSR and its *entire* budget is smaller than HHS. Think of it! HHS, the department charged with helping poor people, spends more money than all the money spent on anything by the governments of Australia, or Canada, or Japan, or China, or even any of the oil rich nations of OPEC! The last time I heard, the DOD's budget is about half of what is spent on social welfare; about 40% goes to people, and most of the rest of it goes to conventional weapons. A very small percentage (I forgot what, though) is spent on nukes. According to the _Information_Please_ Almanac_ of 1985 the DOD's budget was $187 billion and for social welfare, at the federal level alone, spending was over $366 billion (If you include state and local, it jumps to over $592 billion). (The figures for these are bigger now, but the only figures it lists for them are for 1982). With $366 billion, you could buy the GNP of all of the United Kingdom and still have change left over. Indeed there is a problem with the defense spending. But, a bigger problem is with the NON-DEFENSE spending, because more is spent there than almost anywhere else. Whew! 5) To equate supply side with "trickle down" is like equating ERA with unisex toilets. It is simply a derogatory remark made by demagogues who either do not understand or are intellectually dishonest. Supply side is based on the principle that supply creates its own demand; nothing more, nothing less. 6) Whether people save more or not through a tax cut does not invalidate the tax cut -- only a possible reason some people gave as a virtue of a tax cut. Most people who earn their own money know how to use it *better* than any bureaucrat. Even if a case can be made that there are those that don't, it does not justify depriving those that do the fruit of their own labor. In any case, higher taxes mean even less money that is saveable. 7) A problem with Keynesian economics is that it places the cart before the horse. Supply is sufficient to create demand, but demand is not sufficient to create supply. > tim sevener whuxn!orb My opinions are my own, and do not necessarily reflect those of my employer. David Olson ..!ihnp4!drutx!dlo "To laugh at men of sense is the privilege of fools". -- Jean de la Bruyere
orb@whuts.UUCP (SEVENER) (11/02/85)
As usual Mr. Wheeler is full of opinions and very few facts: > The great theorist explains all again. Phooey, Sevener, you > seem to have Tip O'neil's party line rhetoric down pat. > First, supply side economics DOES depend on consumer spending, > not the savings rate. Second, when are you going to admit > that social spending far outweighs military spending? Who > has consistently pushed greater and greater social spending? > The House of Representatives, that's who. Who controls the > House. Tip O'spendit, that's who. I don't know about some > folks, but over the past four years, I have been making > more, spending more, and saving more percentagewise than > ever before. Perhaps it could be that I tore up those > damn credit cards and can now spend real money. I have > a feeling that if more people did the same, they would be > in better shape too. > T. C. Wheeler 1)Ronald Reagan has spent over $1 trillion on the military during his administration, far more than combined outlays for "social spending". For your information, Mr. Wheeler, "social spending" is usually not defined as money for the Weather Bureau, the Parks System, federal highways, etc. but money for various welfare programs. 2)Every year Reagan has submitted a budget the Congress has given him 95% of the funds he requested. Rhetoric notwithstanding the House of Representatives has consistently supported budgets LESS THAN Reagan's proposed budgets 3)Ronald Reagan has amassed more federal debt than all the Presidents up to Jimmy Carter *combined* 4)Numerous sources have pointed out that all Reagan's cuts in various welfare programs, which have hurt the *working poor* more than any other group, do not equal the increase in interest on the federal debt incurred during Reagan's monumental deficits. The New York Times has had several articles citing the statistics for this fact. I may have saved those articles and I will provide a reference if you wish to bother to examine facts
dlo@drutx.UUCP (OlsonDL) (11/02/85)
[] From: tw8023@pyuxii.UUCP (T Wheeler) >The great theorist explains all again. Phooey, Sevener, you >seem to have Tip O'neil's party line rhetoric down pat. >First, supply side economics DOES depend on consumer spending, >not the savings rate. Second, when are you going to admit >that social spending far outweighs military spending? ... In fact, according to the _Information_Please_Almanac_ for 1985, social welfare spending for 1982 (the latest year given) accounts for more than all the other federal outlays *combined*. 51%. >T. C. Wheeler David Olson ..!ihnp4!drutx!dlo
matthews@harvard.ARPA (Jim Matthews) (11/03/85)
> = tim sevener > 1)Ronald Reagan has spent over $1 trillion on the military during his > administration, far more than combined outlays for "social spending". > For your information, Mr. Wheeler, "social spending" is usually not > defined as money for the Weather Bureau, the Parks System, > federal highways, etc. but money for various welfare programs. The budget of the Department of Health and Human Services, which spends money for nothing besides social programs, is much larger than that of the DoD, and has been for at least a decade. In fact, it is larger than the total budget of any nation on the globe, the U.S. and Soviet Union excepted. Furthermore, I don't believe it includes Food Stamps, which are administered by the Department of Agriculture. Jim Matthews matthews@harvard
todd@scirtp.UUCP (Todd Jones) (11/05/85)
> From: tw8023@pyuxii.UUCP (T Wheeler) > >The great theorist explains all again. Phooey, Sevener, you > >seem to have Tip O'neil's party line rhetoric down pat. > >First, supply side economics DOES depend on consumer spending, > >not the savings rate. Second, when are you going to admit > >that social spending far outweighs military spending? > >T. C. Wheeler > > In fact, according to the _Information_Please_Almanac_ for 1985, > social welfare spending for 1982 (the latest year given) accounts > for more than all the other federal outlays *combined*. 51%. > > David Olson Heaven forbid we should spend money helping people, that could be used to build weapons to destroy our enemies! ||||||| See no evil || ||/ [ - - ] Todd Jones \ ^ / {decvax,akgua}!mcnc!rti-sel!scirtp!todd | ~ | |___| SCI Systems Inc. doesn't necessarily agree with Todd.
