Tax cuts are not a panacea to broad based economic growth and well being. If you read through the below, try to remember my original point was changes in tax policy and their outcomes are subject to the conditions in which they are implemented. If taxes on the wealthy are cut with no change in fiscal expenditures, the net result is that the wealthy pay a smaller share of total expenditures, so—with the tax cut—wealth is effectively transferred from average households to wealthy ones. Because the richer the household, the smaller the consumption share of income, the net impact of such a transfer is that overall consumption declines, along with the consumption share of GDP. As the consumption share of GDP declines, by definition, the savings share must rise. But total savings need not rise. Here is one of the great confusions that tends to mar nearly every discussion about the impact of tax cuts on the wealthy. A decline in consumption will only be accompanied by an increase in savings if GDP remains constant, but GDP will only remain constant if a decline in consumption is matched dollar for dollar with an increase in investment. Total savings only rise, in other words, if total investment rises. Will investment rise? It turns out that if desired investment exceeds actual investment, the additional savings will be borrowed and invested, and investment will rise by the same amount by which consumption declines. The net effect is to convert consumption demand into investment demand, so total demand is unchanged. There is consequently no reduction in current GDP, which means that savings rise. As consumption is transferred into investment, current living standards decline for ordinary households, but future living standards rise as the greater investment leads to faster productivity growth. At first, ordinary and poor households are worse off and wealthy households are better off, in other words, but as the benefits of higher investment are realized, wealth trickles down to ordinary and poor households so all are better off. But this isn’t necessarily what happens. If desired investment is in line with actual investment, the existence of a higher ex ante level of savings will not increase investment because businesses have already invested all they want to invest. If that is the case, investment will not rise, except temporarily in the form of unwanted investment as inventory rises (lower consumption leaves goods unsold, which makes it seem at first as if point number 4 above is occurring). This means that consumption demand is not converted into investment demand (except perhaps temporarily), and total demand declines, bringing GDP down along with the decline in total demand. Although there is a decline in consumption, in other words, there is no commensurate increase in savings. But the rich do save more than the poor, so how is it possible that there is no increase in total savings if there is a transfer of wealth from average households to wealthy ones? The savings of the wealthy have definitely gone up. But total savings don’t rise because something must happen to reduce savings elsewhere. As consumption declines, those who produce consumer goods and services must cut back, and as they do so, they must fire workers. These workers shift from zero or positive savings to negative savings, so that the reduced savings of the newly unemployed counter the increased savings of the rich. There are three things that may temporarily interfere with this process. First, as consumption drops, and before businesses that produce consumer goods and services cut back and fire workers, they will see inventory rise or profits decline. Rising inventories cause (unwanted) investment to rise so at first it seems as if points number 4 and number 6 have taken place. But as declining profits reduce business savings, these will counter the rise in the savings of the rich. Second, the additional wealth of the rich pours into real estate markets and sets off a speculative real estate boom. This causes a rise in real estate development. In such a case, investment rises temporarily along with debt and at first it seems again as if point number 4 has occurred. Third, the additional wealth of the rich pours into the banking system and banks respond by lowering lending rates and relaxing lending standards. Riskier or more optimistic households that had previously been unable to borrow for consumption are now able to do so, and so consumption does not decline even as money is transferred from average households to wealthy ones. In that case, total demand is unchanged. There is consequently no reduction in GDP, which means that the savings of the rich rise as the savings of the ordinary and poor decline, and GDP is maintained by a rise in debt. To summarize, if desired investment exceeds actual investment, transfers from ordinary and poor households to wealthy households will immediately cause investment to rise at the expense of consumption, as living standards drop. But the overall economy will increase its total production of goods and services and, depending on how future higher income is distributed, ordinary and poor households will eventually see their income and consumption rise. If desired investment is in line with actual investment, however, investment will not rise sustainably. At first, either overall consumption will not drop because a rise in debt-fueled consumption will counter the drop in disposable income among ordinary and poor households, or overall investment will rise because of a temporary increase in unproductive investment—that is, unwanted inventory or excess real estate development—either of which also implies a rise in debt. Eventually, however, unemployment will rise, in such a way that as consumption drops, it is not replaced by higher investment but rather is accommodated by lower GDP. Overall savings will remain unchanged because the higher savings of the wealthy will be matched by the lower savings of the unemployed Credit: http://carnegieendowment.org/chinafinancialmarkets/71359
Your post here suggests you are mentally ill; there is nothing logical about your ideas here. I have no idea what you think a "lefty" is, nor do I care.
I note you still have not contributed one piece of useful comment explaining why capping the budget and letting us inflate or grow into balance will not work. Even though your first post to me on this thread was an attack of me. Your posts here are typically filled with leftist ideas or ad homs and yet you deny being a lefty. After this, there is no turning back. You take the blue pill—the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill—you stay in Wonderland, and I show you how deep the rabbit hole goes. ==== Take the blue pill and admit you are a lefty...
