Supply-side economics don't work

[Fixated]

I'm tired of explaining to righties why their economic system doesn't work. I don't CARE if they don't want to help the poor. That's a philosophical difference. Fact is, higher corporate taxes work. Reagan's huge tax cut in '81 failed, that's why he had to raise taxes. When did the U.S. become the unquestionable superpower we see today? After WWII, which the New Deal pulled us through, and after which our more progressive system allowed us to boom and take hold of the world economy. It isn't a coincidence that under Republicans the economy seems to always bomb. Under Reagan, everything went wrong economically. Debts soared, recessions started up. The same is happening under Bush. But they don't get it. Hammer it the fuck home.

[Maple]

1. Well......

After WWII the US was one of the very few places left in the world that didn't have any war damage.

And there was a whole world wanting to rebuild, and buy consumer goods.

It was a unique historical situation...and one not likely to occur again.

(And that was not the 'New Deal'. The 'New Deal' was a different era from WWII)

The problem you're having now is 'supply side' in a different way.

You are 'supplying' money to fight and build Iraq.

And Afghanistan.

And all the other places you've promised money to for troops and aid.

THAT is your current supply problem.

[Fixated]

2. ....

The New Deal was the reason we were able to go in and fight WWII, economically. That was my point. We also had to pay $13 billion to post-war Europe, which was why we needed them to buy our goods as well.

[Maple]

4. The 'New Deal'

had nothing to do with WWII

And the Marshall plan paid dividends many times over to the US

They had no one else to buy anything from.

The US did very well from the war.

[Fixated]

6. ....

OK. What I'm trying to say is that the New Deal affected our ability to fight WWII. Things that occur in different time periods can affect each other. For example, if I give my friend money and say "by a shotgun," and he does, he can later use that to fend off someone who robs his house.

The New Deal allowed our economic recovery after the Depression (which, yes, was also not during WWII), which led to our being able to churn out tanks and guns to kill Nazis with.

[Maple]

8. That's not where you got

your money from.

The New Deal meant the govt paid people to build bridges and roads.

It did not gain you anything as a country.

Post 7 by echoboy explains where you got the money.

[Fixated]

10. ....

No it doesn't, he talked about our economic success during and after the war.

Perhaps you're not a liberal, but this is how I see it: The New Deal was the beginning of the welfare state for us. When you help the people on the bottom who aren't doing well, it benefits those on teh top as well. The economy gets moving. The idea of the New Deal was to get the country to function again, not just to build roads.

[Maple]

12. You can see it

any way you want to.

That is not reality of WWII however.

Nor will it do anything for you now.

There is no money to spare...it's going to Iraq.

[jeter]

14. Maple, I disagree

You wrote that the New Deal paid for bridges and roads and that had no effect on the economy. But the New Deal also built TVA, which provided electricity and energy to many rural southern states that previously didn't have that. It enabled the growth of industry and manufacturing in those states.

Some New Deal measures were successful, while others were failures.

[Fixated]

15. ....

Sorry, but that IS the reality of it. You can't fight a war without money to spare, and believe it or not, we didn't turn arms sales to Britain into a military machine in under two years. You've strayed from the point of the post drastically, which was: demand side economics work.

However, this New Deal talk is enlightening. I didn't realize we had risen out of the depression by chance.

[Maple]

18. Sorry guys but that's not the reality

Of course bridges and roads and the TVA were nice...but that didn't bring any new money in.

It was govt money...taxes and deficit..that paid for the work.

Arms sales were going on for a very long time...and not necessarily to Britain.

The New Deal was great...but it was a variation of welfare. It did not make the country boom.

Had the US not gotten into the war...pump priming would have been just pump priming...and without much chance of suceeding.

[Fixated]

20. ....

Did you read his post? The Tenessee Valley Authority DID bring in money. Look, I could sit here all night listening to non-points about "reality," but it's 3:30 a.m. and I have to wake up before 2 as not to be embarassed.

[Maple]

22. The TVA

certainly didn't bring in enough money to do anything major.

But if you wish to toddle off and not be embarrassed....nite.

[Fixated]

25. .....

Yeah you totally had me...when I wake up I guess you'll have a reason for the economic recovery in the 30s that isn't from New Deal policy....

