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If tax cuts don't work ....
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| Renegade |
I could be wrong, but I think that the difference between the tax cuts (and the way they've been received) are the problems they are trying to solve.
Correct me if I'm wrong, but one of America's greatest problems is foreign debt, therefore a major cut in revenue to the government stands a pretty high likelihood of merely exacerbating the problem. What's the old equation? C+I+G-E? I'll have to look it up in my old economics text books.
Germany, on the other hand, faces the problem of an economy that has been stagnant for a long time. While their problem seems to be more supply-side based than demand-side based (I wrote about this in that other article about Germany you posted), fiscal policy stands a good chance of kick-starting the economy and can be funded by, say, trimming back of government funded welfare schemes and so forth. Haven't they also been traditionally large lenders of money to other nations rather than borrowers? Couldn't they just call in everyone's tab?
Oh, and tax cuts are legitimate "economic stimulus tools" so using them doesn't automatically make you an "economic idiot". I don't know enough about the US tax-cuts to tell you definitively whether or not their a good thing in that case, but I'm just drawing my opinion from comments I've read from others. In either case, these tax-cuts surely all over those recently implemented by John Howard totalling a staggering $4 a week - the Milky Bars are on me, Johnny! |
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| rupert |
Personally, I think tax cuts are bad unless the country has an extremely high and arbitrary tax rate which discourages FDI. Once you hand out tax cuts it is extremely difficult to get the money back from the punters. And to be blunt the punters dont really notice the extra money anyway.
Tax reform on the other hand. Taxs can be used in a positive way to encourage certain types of behaviour and discourage others.
For instance you could cut income tax but put taxes on industrial pollution. So rather than tax at the point of consumption or at the point of income, tax is imposed at the point of production and the oncosts are passed onto the consumer. OF course that will never happen. |
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| occrider |
| quote: | Originally posted by Renegade
I could be wrong, but I think that the difference between the tax cuts (and the way they've been received) are the problems they are trying to solve.
Correct me if I'm wrong, but one of America's greatest problems is foreign debt, therefore a major cut in revenue to the government stands a pretty high likelihood of merely exacerbating the problem. What's the old equation? C+I+G-E? I'll have to look it up in my old economics text books.
Germany, on the other hand, faces the problem of an economy that has been stagnant for a long time. While their problem seems to be more supply-side based than demand-side based (I wrote about this in that other article about Germany you posted), fiscal policy stands a good chance of kick-starting the economy and can be funded by, say, trimming back of government funded welfare schemes and so forth. Haven't they also been traditionally large lenders of money to other nations rather than borrowers? Couldn't they just call in everyone's tab?
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Well I think that the debt isn't the primary factor to inhibit the US economy up to this point as it was the bursting of bubbles. The slow-down was largely influenced by the huge bubble of the private sector finanical balance. For the past half a century, net private savings averaged 2.6% which caused a boom in borrowing and spending, bringing many financial balance sheets into the red. By 2000, the private sector was at a net deficit of 5% which essentially burst the boom of excessive corporate borrowing and expenditures. Currentely in 2003, much of the private sector deficit has been trimmed to below 1%, so the argument is that fundementally, America's economy is sound. Therefore, tax cuts could feasibly encourage demand from consumers and increased corporate investing. I forget where I read this but probably somewhere in BW or the economist.
But at any rate, what other choice is there? Deflation must be avoided at all cost, and in order to do that, loose monetary policy and decisive fiscal policies must be employed to ward off that risk EARLY. The Fed did a study of Japan a year or so ago analyzing how deflation could be avoided, and they came to the conclusion that you cannot wait until it becomes a problem before you start taking measures against it. It would be far easier reducing debt with a stabilized economy than one that is going through the death throes of deflation. |
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| LiquidX |
| Did you guys ever heard of Deflation?!?! or better yet.. the upcoming deflation?? |
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| occrider |
| quote: | Originally posted by LiquidX
Did you guys ever heard of Deflation?!?! or better yet.. the upcoming deflation?? |
No, what is this deeeflaashon mumbo jumbo that you speak of? :conf:
Hehe check out my last paragraph liquidX ;) |
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| LiquidX |
| quote: | Originally posted by occrider
No, what is this deeeflaashon mumbo jumbo that you speak of? :conf:
Hehe check out my last paragraph liquidX ;) |
Ooopss.. ye I just scanned through :tongue2 |
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| Galapidate |
| Only an idiot would repeat something that failed in the 1980s... |
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| occrider |
| quote: | Originally posted by Galapidate
Only an idiot would repeat something that failed in the 1980s... |
What? Supply-side economics?
I dunno if what happened in the 80s could be considered a failure. |
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| Nadi |
| If tax cuts dont work, then what do you guys propose to boost the struguling economy? |
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| Galapidate |
| quote: | Originally posted by occrider
What? Supply-side economics?
I dunno if what happened in the 80s could be considered a failure. |
Well, supply-side economics were not very effective and as a result Reagan had to raise taxes three times. He cut many programs as well that especially aided the poverty-stricken areas of the country. Tell me this isn't a failure. |
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| DrummeRaver86 |
| quote: | Originally posted by Galapidate
Well, supply-side economics were not very effective and as a result Reagan had to raise taxes three times. He cut many programs as well that especially aided the poverty-stricken areas of the country. Tell me this isn't a failure. |
It isn't a failure. ;) |
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