orb@whuts.UUCP (SEVENER) (11/06/85)
> The great theorist explains all again. Phooey, Sevener, you > seem to have Tip O'neil's party line rhetoric down pat. > First, supply side economics DOES depend on consumer spending, > not the savings rate. > T. C. Wheeler Unfortunately I have no articles with direct quotes from supply-side advocates as to their theory and its voodoo benefits. However I 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." "Support for the 25% across the board tax cut in 1981 was built on assertions by ardent proponents such as Mr. Laffer and Representative Jack Kemp that lowering tax rates would not add to deficits but would instead so energize the economy that more tax revenues would be generated." This article quotes Mr. Roberts a former official in the Treasury Dept. and supply-side advocate : "As the theory is postulated", he said, "*investment* is leading the recovery, growing at three times the rate of consumer spending." Another economists points out however that investment spending had to go up after the severe recession, and that it was still *below* the 12.1% rate in 1981. Moreover he pointed out that in fact *consumer spending* had *increased* to 62.9% of GNP from 62% of GNP in 1981. Frankly T.C., you don't know what you're talking about. The reason it is called *supply-side* economics is that the economy can be made to grow by increasing the *supply* of goods and output-which is supposed to occur through increased investment in productive machinery to produce that increased supply. To pay for increased investment requires increased savings. Even our dingbat President understands that! tim sevener whuxn!orb
thill@ssc-bee.UUCP (Tom Hill) (11/08/85)
>> The great theorist explains all again. Phooey, Sevener, you >> seem to have Tip O'neil's party line rhetoric down pat. >> First, supply side economics DOES depend on consumer spending, >> not the savings rate. >> T. C. Wheeler > > Unfortunately I have no articles with direct quotes from supply-side > advocates as to their theory and its voodoo benefits. However I Then why do you continue to post on topics you admit to having no knowledge of? One wonders. > 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. > > "Support for the 25% across the board tax cut in 1981 was built > on assertions by ardent proponents such as Mr. Laffer and > Representative Jack Kemp that lowering tax rates would not add > to deficits but would instead so energize the economy that > more tax revenues would be generated." > Since tax revenues are up, this appears to have worked. Again the trouble lies with our legislators who refuse to use the fiscal responsibility in their jobs that they use in their everyday lives. > This article quotes Mr. Roberts a former official in the Treasury Dept. > and supply-side advocate : > "As the theory is postulated", he said, "investment is leading the > recovery, growing at three times the rate of consumer spending." > > Another economists points out however that investment spending had to > go up after the severe recession, and that it was still below > the 12.1% rate in 1981. Moreover he pointed out that in fact > consumer spending had increased to 62.9% of GNP from 62% of > GNP in 1981. > > blah blah blah > . > . > . > > Even our dingbat President understands that! > tim sevener whuxn!orb Yes Tim, I do not believe that you know what you are talking about. 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. Tim I know that you are no fool, but why must you continually attack things that you don't like with "facts" (using this term loosely in Tim's case) that really mean nothing within the context that you use them. Anybody out there who undstands this better than I should feel free to flame or elaborate. Tom Hill note: Creative use of statistics never hurt anybody's argument :-)
mvs@meccts.UUCP (Michael V. Stein) (11/09/85)
In article <756@whuxl.UUCP> orb@whuxl.UUCP (SEVENER) writes: >To the extent it has worked at all it would seem to be more >explicable in terms of Classical Keynesian theory of the effects of >deficits rather than any increase in savings rate or consequent >investment and improved supply. Well considering the level of emotion in the rest of this article I am not surprised to see the term "Classical Keynesian" used... While there are Classical schools and Keynesian schools of thought, usually I have seen the two put together only when people are trying to make a joke. Aside from that oxymoron, one has to stretch Keynesian theories quite a bit to explain the events from 1980 to now. A better explanation might be found in Rational Expectations theory. -- Michael V. Stein Minnesota Educational Computing Corporation - Technical Services UUCP ihnp4!dicomed!meccts!mvs