Why does supply side economics get any credence in today's debate?

[Atreus21]

The notion that tax cuts create jobs is a fraudulent proposition.

The notion that stimulus creates jobs is equally fraudulent, then.

 

[crownjules]

The recession was the result of a Housing bubble that began under clinton.

Please do explain how tax cuts resulted in the housing bubble? 😕

When the rich have more money to play with they're going to invest it. The Housing Bubble collapsed due to poor credit and the inability to pay the bills, but it was driven by Wall St investing.

 

[blankslate]

The recession was the result of a Housing bubble that began under clinton. Please do explain how tax cuts resulted in the housing bubble?

Commercial banks and investment banks had no firewall between them anymore as a result banks took more risks because they still were covered by FDIC for the depositor's monies lost in a gamble.

With lower tax rates people in higher income brackets who already had enough money to take care of shelter, food, education, etc. had extra money that they really didn't have a real need for. As far as covering those basic necessities goes at least.

So why not invest it? If they already had safe investments already then why not choose riskier investments?

The new derivatives that the FCTC was kept from regulating by Mr. Greenspan and friends was waiting for those investors with new found money and the banks freed from Glass-Steagall gladly used them to lure investors because it was thought they could make investments safer.

Lower taxes weren't the only factor. However, it does seem to have been a contributing factor. If the taxes were higher then people would actively put money back into their businesses instead of taking a higher payment and investing it in riskier ventures.

 

[Raghu]

It is if you are ugly enough that nobody would agree to have sex with you.

Oh, looks like you have personal experience. Good to know.

 

[Pr0d1gy]

The notion that stimulus creates jobs is equally fraudulent, then.

It very well could be. That just depends on how that money is used, but your boy Paul Ryan sure touted it as a job maker when he was begging for his share of the stimulus, didn't he?

 

[nextJin]

All economists agree (from all schools) that the fundamental problem is uncertainty. How do we have certainty? Without going into either Austrian or Keys level rhetoric an 8 yr lockdown on rules and regulations that can only be modified by a supermajority or something even higher.

The ACA certainly doesn't help but that is the only off the hip response I can come up with that could potentially have an effect.

It goes against everything I'd like to actually see but being realistic it's all I can think of. The private sector can adapt and pass off expenses to the consumers.

 

[nehalem256]

Commercial banks and investment banks had no firewall between them anymore as a result banks took more risks because they still were covered by FDIC for the depositor's monies lost in a gamble.

With lower tax rates people in higher income brackets who already had enough money to take care of shelter, food, education, etc. had extra money that they really didn't have a real need for. As far as covering those basic necessities goes at least.

So why not invest it? If they already had safe investments already then why not choose riskier investments?

The new derivatives that the FCTC was kept from regulating by Mr. Greenspan and friends was waiting for those investors with new found money and the banks freed from Glass-Steagall gladly used them to lure investors because it was thought they could make investments safer.

Lower taxes weren't the only factor. However, it does seem to have been a contributing factor. If the taxes were higher then people would actively put money back into their businesses instead of taking a higher payment and investing it in riskier ventures.

Since when is investing in AAA rated securities a riskier venture?

 

[dank69]

Oh, looks like you have personal experience. Good to know.

Ohhhhh, zing! Except you are the one that thinks abstinence works, not me. Maybe next time, chef.

 

[Siddhartha]

Instead of trying to demonize an entire economic idea why not instead explain why it will not work TODAY?

Namely, that the current problems stem from a lack of demand.

IIRC, supply side economics is based on the idea that if you cut taxes for the wealthy:

1. You will stimulate growth in the economy.
2. Everybody would benefit from the stronger economy.
3. Create a larger tax base.
4. The government takes in more taxes than it would if it had not lower taxes.

After thirty years,

The US is facing hugh deficits.

Middle and working class incomes have been stagnate.

There is dicussion to cut funding programs that benefit the poor, working and middle classes.

