t+1 - Latest Comments in Supply-side economics explained

Re: Supply-side economics explained

Bedding Set Deals — Wed, 14 Apr 2010 12:12:28 -0000

I agree that many potential investors nowadays wants to save their money rather than investing it because they have a big doubts of no return due to the effects of recession.

Re: Supply-side economics explained

Orijen Dog Food — Mon, 21 Dec 2009 23:23:20 -0000

One thing you mentioned above is that money which is not confiscated by the government may well be put into savings. True, but they probably won't stuff it under the mattress.

Re: Supply-side economics explained

lean automation — Sun, 19 Apr 2009 06:37:02 -0000

With the gambles taken by the government on automating processes, the huge investments that they have poorly decided on will backfire not only on their faces but back to us as well. They're brewing a bigger problem that may be too big for us to handle because of impulsive acts.

Re: Supply-side economics explained

Ed Jones — Mon, 21 Jul 2008 12:47:41 -0000

Yeah, Halberstam reiterates the old idea that Bush Sr. was "doing the right thing" and taking the political hit for the good of the country. Well, it may work that way with the Akron budget, but not necessarily so with the Feds.

One thing you mentioned above is that money which is not confiscated by the government may well be put into savings. True, but they probably won't stuff it under the mattress. They'll invest it in stocks, bonds, money market accounts, whatever. That money in turn becomes available to companies, or to individuals to borrow and buy and grow the economy.

The good of more taxes or less taxes depends where we're at on the tax curve. If individuals are at 90%, its probably not an incentive to work. If at 5%, they can probably be safely raised. You've seen the Laffer curve, right?

Its been a long time since the Bush tax cuts, and the economy along the way was pretty good. This current mess, though, wow! One thing I see is that the NASDAQ has never properly recovered from 2000. If you look at a lifetime chart, you can see how rediculous the pre-2000 run-up was. However, if you follow the 50 year trendline to today, you can see that the stock market has never properly regained all its value. So, where is that money? Propping up ridiculous commodity prices!

The fed doesn't help of course. Why would someone want to put cash in US accounts when the market interest rates are so low? Might as well put it in a European bank. Which, I guess people do.

But the tax issue--well, the thing with that is, who can better make us of the money right now. In the 30's, government could somehow spend "better". They slowly got people back to work. And of course in '42-25, govt was spending half the GDP! Under Reagan, we gave lots and lots of money to electrical engineers, computer scientists, rocket developers, and aerospace designers, and that certainly boosted the high end of the economy, propelling us immensely forward in the technical arena. The processors you and I are communicating with, and the vast network in between, all sprung from the huge govt spending on tech in those days.

Once launched, then, all that technology is probably better in the hands of entrepreneurs and the public. Which is what Clinton did. (Though a huge portion of his defense budget was still high tech).

The other question about taxes is, should government ALWAYS grow? For example, in the past 20 years, huge investments have been made in automating all kinds of processes throughout the governments. Shouldn't that tech pay off sooner or later in reduced payroll?

Speaking of not laying off workers, the unemployment rate still seems to be historically pretty good. Not quite as low as '98-2000, but then the economy was a bit overheated in those last couple years before the market crash.

Re: Supply-side economics explained

Matt Wilson — Mon, 21 Jul 2008 09:05:14 -0000

Hi Ed,

If I understand you right, you're saying the 1994 election was about more than "the dems raised my taxes, so out they go!". I agree with that. It can't be overstated though how unpopular those tax hikes were. Sure there was other issues in 1994; the old war on poverty ideas were showing their failure, and it was time for an overhaul of the welfare state.

Thinking back to the 2000 election, there was a clear difference between Gore's "lockbox" mantra and Bush's arguments about giving the surplus back by cutting taxes. I think that's the mentality I want to highlight.

Thanks for the comments!

Re: Supply-side economics explained

Matt Wilson — Mon, 21 Jul 2008 09:03:56 -0000

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Re: Supply-side economics explained

Ed Jones — Mon, 21 Jul 2008 08:25:59 -0000

Matt, a good long review of economic policy. A few things you skipped over/ may want to look at.
1) Why would the people throw out a Congress when they had just done such an excellent job balancing the budget and fixing the economy? Its hard to find an answer to that when working from the limited views of the notions here, but there are some really, really good policy reasons dealing with the poor in this country, whom the Congress (40 years the same party and very incumbent-heavy) had ignored.
(Interesting side--I'm reading War in a Time of Peace, and David Halberstam, that icon of a writer, just totally glosses over the issues of that election, and ascribes it to some right wing fad! How a writer so gifted could completely ignore the domestic mess of those years just stuns me!)

What was wrong in 1994 was that our cities had collapsed into mires of crime and decay. Murders in DC had risen to 400-450 a year (they're now half that). Welfare had created a situation where three generations were still making no upward movement to get off. Homeless/mentally ill people lay on the corners of every street--and the park, libraries, etc. Schools went into lockdowns daily, and little to no learning was taking place. Drug gangs rules the streets. In the best of areas, normal people were afraid at night, and often during the day.

Its hard now to remember just how bad our cites had gotten, but that was the issue in 1994.

Another skipped item is the budgets of the Reagan years. There is an image of Reagan standing at the podium in Congress with the spending bill they had sent him. It was as tall as he was. He spoke with disgust of it, of all the junk that Congress had added. Unfortunately, he didn't veto the whole thing. When we talk of deficit spending in those days, its wise to remember Congress' part.

Also, what price did Clinton pay when he and Congress "balanced" the budget? Well, in some ways, none. All of the biggest defense programs of the 80's were ramping down. So, for example, Clinton was handed stealth bombers and fighters, and submarines, and a complete navy, and a GPS satellite fleet, and military communications systems-- he got all the benefits of those, with the cost already sunk on Reagan's political tab. (By the way, if you buy a plane that lasts 30 years, is debt a bad way to go? You'd think nothing bad of taking out a car loan for a car you know will serve you into the future. On the other hand, if you take out a loan for groceries---which was Congress sin--not so good!). Everyone in that time called this the "Peace Dividend". Since the cold war was over, we could save on defense.

Ahh, but one could go to far on cutting defense costs, and did we? Well, when GWB took over and needed an Army, we had a few problems. One, training was inadequate--not enough had been allotted to supplies. Similarly, maintenance was a terrible problem, as no one had allotted enough funds to keep all the fielded equipment running. And, of course, as you know, we had skipped on things like enough armor for the troops who would be deployed. All that lean spending had a cost in lives.

There's more going on, of course, but this gives a flavor of some of the many factors left out by the pundits. Good writing, though!!!