Tax cuts don't make basic economic sense - Page 2 - Politics Forum.org | PoFo

Wandering the information superhighway, he came upon the last refuge of civilization, PoFo, the only forum on the internet ...

"It's the economy, stupid!"

Moderator: PoFo Economics & Capitalism Mods

Forum rules: No one line posts please.
#15137023
ccdan wrote:Terribly wrong assumptions.

If revenues are less, government can just spend less, not necessarily borrow money.

That's assuming government does actually cut its budget.

In reality that very often does not happen.

The talk is all about cutting taxes, but no one wants to talk about cutting the budget, or reducing the budget deficit.


To answer your objection, yes, if that were the case, then my whole argument in this discussion would not apply.

I apologise, my opening post was not the best worded. It was assuming we were talking about tax cuts paid for by budget deficits (adding to the national debt).
#15137217
Puffer Fish wrote:That's assuming government does actually cut its budget.

In reality that very often does not happen.

The talk is all about cutting taxes, but no one wants to talk about cutting the budget, or reducing the budget deficit.
. . . .
To answer your objection, yes, if that were the case, then my whole argument in this discussion would not apply.

I apologise, my opening post was not the best worded. It was assuming we were talking about tax cuts paid for by budget deficits (adding to the national debt).

Puffer Fish, I'm not singling you out, but the conversation you are having simply stimulated this thinking.

I keep telling you, that I'm not an expert, but I'm all you have here for an MMTer.

The MMT based analysis of what happens when the US cuts taxes and also cuts the exact amount of spending is ---
. . . I'll assume that the cuts are mostly for the top 20% of earners.
So what happens?

1] The people whose income is directly related to the spending cuts is reduced. For example, workers in a plant making jet fighters will be laid off if the Gov. stops buying the jets. [In normal times they go on unemployment which is a state program , but they get somewhat less on unemployment and so they often spend less.] People who were getting money to buy food with Food Stamps (now with a debit card) will spend less on food or some other thing.
2] This reduction in spending will show up as a drop in GDP. It will also show up as a drop in sales and profits of small businesses where they live.
3] Some of the people who get the tax cuts will spend it all, but others will save some of it. Economic history tells us that about 20% of it will be saved.
4] MMTers have proved that saving is a dead end for the money, until the saver wants to spend it. Saving does nothing to stimulate the US economy in any way. This is also true of dollars spent (by the importer) to buy stuff from overseas.
. . . Banks don't need more deposits to make more loans.*
5] So, 100% of the spending cuts reduce the GDP dollar for dollar.
6] So, only 80% of the money left in the hands of the people gets spent to 'increase' the GDP.
7] Therefore, cutting taxes and cutting an equal amount of spending will always reduce the GDP. It, also, reduces the sales and profits of small businesses.

Now, those who want tax cuts will argue that the savings does do some good in the economy. They will assert this 'til their dying day. Do they have any evidence? I would like to see it. I will reject all simple assertions of it though.

Notes:
. * . The Fed. has been giving money to banks with QE and other programs for many years now (since 2008). The amount has been several trillions, has trillions more been loaned into the economy? Maybe, but it has been used to buy corp. stock and real estate. This does not stimulate the economy.
.
#15140220
Steve_American wrote:4] MMTers have proved that saving is a dead end for the money, until the saver wants to spend it. Saving does nothing to stimulate the US economy in any way.

I'll tell you how classical conservative economists have viewed this.
If people are generally less inclined to spend money and more inclined to save it, then price levels go down, eventually reaching a level where economic exchange continues as before. So the incentive resulting from reduced prices will exactly cancel out the effect of people's reduced propensity to spend.

You see, when people are not wanting to spend as much, they are also wanting to save more, so money becomes more valued and sellers are willing to lower their prices. It reaches an equilibrium.

Now, obviously this may not apply so much in a situation of inequality, but would apply in a situation where everyone is roughly partaking in an equal way in the economy.


Now, I do not want you to feel like you are ignorant for not having known about this, because I would say the majority of economists these days think the same way like you, and don't really realize this or take it into account.
#15140228
Politics_Observer wrote:Tax cuts don't help anybody but the rich.

Unless you're cutting taxes on the poor and middle class and not the rich. Letting the non-rich keep more of their money means they'll have more wealth, and they'll buy these things from businesses.

It comes down to if private citizens can spend their money better than the government can.
#15140266
Unthinking Majority wrote:Unless you're cutting taxes on the poor and middle class and not the rich. Letting the non-rich keep more of their money means they'll have more wealth, and they'll buy these things from businesses.

It comes down to if private citizens can spend their money better than the government can.


Of course the same logic applies to the rich too. Having more money doesn't somehow mean you're LESS responsible of less deserving of keeping it.

Politics_Observer wrote:@Unthinking Majority

Unfortunately, a lot of those tax cuts went to the super wealthy (top 1%) and not to the rest of society.


Only 9.3% of the last tax cuts went to the top 1%. https://www.forbes.com/sites/kotlikoff/ ... bcb89af209 Of course, the top 1% pay more in taxes than the bottom 25%, so there's that. Likewise 82% of Bush's tax cuts went to the lower classes. https://www.cbpp.org/research/budget-de ... s-tax-cuts

The idea that only the rich benefit from tax cuts continues to be popular, but it simply isn't based in fact.
#15140284
@Wolvenbear

Yeah right! Kinda like our billionaire Trump paying only $750 in taxes. I checked your source at https://www.cbpp.org/research/budget-de ... s-tax-cuts and it makes no mention of those tax cuts going to the lower classes. You are being a bit misleading aren't you?
Election 2020

You don't know what people who support thing beca[…]

China is now claiming that Korea is really part o[…]

So it comes to this.

Translation into Truth: The destruction of WW2 a[…]

@Oxymoron Do any of your bigoted claims have […]