Now if your rich and or your political agenda is to overturn the New Deal then yes supply side economics has been a success. But if you are in the working a middle classes then no supply side economics has not been a success.

 

[nehalem256]

IIRC, supply side economics is based on the idea that if you cut taxes for the wealthy:

1. You will stimulate growth in the economy.
2. Everybody would benefit from the stronger economy.
3. Create a larger tax base.
4. The government takes in more taxes than it would if it had not lower taxes.

After thirty years,

The US is facing hugh deficits.

Middle and working class incomes have been stagnate.

There is dicussion to cut funding programs that benefit the poor, working and middle classes.

Now if your rich and or your political agenda is to overturn the New Deal then yes supply side economics has been a success. But if you are in the working a middle classes then no supply side economics has not been a success.

Because clearly the only change in the economy has been supply side economics 🙄

But hey go ahead and alienate anyone who has any belief in supply side economics instead of simply explaining why obviously supply side economics do not make sense in a period of lack of demand. See where that gets you 🙄

 

[crownjules]

Since when is investing in AAA rated securities a riskier venture?

Therein lies one of the fundamental problems of the market collapse. CDOs that had no business being rated AAA were passed off as such. The underlying assets were sub-prime mortgages with high probabilities of default. But Wall St bribed and convinced the SEC and investors that they were as good as mortgages taken out by people with 800 credit scores. And when the defaults started rolling in, people realized they were holding nothing but paper while the banksters laughed with their commissions all the way home.

 

[blankslate]

Since when is investing in AAA rated securities a riskier venture?

As I said they probably invested in safe investments first and weren't satisfied with relatively low returns and though "well, these tax breaks gave me some extra dough, so why not something riskier."



Apparently not every AAA rated investment was actually that safe. The ratings agencies perhaps weren't wholly unbiased.


This isn't the whole story.

http://www.youtube.com/watch?v=bx_LWm6_6tA

but this video goes into how the subprime mortgages and the "fancy financial instruments" when combined turned out to be really bad.

 

[Pr0d1gy]

Since when is investing in AAA rated securities a riskier venture?

Since the ratings agencies intentionally falsified their ratings on behalf of the banks, which lead to the crash of 2008. Learn your history....the facts, not the ideaological bullshit.

 

[nehalem256]

As I said they probably invested in safe investments first and weren't satisfied with relatively low returns and though "well, these tax breaks gave me some extra dough, so why not something riskier."



Apparently not every AAA rated investment was actually that safe. The ratings agencies perhaps weren't wholly unbiased.


This isn't the whole story.

http://www.youtube.com/watch?v=bx_LWm6_6tA

but this video goes into how the subprime mortgages and the "fancy financial instruments" when combined turned out to be really bad.

And does it also connect them to the tax cuts on the rich. Which is the question at issue?

 

[blankslate]

And does it also connect them to the tax cuts on the rich. Which is the question at issue?

With lower tax rates people in higher income brackets who already had enough money to take care of shelter, food, education, etc. had extra money that they really didn't have a real need for.
As far as covering those basic necessities goes at least.

So why not invest it? If they already had safe investments already then why not choose riskier investments?

You apparently didn't bother to read my earlier post.

And the video wasn't meant to answer the question... the hint for that is that I quoted your post

Since when is investing in AAA rated securities a riskier venture?

before replying with a link to the video.

As far as the tax cuts for the rich in relation to bubbles question you had...
crownjules already answered it.

When the rich have more money to play with they're going to invest it. The Housing Bubble collapsed due to poor credit and the inability to pay the bills, but it was driven by Wall St investing.

If you keep giving cuts in taxes to the incredibly wealthy it doesn't really go back into the economy except back into wall street.

Then you get those wallstreeters dreaming up new and risky ways to gamble with that money. If those wallstreeters / banksters really screw the pooch then don't worry they'll get a bail out because their banks are "too big to fail."

Or alternatively they go into super pacs to by politicians who will do what they want.
We really need a Teddy Roosevelt back in Washington imo.