1. if we are trying to learn something... lets cease pretending Reagans tax cuts were only for the wealthy... 6 million people were given a zero tax rates and every level paid less taxes as a result of the 1986 reform... per wikipedia.... Income tax rates[edit] The top tax rate for individuals for tax year 1987 was lowered from 50% to 38.5%.[3] Many lower level tax brackets were consolidated, and the upper income level of the bottom rate (married filing jointly) was increased from $5,720/year to $29,750/year. This package ultimately consolidated tax brackets from fifteen levels of income to four levels of income.[4] The standard deduction, personal exemption, and earned income credit were also expanded, resulting in the removal of six million poor Americans from the income tax roll and a reduction of income tax liability across all income levels.[5][6] The higher standard deduction substantially simplified the preparation of tax returns for many individuals.[2] For tax year 1987, the Act provided a graduated rate structure of 11%/15%/28%/35%/38.5%. Beginning with tax year 1988, the Act provided a nominal rate structure of 15%/28%/33%. However, beginning with 1988, taxpayers having taxable income higher than a certain level were taxed at an effective rate of about 28%.[7] This was jettisoned in the Omnibus Budget Reconciliation Act of 1990, otherwise known as the "Bush tax increase", which violated his Taxpayer Protection Pledge. 2. usual name... we have not gotten to a much more useful place. You are no longer attempting to blame the distribution of wealth on Reagan. You cited an article which stated it depends... "Conclusion Trickle-down economics does indeed work, as does its opposite, trickle-up economics, depending on underlying conditions that are not hard to specify. The key is the relationship between desired investment and actual investment. When the former exceeds the latter, policies that increase income inequality will generally cause savings to rise and expenditures to shift from consumption to investment; this leads to higher future growth that will eventually more than compensate ordinary and poor households for the increase in income inequality." 3. And when you bring in 40 to 60 million new americans... mostly at the bottom of the economic ladder... you should not be blaming Reagan for the fact they have a lot less money than other Americans. 4. By the way "income inequality" is not that great a metric. It does not really tell us about the standard of living of the people. would you rather be in a country where every person had a least 100,000 in assets with a bunch of really rich people and therefore high inequality or... or in country were almost everyone had no assets and little income. For instance would you live in a place like Greenwich or Caracas. With all that inflation wiping out assets in caracas I imagine it would have a great GINI score at the moment. I would also imagine Greenwich has a high income inequality score... ( I know it would have when I grew up there.) but I would imagine being in the 10th percentile in greenwich is far superior to the 90th percentile in Caracas right now.
Again, the tax cuts did not keep up with inflation or wages for working people. There was no rising and tide and only the wealthiest boats were lifted. This is not an unaccountable phenomenon. It is due to the investing incentivized by the tax cuts and the decrease in consumption power of the middle class. This was explained to you in my last post you failed to reply to.
Those who started their careers in the last several years had it easiest of all. Record-low interest rates combined with a growing economy and the greatest stock bull market ever. That combination didn't exist for boomers during their working years. If someone can't find success with all that handed to them, then they're a loser and wouldn't have found success in the 60s, 70s, 80s or any other era. Millennials who started their careers around 2007 had it hard for 3 years, then things got easier. But it wasn't more difficult than a boomer who started their career in the late 70s, having to deal with 11% unemployment + 13% inflation. Someone who started their career in 2011 with $0 should have $1-2 million by now. That was the easiest time to make money, ever
usual name... I told you from the beginning inflation and taxes are one of the key issues causing wealth disparity. So I am not going to argue with you now that you are agree inflation is a problem. But, you are completely wrong about the rising tide after reagan tax cuts. The country was a mess in the 70s. Carter gave his malaise speech. He told us America had to accept crappy future outcomes. Reagans tax cuts gave us a generation of growth. There were tons of great jobs the next 10 to 20 years. The reason its seems not enough boats rose with the tide is that we have imported 40 to 60 more americans many are own the very low end of the economic scale. You keep refusing to acknowledge that point. We have increased the standard of living of 40 to 60 million new people as we outsourced industries in the face of fed induced dollar dilution. Had it not been for Reagan's tax cuts we would really be a mess.
Immigration is a net benefit to the country. It would be helpful if you provided some research showing your point about 40 to 60 million immigrants dragging down incomes. The Reagan tax cuts were accompanied by huge deficits, which caused inflation. Skewing tax cuts to the investor class in consumption driven economy creates wealth gaps, as I have shown you in post #81.
1. usual name - how does a budget imbalance cause inflation if the money is borrowed? The point of borrowing the money is to avoid inflation... correct? 2. You don't know that tax cuts caused the budget deficit. Tax revenues went up after the tax cuts so you should either blame the spending increases are say we don't know what impact the tax cuts had on the budget deficit. 3. regarding the numbers. We have had 10 to 20 million anchor babies since Reagan. 700,000 to a million naturalizations per year since 1988 (on average) . And we are not counting the 10 to 30 million illegal immigrants who do show up on the census and who do get benefits and some work and take jobs. In the past we had a thread here were this was documented. By the way I am not putting down citizens... they are Americans like me... not sure about you are you american? But, I am saying they are large part of the reason for the wealth inequality you tried to blame on Reagan.