I couldn’t let the “Right Wing tax Cut Theory” jab a few posts ago slide, so…..
Right wing (AKA Correct wing in this case) tax cut-theory absolutely works…You can disagree with this, but I will have to ask, what planet are you from…or better yet, how would you say the economy is doing right now? For that matter, how has the economy been for the last couple of years? The undeniable, un-spinnable truth is that we have record low unemployment, The DJIA is near all time highs, home ownership levels (especially for minorities) have sky rocketed recently and the Fed is concerned that the economy is doing so WELL that they have to continue raising interest rates to ward off inflation.
As everyone knows, the effects of any administrations policies lag for a few years. A perfect example of this is how GWB got handed a bag of shit when he stepped into office. Remarkably we had a very short lived Bear market which started in 2000 (while Clinton was still in office) and one that G. W. Bush was able to get a handle on quickly…mostly via Tax-cuts. As I said earlier the results are best proven by going back to hard data so lets go back to the last administration with heavy tax cuts.
Ronald Reagan concentrated on economic issues his first six months in office. Reaganomics was the name given to the supply-side economic theory which Reagan based his economic plans. It operated on the belief that the economy was struggling in large part because of…..EXCESSIVE TAXATION. With more money going to taxes, individuals and corporations were unable to invest capital to stimulate growth. The plan called for massive tax cuts in order to stimulate investments. The economic growth would then “trickle down” to the workers. Supply-side economics also called for budget cuts to counteract the loss of revenue from the tax cuts. Reagan followed this model in creating his budget plan in 1981. Reagan put together legislation that cut government expenditures by $40 billion and created a three year tax cut plan (the largest ever) for individual and corporate income taxes.
In no year following the tax cuts did revenues decline. They increased in fact in almost a straight progression from pre-Reagan years. The Cold War budgets did increase, and of course the happy fact was that this led to the end of the Cold War itself, as the Soviet Union recognized it could not outspend the U.S. But those military budgets were not significantly larger than during the 70s, and were smaller than in the Kennedy and Johnson years. It was actually domestic spending, and particularly entitlement spending, that grew enormously under the Democrat congress.
***”Between 1980 and 1981 the top capital gains rate was cut from 35 percent to 20 percent and revenues soared by 90 percent in real terms between 1978 and 1985.After Congress lifted the rate to 28 percent in 1986, capital gains revenues declined by 20 percent by 1990
The average annual growth rate of real gross domestic product (GDP) from 1981 to 1989 was 3.2 percent per year, compared with 2.8 percent from 1974 to 1981 and 2.1 percent from 1989 to 1995. The 3.2 percent growth rate for the Reagan years includes the recession of the early 1980s, which was a side effect of reversing Carter’s high-inflation policies, and the seven expansion years, 1983-89. During the economic expansion alone, the economy grew by a robust annual rate of 3.8 percent. By the end of the Reagan years, the American economy was almost one-third larger than it was when they began
When Reagan took office in 1981, the unemployment rate was 7.6 percent. In the recession of 1981-82, that rate peaked at 9.7 percent, but it fell continuously for the next seven years. When Reagan left office, the unemployment rate was 5.5 percent.
Real median family income grew by $4,000 during the Reagan period after experiencing no growth in the pre-Reagan years; it experienced a loss of almost $1,500 in the post-Reagan years***
Source -Cato Institute
The first rebuttal to this post will likely be an unwarranted pro-Clintonian, pro tax pump up , however, not factored into any liberal equation is that at the time Clinton took office (in fact, long before the election) the economy was growing briskly again, the brief G. H. Bush recession having ended in March 1992. Moreover, the end of the Cold War led to massive cuts in military and Defense Department budgets, a reduction in the size of government that Clinton and Gore had the audacity to claim as their achievements.
In summary, some of Reagan’s Tax Cut benefits were:
Inflation averaged 12.5 percent when Reagan entered office, was reduced to 4.4 percent when he left.
Interest rates fell six points.
Eight million new jobs were created as unemployment fell.
An eight percent growth in private wealth.
Right Wing Tax Cut THEORY???? What Theory?
You have every right to pay more taxes…if this is your prerogative, please be my guest!
Add Jim to your del.icio.us network
What your failing to realize is that you’re getting stuck with all the bills that these dudes aren’t paying. You can’t cut the budget enough to allow for tax cuts to become permanent. Enjoy your high taxes, they will keep growing no matter what the econmy does.
here’s a good article from e few years back . http://www.hoover.org/pubaffairs/we/current/henderson_0401.html
And now we have W trying to cut taxes further while increasing federal spending massively and creating enormous deficits and debt. What’s the special coinage for that bright idea? Stupidnomics? Something-D-O-O? Anyone? Anyone?
I’m getting stuck with bills that who isn’t paying BJ? As far as the federal increasing and spending…I am with you KY. That aspect IS a shitshow, the cuts do work though. When middleclass people have more money in their pocket, the economy does better…it’s hard to argue otherwise.
What middleclass people are getting more money back? Are you reffering to the $300 that I got several years ago? I’m sure that there are better solutions. The people in the 1% of the tax bracket are the ones seeing the real relief, the rest of the popluation is taking the hit. Feds cut funding that local governments have to make up for, raising poperty and state taxes, how does help the middle class? It seems to me that you have been fooled into thinking that whats good for the top 1% is somehow good for you but I dont think you’ve really thought it through.
The things that can truly impact the middle class in a meaningful and lasting ways are things that this government hasn’t done anything about like health care and environmental issues. I could go on but I don’t think you’ll listen… sorry
On a much more important note I’m leaking the next big headline: IT’S A BOY!!!!!!!
