Tag: Supply Side Economics

Voodoo Economics Returns

Roll us over and do it again!

Our Congress is once again on a break (is there ever a time when this isn’t so?)  They have tried health issues and failed…..they are talking abut some sort of gun regulations…..and since nothing is sticking to the wall then they will go to the ever popular tax reform.

And since the GOP is in control then we will try their fix for the economy…..supply-side solutions.

This solution has not been a answer for 30+ years….hey, why not try it again?

Our president has decided the “voodoo economics” will solve all the ills of our economy….

Billionaire US President Donald Trump wants to reform the US tax system, like others before him. But his plan looks more like tax cuts for America’s wealthiest and some of the world’s biggest corporations.

Although it’s yet to be fleshed out, it’s based on the idea that the cuts will pay for themselves, with the economic growth they generate in years to come. Yet, that’s never happened in the history of US tax cuts.

In economics jargon: this is a classic supply-side response to a demand-side problem. But why help companies and investors if workers are the ones in trouble?

It’s been done before and George HW Bush famously called it “voodoo economics” to discredit the notion that cutting tax rates will increase revenues.

Source: Donald Trump’s ‘voodoo economics’ | USA | Al Jazeera

An IST factoid:  Tax cuts have NEVER paid of themselves!

But you will be asked to buy into the dream anyway…..you cannot drain the swamp and keep the crap in place.

I have written on this subject before and pointed to the fallacy……..

Source: It Is Always Supply Side Economics – In Saner Thought

Source: The Humor That Is Trickle Down Economics – In Saner Thought

Source: Let’s End The Illusion Now! – In Saner Thought

A laughable solution that the population falls for almost every time.

The Man Who Invented Supply Side Economics

Last week the country’s most egocentric person shown just how much he thinks he is far superior to others…………..when he stated……

“I helped Ronald Reagan and Jack Kemp develop supply side economics.”

His small attempt to show that he is the man with the big ideas and the forward thinking process……all this may be just the attempt to be more important than he really is or he could very well believe that he is all that…..but the truth is he is delusional….

Supply Side Economics is a school of macroeconomic thought that argues that economic growth can be most effectively created by lowering barriers for people to produce (supply) goods and services, such as lowering income tax and capital gains rates, and by allowing greater flexibility by reducing regulation. According to supply-side economics, consumers will then benefit from a greater supply of goods and services at lower prices. Typical policy recommendations of supply-side economics are lower marginal tax rates and less regulation.

The intellectual roots of supply-side economics have also been traced back to various early economic thinkers, such as Ibn Khaldun, Jonathan Swift, David Hume, Adam Smith, and Alexander Hamilton……….the term “supply side” (“supply-side fiscalists”) was first used by Herbert Stein, a former economic adviser to President Nixon, in 1976, and only later that year was this term repeated by Jude Wanniski. Its use connotes the ideas of economists Robert Mundell and Arthur Laffer.

Okay, that is enough….with that short intro to supply side economics did anyone see the names of Ronald Reagan or Jack Kemp or the professed father of supply side, Gingrich mentioned?

Once again we see that the Newt-ster has an over-rated sense of accomplishment……surely the GOP can find someone other than this bloated wind bag to support…..if not, then the Party is truly in a sad state of disarray…….

Now I see why witches use Newt parts in their incantations…..apparently it is the only way to shut one the Hell up!

Is “Voodoo Economics” Finally Dead?

Voodoo economics?  That is what George I called Reagan’s supply side economic package back in 1980.

Quickly from the wikipedia:

The typical policy recommendation of supply-side economics is to achieve the proper level of marginal tax rates, which, by virtue of the high rate of taxes in general, equates with cutting of taxes.[2] Maximum benefits are achieved by optimizing the marginal tax rates of those with high-incomes and capital who are deemed as most likely to increase supply and thus spur growth.[3] Mainstream Keynesian macroeconomics, by contrast, contends that tax cuts should be used to increase demand, not supply, and thus should be targeted at cash-strapped, lower-income households, who are more likely to spend additional income

Reagan’s ideas:

  1. reduce the growth of government spending,
  2. reduce marginal tax rates on income from labor and capital,
  3. reduce government regulation of the economy,
  4. control the money supply to reduce inflation

I recall when this whole election process began so many months ago and the Republicans were invoking the name and policies of Reagan trying to gain the upper hand over their opponents.  Funny what a difference 6 months can make.

To answer the question…NO it is not, only parts of it, the Repubs still push the reduced regs and the spending cuts and then the always popular tax cuts.  The current crap in the economic spheres shows that it is not.  My fav is that tax cuts create jobs.  That is a sweeping statement, has not worked well in the last year or so, but yet it is still taunted as a savior of the economy.

Why do I say this?  To me the whole thing sounds like a massive BS ploy.  We will borrow money from banks to give to banks and then hope that any benefits would trickle down through the system to help the average taxpayer.  Trickle down economics has not worked as promised in the past and I doubt that it will it this situation.

To Tax Or Not To Tax

That is the question…….that the American voter will have to answer with their next general election vote.

If you tax the big oil companies that will just pass on the extra cost to the consumer…..thinking…..at present they have massive tax breaks……they have subsidies…..they make massive profits….and yet we are still paying throught the nose for their product…..where is any of that a good thing? Basically, the government lets them run wild and we still pay higher gas prices. So, if we demand a tax on their windfall profits, the price they pay will be past on to the consumer in higher prices….it is all so confusing.

So if we do not tax the oil companies we will have lower prices at the pumps, right? That has not been the case so far. If you are a supply sider then you believe that cutting taxes will make the economny grow and prosper—thinking—–with all the tax cuts and benefits that companies have gotten in the last 10 years, just how healthy is the economy now? Just ask the middle class and someone has a recent poll they say that they are no better off now than they were 4 years ago and 43% said they are actually worse off. Sounds like the supply siders are not delivering on their promises.

What to do? What to do? First, face the cold hard facts that these ever popular tax cuts are helping NO ONE in the middle class. Secondly, this country cannot afford a war. This country is suffering badly. Finally, the hard truth is that taxes are needed if this country is to move forward.

Democrats have been called “tax and spend” but think about that—is that not what is needed? The country needs to spend cold hard cash on the infrastructure. The spend part will create jobs, income, and revenue for the government.

Your answers are easy. Either stop the war and spend the cash where it is needed—this country or increase some taxes to generate the needed funds. Does not get any simplier than that. If you want this country to prosper again, then spend is what is necessary. Just something to think about.