If you give a tax cut to those who aren't wealthy, they're much more likely to spend that money on actual items that would boost the economy. Like say a new car that gets better gas mileage. Or a new house.

 

[Pr0d1gy]

And does it also connect them to the tax cuts on the rich. Which is the question at issue?

The tax cuts, it has been proven over the last 3 decades, have done nothing to create new jobs. All it has done is raise our deficit to record levels, forcing us to raise our debt ceiling and putting us at the mercy of Red China. Nice work, what's next? pfft

 

[Moonbeam]

I think the answer to the question, "Why does supply side economics get any credence in today's debate?", is best answered by neuroscience studies of conservative and liberal brains, namely, that for a conservative, it is no longer supply side economics, but supply side religion. What the conservative mind does when proven wrong is to double down on being incorrect, whatever opinion such a mind has, when shown wrong, goes from opinion to conviction, to embedded bedrock truth. Do not expect to be able to tell them this without also convincing them even more intensely they are right.

This is no laughing matter in my opinion, because the enormous financial damage they have done to the country is the very rebuke to their thinking that leads to deeper conviction. We have a serious problem on our hands, in my opinion.

 

[Jaskalas]

Who said $3T deficits every year, other than you?

You did, in fact. Hence I directly quoted you, which should have been obvious enough. Let us try it again, perhaps you'll give an alternative explanation.

That's kinda like blood transfusions. Giving the patient 1 pint when he needs 3 won't have the desired effect, just like giving taxcuts & rebates to people who won't spend them won't stimulate the economy.

Are you clever enough to argue that 3x our current deficit spending is not $3 trillion or greater?

 

[Matt1970]

The tax cuts, it has been proven over the last 3 decades, have done nothing to create new jobs. All it has done is raise our deficit to record levels, forcing us to raise our debt ceiling and putting us at the mercy of Red China. Nice work, what's next? pfft

I am curious, what exact proof do you have of this?

 

[Jaskalas]

I thnk as the economy worsens people realize and adapt to what they really "need" to survive and get by. Thus demand for "stuff" goes down as its not a necessity. So trying to supply "stuff" to people, no matter the cost, that have deemed it not worthy any longer do to financial reasons dont buy it.

Thus supply side economics is fail. Supply things that are in demand.

That is interesting, but isn't the current 'solution' just to throw money at it and hope the supply-side economics starts working again? You appear to be suggesting that it wouldn't work - cause the mindset of people has changed.

 

[blankslate]

Are you clever enough to argue that 3x our current deficit spending is not $3 trillion or greater?

Let's see get a time machine and make sure the tax rates from the nineties enacted by President Clinton along with a tie breaking vote by VP Gore (yes it was that close in the Senate), don't get reduced.

Then make sure that President Bush doesn't shift his focus to Iraq when Osama Bin Laden's location is actually known then...

We probably wouldn't have wasted 1 trillion in Iraq and deficit spending would probably be much less than actual $1.37 trillion for this year.

Of course other people would see that differently.

 

[nehalem256]

The tax cuts, it has been proven over the last 3 decades, have done nothing to create new jobs. All it has done is raise our deficit to record levels, forcing us to raise our debt ceiling and putting us at the mercy of Red China. Nice work, what's next? pfft

Note the complete lack of mention of anything to do with housing.

 

[blankslate]

Note the complete lack of mention of anything to do with housing.

Tax policy allows you to take deductions on mortgage interest. It was probably a selling point to get people who shouldn't have bought a house to buy a house.

Again read post #77 in this thread.

 

[nehalem256]

Tax policy allows you to take deductions on mortgage interest. It was probably a selling point to get people who shouldn't have bought a house to buy a house.

Again read post #77 in this thread.

Mortgage interest deduction existed long before the Bush tax cuts.

 

[Matt1970]

Mortgage interest deduction existed long before the Bush tax cuts.

This.