[Maple]

30. There was none

The war saved your butts.

The New Deal was a stop gap measure.

[TreasonousBastard]

34. Only part of the story.

The public works increased the infrastructure to where vast areas of the country could experience an economic revival. Then, WWII was the ultimate pump-priming. Keynesians were right about gummint deficit spending, but they were probsbly shocked at just how deep the deficit had to be. Millions in uniform and millions more producing war materials, all on the public tit. The WPA and CCC couldn't come close to that kind of building and spending.

Whether or not we could have eventually dragged ourselves out of the Depression without WWII is an interesting argument, but a moot one since we'll never really know. Personally, I suspect monetary policy, and the contraction of the money supply, may have been the largest single factor in the Depression.

[jeter]

24. Maple, you're right that it didn't "bring in money"

But it did help establish the US as an industrial power. When the demand from the war (and lets not forget that the war created a HUGE debt for the US) the economy grew rapidly. It was the two working together that got the US machine rolling.

The way the US paid for it eventually was with the economic settlement of the postwar world.

They gave Europe $13 billion, true. But Europe had to purchase American consumable items, etc. The GDP grew as a result. The debt to GDP ratio fell as a result of that.

[Maple]

27. The New Deal

was a localized program. Local to the US. No help in any other way.

The war made the difference...not a govt welfare plan.

[jeter]

19. fixated, demand-side economics alone isn't good either.

There has to be a balance between the supply and demand. An equilibrium of sorts. If you have too much demand and not enough supply, you get inflation - hence, what happened in the 1970s. If you get too much supply and not enough demand, you get deflation - hence what's happening now.

[Fixated]

23. ....

Yes yes, I know. I believe that the supply side feeds a smaller number of people, and that the demand side is required more heavily because the "trickle-down" theory works minimally. Poor wording on my part.

[Maple]

29. Economies in the real world

are never in equalibrium.

And that...to quote Martha...is a good thing.

[jeter]

9. Didn't have to. Just did.

The New Deal had successes and failures. But your point is well taken.

If you want to really get under a republicans skin tell them this:

That the current recession was their fault. Why? Because when the republican governors took over in 1994-5, they slashed their budgets. Introduced Welfare reforms, Slashed the public service, etc. But they weren't stupid. They put a 5 year wait on those enactments, which means they didn't go into effect until 1999-2000. When did the economy get all screwy? 1999-2000.

The largest employer in the United States is not any corporation. It is the public service. Working for the federal, state, local government. That's where 50% of all jobs come from. Think about it: what do teachers, firefighters, police officers, nurses, doctors, garbage collectors, and on and on have in common? They all work for the government. When you cut the public service, you're effectively eliminating millions of jobs. The supply-side theory works the other way too. The whole point of that theory is that people have more money in their pocket (albeit, usually only a little bit) and spend that money. But what happens when millions of people are out of work? Or forced to take jobs at a fraction of their previous wage? Doesn't the theory work the other way, too? The economy slows.

Total Employment in US:
Public Service - 50%
Small Business, self employed - 30%
Corporation - 20%

That's right. Only 20% of all jobs in the US come from Corporations. And I bet you there are more people who work behind the counter at a McDonalds then in its head office.

The best corporations to work at (for workers)?
In the industrial industries. Auto, steel, aerospace. But even there, the aerospace industry is VERY dependant on federal dollars (through defence contracts, etc) to be viable. And shithead Bush thought it was a good idea to put tariffs on steel, which raised the costs (and lowered the productivity) in both the auto and steel industries. How do offset lowering productivity? By laying off workers. Hence, the decline in the manufacturing sector.

All these things lead to lower standards-of-living, higher unemployment, and higher deficits/debt. How would cutting taxes for rich people improve that?

[Maple]

13. The simple fact is

you can't massively slash taxes, and then fight expensive wars at the same time.

[jeter]

16. true. But that's not the only reason the economy is suffering

No doubt it has an effect. But regardless, the policies of the mid 1990s led to the downturn of the economy in 2001, before the war was being fought. Before, taxes were cut federally.

The only reason the economy hasn't just collapsed is because of all the infusion of money being put into it.

The trade deficit in the US is now $500 billion. The Budget Deficit is $420 billion. The US spends $920 billion dollars a year more than it takes in. That's a deficit of nearly 10% the GDP. That's unheard of.

