Plan B Forum

Why do they keep denying that the experiment has failed, again?


"Despite their failed promises, the Republican Party is asking that we extend the tax cuts for the wealthy, and some are even calling for further reductions in tax rates. However, if the Republican Party is truly the party of business, then surely it will understand that no responsible financial institution would continue to invest in a business that failed meet, or even come close to the growth and revenue projections that justified the investment in the first place. The payoffs from tax cuts that were promised during the Bush years have not been realized, and the failed promises about growth and revenue have damaged the health, education, and retirement programs the working class depends upon in our increasingly globalized economy."



http://www.thefiscaltimes.com/Columns/2 ... aspx#page1
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Why the GOP Won't Admit Supply-Side Econ Has Failed

By MARK THOMA, The Fiscal Times
December 4, 2012

The Republican Party has long promoted itself as the party of business. Republicans understand the needs of business, we are told, and if the country would leave the economy in their hands business would boom. All we need to do is to give those at the very top of the income distribution – the “job creators” – more income through tax breaks, and then sit back and wait for the magic happen. Our investment in the wealthy will produce remarkable economic growth, and everyone will be better off.

The Bush tax cuts were a test of these claims about supply-side economic policies. To justify the tax cuts the nation was, in effect, given a business prospectus from the Republican Party. We were promised that cutting taxes on the wealthy would result in much higher economic growth and broadly shared prosperity. For those who wondered how we would pay for such a large cut to the government’s revenue stream, the Republican prospectus had a remarkable claim. The tax cuts wouldn’t cost us anything. Growth would be so strong that the tax cuts would more than pay for themselves. Even those who admitted that the tax cuts might not be fully self-financing still made strong claims about faster economic growth offsetting much of the lost revenue from the tax cuts.

The reality, of course, has been quite different. There is little evidence that the Bush tax cuts, or any other tax cuts directed at the so-called job creators, have had a noticeable effect on economic growth. And the promise of broadly shared prosperity has not been realized. Most of the gains from economic growth in recent decades have gone to the top of the income distribution while the inflation adjusted wages of the working class have been relatively flat. Furthermore, the tax cuts have not paid for themselves as promised, and it hasn’t even been close. The Bush tax cuts have already cost us trillions in revenue, and if they are extended for high income tax payers, they will cost us roughly another trillion over the next decade.

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The failure of Republicans to deliver on their promise that tax cuts would be mostly self-financing is a large factor in the deterioration in our long-run fiscal outlook, and it is putting considerable pressure on programs such as Social Security. In fact, the Bush tax cuts can be thought of as a loan from the Social Security Trust Fund that was supposed to be paid back with the revenues from higher economic growth, a loan that is presently in default.

To see this, recall that the government began intentionally collecting a surplus from the Social Security program beginning in 1983 in order to prefund the retirement needs of baby boomers. The idea was to run a surplus for several decades while the baby-boomers were still working to get ready for the deficit years the system would experience after they retired.

The revenue from Social Security over and above what was needed to fund payouts reduced the overall government debt and allowed taxes to be lower than they could have been without these surplus funds. For example, the surplus that Bush inherited from the Clinton administration was largely due to the Social Security Trust Fund, and Bush argued it would be better to give this surplus to the private sector through tax cuts than to leave it in the hands of the government.
But it wasn’t better. The income of the wealthy grew as they pocketed the tax cuts, but workers experienced stagnant wages, a recession that hit working class households particularly hard, and intense pressure to cut important social programs.

Despite their failed promises, the Republican Party is asking that we extend the tax cuts for the wealthy, and some are even calling for further reductions in tax rates. However, if the Republican Party is truly the party of business, then surely it will understand that no responsible financial institution would continue to invest in a business that failed meet, or even come close to the growth and revenue projections that justified the investment in the first place. The payoffs from tax cuts that were promised during the Bush years have not been realized, and the failed promises about growth and revenue have damaged the health, education, and retirement programs the working class depends upon in our increasingly globalized economy.

A true party of business would end our investment in the false promise of supply-side economics. However, a party with a goal of reducing the scale of programs such as Social Security and Medicare along with delivering tax cuts to wealthy political backers would use arguments about the economic effects of tax cuts to disguise its true intentions. Which description fits best? Many Republicans still claim that tax cuts for the wealthy enhance economic growth despite the evidence to the contrary, but it’s rare to hear a Republican admit that these supply-side policies have failed.
Read more at http://www.thefiscaltimes.com/Columns/2 ... 0Be0JrM.99

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Anyone who even uses the expression, "tax cuts for the wealthy," is likely either a fool or a shameless political whore.

Take this essay (above) for what it's worth, but consider the following parallel: When The Dem's proposed the unprecedented stimuli in the late Bush (when Dem's held both houses of Congress) and first Obama years, we were told that the rise in unemployment and other negative prosperity indicia were not to be taken at face value. Indeed, the story line was that we must believe the situation would have been WORSE, but for the stimuli.

Of course, some skeptics said that the stimuli were total failures, that left us not only worse off, but also in debt to a much greater degree, with essentialy nothing to show for it.

Take your pick.

Now compare that scenario with the essay quoted by the rubato person above. The writer claims (apparently) that the relatively good economy following the mis-named 'Bush Tax Cuts" was an illusion, and that the ensuing recession is "proof" that supply-side principles are pure hokum.

But I say, the economy of the first decade would have been much WORSE, but for the "Bush Tax Cuts," thus the fact that we are still afloat and not YET at the level of Greece is PROOF that Supply Side theories are valid.

Take your pick.

Dave, why do you indulge him?

Two sides of the same coin.

Hardly.

One side believes that the economic decisions of those with the highest incomes are independent of tax policy, while the other side believes that the said group is quite sensitive to tax policy, and will tailor their economic activity to minimize their tax outlay, even if it means "taking" less in apparent income from the sources available.

I and others have posted many examples of goverment revenues increasing dramatically after reductions in tax rates. Does it always happen that way? Of course not; many other factors come into play.

But where are the examples of dramatically increased government revenues coming from significant increases in rates? It never happens. In fact, the NORM is for the increased revenue projections to be grotesquely overblown - as are the current ones being peddled by the Democrats as we write.

For the current discussion, suffice it to say that increasing tax rates on the top earners is probably not a good idea, as evidenced by Congress' bipartisan decisions over the past several years to leave the "Bush Tax Cuts" alone. A pox on the president, who is continuing to peddle the implicit message that if only The Rich were paying their fair share of taxes, everything would be just peachy.

Yeah, I figured that one would go right over your head. Carry on.

dgs49 wrote:
"... The writer claims (apparently) that the relatively good economy following the mis-named 'Bush Tax Cuts" was an illusion, and that the ensuing recession is "proof" that supply-side principles are pure hokum.... "

Your 'relatively good economy' is the worst performance of any two-term administration in 70 years.

This is the first time median income has gone DOWN for two terms.

Most people would say that is relatively bad.

You don't even marginally know the facts.

yrs,
rubato