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From: thill@ssc-bee.UUCP (Tom Hill)
Newsgroups: net.politics
Subject: Re: Supply-side Economics: the  Savings Rate
Message-ID: <418@ssc-bee.UUCP>
Date: Fri, 8-Nov-85 12:31:16 EST
Article-I.D.: ssc-bee.418
Posted: Fri Nov  8 12:31:16 1985
Date-Received: Sat, 9-Nov-85 07:27:48 EST
References: <1475@teddy.UUCP> <7800591@inmet.UUCP>, <756@whuxl.UUCP> <264@pyuxii.UUCP> <364@whuts.UUCP>
Organization: Boeing Aerospace Co., Seattle, WA
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>> The great theorist explains all again.  Phooey, Sevener, you
>> seem to have Tip O'neil's party line rhetoric down pat.
>> First, supply side economics DOES depend on consumer spending,
>> not the savings rate.  
>> T. C. Wheeler
>
> Unfortunately I have no articles with direct quotes from supply-side 
> advocates as to their theory and its voodoo benefits.  However I

Then why do you continue to post on topics you admit to having no knowledge
of?  One wonders.

> have some quotes from a New York Times Business Day article, Sept. 18,1984:
>    "The key supply-side tenet is that lowering marginal tax rates
>     will have a substantial incentive effect on work and investment,
>     fostering long-term, noninflationary growth.  In addition, the
>     theory holds, this growth will eventually shrink the budget
>     deficits."

ie. Put the money back in the hands of the people and they will both spend
    more and save more.

>   
>    "Support for the 25% across the board tax cut in 1981 was built
>     on assertions by ardent proponents such as Mr. Laffer and 
>     Representative Jack Kemp that lowering tax rates would not add
>     to deficits but would instead so energize the economy that
>     more tax revenues would be generated."
>   

Since tax revenues are up, this appears to have worked.  Again the trouble
lies with our legislators who refuse to use the fiscal responsibility in 
their jobs that they use in their everyday lives.

> This article quotes Mr. Roberts a former official in the Treasury Dept.
> and supply-side advocate :
>    "As the theory is postulated", he said, "investment is leading the
>    recovery, growing at three times the rate of consumer spending."
>  
> Another economists points out however that investment spending had to
> go up after the severe recession, and that it was still below
> the 12.1% rate in 1981.  Moreover he pointed out that in fact 
> consumer spending had increased to 62.9% of GNP from 62% of 
> GNP in 1981.
>  
>  blah blah blah
>  .
>  .
>  .
>  
> Even our dingbat President understands that!
>             tim sevener  whuxn!orb

Yes Tim, I do not believe that you know what you are talking about.
My understanding of the savings rate is this (you have already admitted that
you know nothing so please listen)  the marginal savings rate is equal to
1 - the marginal propensity to spend.  So, after you have paid all your
bills the amount of the money you have left over to do with as you wish
is either spent or saved.  If 98% is spent then the savings rate would be
2%.  

The 1981 tax cuts put more of those marginal dollars into the hands of the
taxpayers.  Say you normally saved (or invested) $300 dollars out of
$10000 for a savings rate of 3%.  Now say that you get more money to spend
(through tax cuts) and now have $12,000 instead of just $10,000.  If you
now save $350 your savings rate have decreased even though your *ACTUAL*
savings have increased.  Could this be the case with your observation that
the savings rate has decreased since 1981?  Let the people keep their hard
earned money and make the politicians account for their ineptness.

Tim I know that you are no fool, but why must you continually attack things
that you don't like with "facts" (using this term loosely in Tim's case)
that really mean nothing within the context that you use them.

Anybody out there who undstands this better than I should feel free to flame
or elaborate.

	
	Tom Hill

note:  Creative use of statistics never hurt anybody's argument :-)