@bjay: Right on, brutha! Power to tha People!
And “woo-hoo!” on the other news! Can’t Jim email the story and a picture from his Blackberry or something? How dare he not take time out to blog this!? I mean, we get pictures of leftover-BBQ sandwiches but not newborns! Where are the priorities. Oh, the humanity!
maybe we should spend some money teaching the teachers grammar and spelling.
hold on to your seat bjay, i have a feeling you pulled a hempstead and are about to get KY’d by JJ.
btw…the middle class isnt alone in caring about the environment but might be when you consider their skyrocketing debt, cost of retirement and education …you see, the rich folks dont need to worry as much about those things…and the poor folk, well, you and i both know that they get special treatment when it comes to govt. handouts that the middle class doesnt qualify for and the upper class doesnt need.
Congrats to Jim and Kel!!! Awesome news.
As far as responding to your last post BJ, the middle class (which I admit is VERY hard to define if you live in NJ) benefits in too many ways to count (re-read my post for clarity)
The following analogy has been around for while, it would be hard to articulate my point better than this:
Suppose that every day, ten men go out for dinner. The bill for all ten comes to $100.00. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing, the fifth would pay $1.00, the sixth would pay $3.00, the seventh $7.00, the eighth $12.00, the ninth $18.00, and the tenth man (the richest) would pay $59.00. That’s what they decided to do. The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement until one day the owner threw them a curve (in tax language a tax cut).
“Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily meal by $20.00.” Now dinner for the ten only cost $80.00. The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still eat for free, but what about the other six, the paying customers? How could they divvy up the $20.00 windfall so that everyone would get his “fair share?”
The six men realized that $20.00 divided by six is $3.33. But if they
subtracted that from everybody’s share, then the fifth man and the sixth man would end up being PAID to eat their meal. So the restaurant owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay. So the fifth man paid nothing, the sixth pitched in $2.00, the seventh paid $5.00, the eighth paid $9.00, the ninth paid $12.00, leaving the tenth man with a bill of $52.00 instead of his earlier $59.00.
Each of the six was better off than before. The first four continued to eat for free. Once outside the restaurant, the men began to compare their savings. “I only got a dollar out of the $20.00,” declared the sixth man, but he, (pointing to the tenth) got $7.00!” “Yeah, that’s right,” exclaimed the fifth man, “I only saved a dollar, too; It’s unfair that he got seven times more than me!” That’s true!” shouted the seventh man, “why should he get $7.00 back when I got only $2?” The wealthy get all the breaks!”
Wait a minute,” yelled the first four men in unison, “We didn’t get anything at all. The system exploits the poor!” The nine men surrounded the tenth and beat him up. The next night he didn’t show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered, a little late what was very important. They were FIFTY-TWO DOLLARS short of paying the bill! Imagine that!
And that, boys and girls, is how the tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore. Where would that leave the rest?
It’s a boy??
Come on… You might as well say, “It’s a Willis!”
I dont know when Jim will post the news about the duece, but we’re all thrilled that Christopher Jack Willis has arrived safely. We can’t wait to see the pictures and are eagerly anticipating our first visit next weekend.
JJ where do you suppose the tenth man will go to continue earning his fortunes and getting his meals. Once he meets the new dinner companions he won’t want to stay. America is still the best place to do business for a multitude of reasons. He will return to fatten himself at our trough and pay the cost to be the boss. I agree that the first four guys don’t have a legitimate gripe and I understand and appreciate the metaphor you offer, even if you fail to realize that the resturant owner can not afford to offer the discount especially as he continues unchecked spending increases.
I had a thought about all of this nonsense yesterday and I came to the conclusion that we are both almost certainly wrong, even as we approach the topic so sure that we are right.
-peace, bitch
kent????
ky????
surely you have something to contribute…..
i am eagerly awaiting your attempt to refute JJ’s post. (in a good way too)
Beege
While I agree that America is the best country in the world for pretty much everything, there are a lot of other nearby countries (ie Bermuda, The Cayman Islands etc) that make it pretty compelling to do business there. To quote an editorial in todays WSJ, “If we continue to grip the neck of our vibrant economic goose so tightly, it will quit laying those golden eggs. Those golden eggs come in the form of capital that allows…businesses to remain intact, fuels new businesses and our economy as a whole”. Like the earlier post, if you keep pissing people off with prohibitive tax increases, maybe they will take their ball and go home.
Can I get a harump?
What I wrote was: “According to right-wing tax-cut theory, that confiscatory tax rate should have discouraged people from wanting to be highly-paid CEOs - so much for that tax-cut theory!”
It is widely accepted in economics that when anything is heavily taxed, it discourages the activity that is heavily taxed, e.g., cigarette smoking, high-tariff imported goods, etc. And the confiscatory marginal tax rates in the post-war period certainly qualify as heavy taxation. I don’t see anything in your post that takes issue with any of that.
But those taxes certainly didn’t seem to discourage anyone from aspiring to be a highly-paid C.E.O. So what part of my statement are you taking issue with?
In my adult lifetime, I’ve seen top marginal tax rates of 85% - under a relatively simple tax code where those high earners actually paid their taxes, as in the example given - and as low as the current rate, which is probably about 28% under the a.m.t. But I’ve never seen a situation where, regardless of the tax rate, people didn’t want to make the big bucks - so tax cuts weren’t in any way needed to foment anyone’s upwardly-mobile ambitions.
As to the general subject of the supply-side economics myth, I’ll post separately in the next few days.