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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
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[]

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