Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10.1 (Denver Mods 7/26/84) 6/24/83; site drutx.UUCP Path: utzoo!lsuc!watmath!clyde!burl!ulysses!mhuxr!mhuxt!houxm!mtuxo!drutx!dlo From: dlo@drutx.UUCP (OlsonDL) Newsgroups: net.politics Subject: Re: Supply-side Economics: the Savings Rate Message-ID: <418@drutx.UUCP> Date: Fri, 1-Nov-85 13:08:49 EST Article-I.D.: drutx.418 Posted: Fri Nov 1 13:08:49 1985 Date-Received: Sat, 2-Nov-85 08:36:19 EST Organization: AT&T Information Systems Laboratories, Denver Lines: 82 [] From: orb@whuxl.UUCP (SEVENER) >One of the key arguments for Reagan's enormous tax giveaway to >the rich and corporations in 1981 was based on "Supply-side >economics"- namely that giving the rich tax bonanzas would lead >them to save and invest in productive enterprises that would >"increase supply" and therefore trickle down to the poor. > >[some stuff about the Reagan budget and defense spending on nukes] > >How can supply-side economics work if its major premise (that >tax giveaways would lead to an increase in the savings rate) >does not prove to be valid? > >To the extent it has worked at all it would seem to be more >explicable in terms of Classical Keynesian theory of the effects of >deficits rather than any increase in savings rate or consequent >investment and improved supply. You've presented a rather impressive collection of straw men. 1) "tax givaway" is a self contradiction. Tax cuts and tax breaks do not GIVE AWAY anything; they only TAKE AWAY less. It's like if a burglar stole your stereo but left your TV, he didn't give you a TV; he took your stereo. 2) A corporation is NOT a source of wealth. But, the money for corproate taxes must come from someplace. A corporate tax is just another hidden tax that *all* of us pay -- mainly in the form if higher prices. Oh, they may sign the check, but the money for it comes right out of our pockets. Besides, since the rich and poor alike pay the same price for the same item, a higher percentage of the poor's income goes to the payment of these taxes; it is, therefore, a regressive tax. 3) Spending bills are originated in the House of Representatives, not the White House. 4) The United States has the largest budget in the world, followed by the Soviet Union. Guess what comes third. Canada? China? Japan? Nope. It is a department in the federal govt called Health and Human Services, formerly HEW. Pick ANY country in the world outside of the US and USSR and its *entire* budget is smaller than HHS. Think of it! HHS, the department charged with helping poor people, spends more money than all the money spent on anything by the governments of Australia, or Canada, or Japan, or China, or even any of the oil rich nations of OPEC! The last time I heard, the DOD's budget is about half of what is spent on social welfare; about 40% goes to people, and most of the rest of it goes to conventional weapons. A very small percentage (I forgot what, though) is spent on nukes. According to the _Information_Please_ Almanac_ of 1985 the DOD's budget was $187 billion and for social welfare, at the federal level alone, spending was over $366 billion (If you include state and local, it jumps to over $592 billion). (The figures for these are bigger now, but the only figures it lists for them are for 1982). With $366 billion, you could buy the GNP of all of the United Kingdom and still have change left over. Indeed there is a problem with the defense spending. But, a bigger problem is with the NON-DEFENSE spending, because more is spent there than almost anywhere else. Whew! 5) To equate supply side with "trickle down" is like equating ERA with unisex toilets. It is simply a derogatory remark made by demagogues who either do not understand or are intellectually dishonest. Supply side is based on the principle that supply creates its own demand; nothing more, nothing less. 6) Whether people save more or not through a tax cut does not invalidate the tax cut -- only a possible reason some people gave as a virtue of a tax cut. Most people who earn their own money know how to use it *better* than any bureaucrat. Even if a case can be made that there are those that don't, it does not justify depriving those that do the fruit of their own labor. In any case, higher taxes mean even less money that is saveable. 7) A problem with Keynesian economics is that it places the cart before the horse. Supply is sufficient to create demand, but demand is not sufficient to create supply. > tim sevener whuxn!orb My opinions are my own, and do not necessarily reflect those of my employer. David Olson ..!ihnp4!drutx!dlo "To laugh at men of sense is the privilege of fools". -- Jean de la Bruyere