The Problem With Supply Side Economics

Forbes ^ | 02/10/2011 | Bill Flax

[billflax]

Supply side economics invokes the most basic element of human nature: self-interest. We all seek to improve our material circumstances. The tinier the tax man’s bite, the greater is our incentive to produce. As tax burdens lighten, motivation heightens, sparking a robust economy. Allowing producers to enjoy their hard earned gains is both just and effective.

Contrasted with demand side economics it’s a no-brainer. It is neither just nor effective to funnel public money to political favorites hoping they will spend lavishly and thus stimulate production. Paying people not to produce inspires little effort. Depriving producers of needed capital so it can instead be transferred according to political whim ridicules the very pretense of stimulus.

Even calling political waste “investments” merely makes the semantics more palatable to gullible voters. Rather than paying people to consume others’ wealth hoping this will rejuvenate production, it obviously works far better to let producers enjoy their gains. We will always direct our own resources better than will politicians or their bureaucratic henchman. It’s not rocket science. Tax cuts incent production; profligate spending enables sloth and encourages corruption.

[billflax]

Supply side economics gives Washington too much tax money to waste.

[Lysandru]

The problem is not supply side economics— it’s amibtious politicians who then take the extra revenues and spend it foolishly.

[samtheman]

It's a long article to get to a fairly obvious conclusion.

If you're in a hurry, here it is:

We should find that point on the Laffer Curve which generates the highest tax revenue and then cut taxes further by several magnitudes.

Sound advice.

[Sherman Logan]

Tax cuts do not always increase revenue. It depends on where you are on the Laffer curve.

[Soul of the South]

The other issue is Wall Street. They no longer want to invest in long term productive assets in the United States. Instead of a place to raise equity capital, Wall Street is a casino where speculators spin the 401K’s and IRA’s of the public, siphoning off huge fees and living their customers and the taxpayers holding the bag when they fail.

[central_va]

Tax cuts do not always increase revenue. It depends on where you are on the Laffer curve.

Who, except a total idiot, doesn't think we are WAAAAAAAAAAAY to the right of the inflection point on the laffer curve?

[TheOldLady]

Welcome to Free Republic.

[Salamander]

15 spyware, 17 cookies.

Gotta be a new record.

[TheOldLady]

Check out the goodies Sal found.

[YankeeReb]

Tax cuts do not always increase revenue. It depends on where you are on the Laffer curve.

Do you seriously think we have to worry about even getting near that point?

[Colonel_Flagg]

The problem with supply-side economics at the moment is that it’s not being tried.

[BreezyDog]

15 spyware, 17 cookies. Gotta be a new record.

Please edumacate me on what you mean.

[shibumi]

Here at FreeRepublic we have a supply of readers, to the tune of over 1MM page views per day.

At your blog, you have a demand for blog hits, to the tune of 17 cookies (which pay you a per hit fee) and 15 spyware thingys which obviously are another source of revenue for you, and an invasion of privacy for us.

If you want FReepers to read your stuff, you can just post it here, as an act of good faith. We do not support this site just to give you a soapbox, and we sure as hell don’t do it so that you can gunk up our computers and track our movements about the internet.

This is a community. Sometimes it is a feisty one, sometimes a calm and reasoned one. But one thing it is not, is a marketing tool for you.

I speak now for myself and a few other like-minded FReepers. Perhaps you would also like to read what the owner of this site has said on the subject?

http://www.freerepublic.com/focus/bloggers/2636843/posts?page=552#552

Or perhaps you’d rather hear it from the Moderators?

http://www.freerepublic.com/focus/f-news/2722423/posts

And in closing - just as a word of advice - arguing against Conservative economics, specifically Reaganomics/Supply Side Economics is not a good way to insure your longevity as a Freeper. I’ve seen n00bies get The ZOT for lots less.

Just sayin’

[shibumi]

It means that if you click on this guy’s blog without wearing a condom, your computer is going to get a social disease.

[CurlyDave]

Tax cuts do not always increase revenue. It depends on where you are on the Laffer curve.

While the Laffer curve represents reality, it is not the correct measure to determine tax policy.

Think of a new plot, the CurlyDave curve, where we plot GDP vs. tax rate. We want to adjust tax rates to maximize GDP, not to maximize government revenues.

[C. Edmund Wright]

>> We want to adjust tax rates to maximize GDP, not to maximize government revenues.<<

You are right, but the point of supply side is to maximize personal production - the increased tax revenues are just a way to sell it and a way to point out the hypocrisy of the redistributionists. So, supply side is great theory, and balanced with a target % of GDP for all tax expenditures is fabulous.

[Hoodat]

Tax cuts do not always increase revenue.

The rule is that taxes inhibit economic growth. Tax revenues are a function of economic activity, but economic activity is not a function of tax rates. If economic activity increases, tax revenues increase. If economic activity decreases, tax revenues decrease.

Basically as a society, we should decide what fraction of our total economic output should go towards funding government, and then we should set rates accordingly. The only fair way to do that is to implement a flat tax. Historically, the current 'progressive' tax system has resulted in roughly 19% of economic output being directed into government coffers. We could implement a flat 19% rate (no deductions) and achieve the same numbers.

[DeoVindiceSicSemperTyrannis]

Man, these blogs are always full of such trash....

[Let_It_Be_So]

Tax cuts do not always increase revenue. It depends on where you are on the Laffer curve.

 

And it also depends on whether the only arrow in the quiver is tax cuts.

 

The key to government-initiated economic stimulation is whether tax cuts (especially with respect to the producers-businesses) are coupled with reduction/elimination of excessive regulatory burdens on those producers...in other words, a package that actually reduces unnecessary costs to the businesses, costs that are directly or indirectly attributable to the policies/laws/regulations of the government.

 

Sometimes, tax cuts in and of themselves will stimulate enough to produce a net increase in revenue to the government, but as you point out it would depend on where you are on the Laffer curve.  But couple tax cuts with other measures that actually reduce government-induced burdens on businesses, and you'll see economic growth every time, along with the associated increases in tax revenues tied to that growth.

 

Add to that tax cuts that allow individuals/families to keep more of their earnings and you have a recipe for sustained growth.

 

What would, in theory, do all of the above (from a tax standpoint)? 

 

Tax reform that replaces all taxes with a consumption tax (again, in theory). 

[steveab]

‘The only fair way to do that is to implement a flat tax.’

Personaly, I would like to see a “Fair Tax” on all goods and services paid by the end user of goods and services with no exception. Why? Because every time I would buy an item the rate of tax would be staring me in the face. The difference is point of “view”. People get use to seeing the “bottom line” on a pay check. But when you go to buy an item(which could be several times a day)and the tax goes up 1% you would notice and get ticked off enough to end some elite politician’s dream of redistribution of money.