Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10.2 9/18/84 exptools; site whuxl.UUCP Path: utzoo!lsuc!watmath!clyde!cbosgd!ihnp4!houxm!whuxl!orb From: orb@whuxl.UUCP (SEVENER) Newsgroups: net.politics Subject: Supply-side Economics: the Savings Rate Message-ID: <756@whuxl.UUCP> Date: Wed, 30-Oct-85 09:25:15 EST Article-I.D.: whuxl.756 Posted: Wed Oct 30 09:25:15 1985 Date-Received: Thu, 31-Oct-85 19:10:01 EST References: <1475@teddy.UUCP> <7800591@inmet.UUCP> Organization: AT&T Bell Laboratories, Whippany Lines: 33 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. After 4 years one could probably say this policy should have had enough time to have some effect. What has been the effect on the savings rate? Has it been the upsurge postulated by Laugher and his silly curve? Just last week the government issued a report that the savings rates was less than 2% -the lowest rate it has been in 40 years. Moreover the proportion of consumer debt has skyrocketed. It has been consumer spending which has fueled the economic recovery - not investments. While consumer debt is at record high levels, the government itself is of course saddled with a doubling of its debt in the last 5 years (to pay for Reagan's spending spree on new nukes and such) to the point where all of Reagan's touted cuts in domestic spending for people's needs has been overshadowed by simply the increase in the amount of interest owed on the national debt. Moreover, an earlier report projected that increases in workers take-home pay would continue to drop as it has been dropping for a couple years. 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. tim sevener whuxn!orb