The US dollar, which has already fallen by about 30%, will almost certainly collapse if this continues much more.

[Maple]

21. The economy was fine then

No dotbomb bubble bursting was enough to damage the economy.

You had no deficit, and a surplus.

There is no infusion of money going into the US...there will be inflation when they start printing more money tho.

Yes, the US economy is in serious danger.

But not from any policies of the nineties.

[echoboy]

28. up , up and away..

I believe the deficit will be more like$500 billion when all is said and done with the extra approprations. The irony is that we consider the Europeans big spenders, but if you compare us to them we couldnt even get into the Euro requirements because our debt is beyond the 3% cap. the Europeans are fall into recession especially Germany and France. they need to lower their interest rates and that would help the dollar regain some ground and spur their economies on.

[spooky3]

35. what is your source for these #s? Link, please, thanks.

[spooky3]

36. Not sure your numbers are correct.

See

http://www.nber.org/digest/jun03/w9313.html

[dsc]

3. Argentina also was undamaged

had around the same percentage of highly educated people and ample natural resources. Yet they are Argentina. Policies matter.

[Maple]

5. Argentina

had nothing like the US industrial base.

[echoboy]

7. Correct, but a bit too reader digest

Correct in that we were in a unique situation after WWII plus before we got into the war we charge the brits up the ass for arms and they had no choice but to open their coffers plus we forced the brits to open their colonies to Us products.

And at the end of the war only the dollar was the only currency that really had some muscle behind it. Now the situation is completely different.

I was hoping this war would bring down this administration and it is doing just that unfortunately we are along for the ride...

[Maple]

11. I'm amazed !

I didn't think many Americans were aware of that.

The only reference to the actual situation that I've ever seen on the web is:

"IN ONE OF HIS FAMOUS SPEECHES Churchill asked America 'Give us the tools and we will finish the job'. But America wouldn't 'give' anything without payment. After two years of war, Roosevelt had drained Britain dry, stripping her of all her assets in the USA, including real estate and property. The British owned Viscose Company, worth £125 million was liquidated, Britain receiving only £87 million. Britain's £1,924 million investments in Canada were sold off to pay for raw materials bought in the United States. To make sure that Roosevelt got his money, he dispatched the American cruiser, 'Louisville ' to the South African naval base of Simonstown to pick up forty two million Pounds worth of British gold, Britain's last negotiable asset, to help pay for American guns and ammunition!. Not content with stripping Britain of her gold and assets, in return for 50 old destroyers, he demanded that Britain transfer all her scientific and technological secrets to the USA. Also, he demanded leases on the islands of Newfoundland, Jamaica, Trinidad and Bermuda for the setting up of American military and naval bases in case Britain should fall. (Of the 50 lend lease destroyers supplied to Britain, 9 were lost during the war)

QUOTE. Lord Beaverbrook was later to exclaim 'The Japanese are our relentless enemies, and the Americans our un-relenting creditors'."

http://members.iinet.net.au/~gduncan/facts.html

[echoboy]

17. Some Americans study history...but not too many

yes I have heard these stories of the South African gold and the bases in the Carribean. The sad fact now is that the US is a debtor nation and with this war, these huge deficits, the other twin deficits (trade and current account) the dollar can do nothing but depreciate which I suppose as it should be but that will ultimately drive up inflation by making foreign goods like oil more expensive. And with the US gov't borrowing so much money they are going to crowd out the capital market in this country which will cause interest rates to climb especially when corporations want to sell their commercial paper and have to compete with the US gov't. debt and the States debt.

For me it means one thing - double dip recession and the banishment of monkey boy bush :-)

[Maple]

26. Awriiiiiight then.....!

Yes I certainly agree with you.

The govt apparently plans to monetize the debt...so inflation could well be a factor.

Then again, they are warning against deflation...even worse!

What I'm most concerned about is bonds and bills...if people/countries stop buying them......

I can only hope Bush is replaced by someone with brains.

I think he got his MBA from a Cracker Jack box.

[echoboy]

31. the bonds stop here

Well the problem is that if noone will buy the bonds, then the government will either sell them at a discount or up the coupon to increase the yield on the bond which will cost the US tax payer more in interest payments on the debt which now represents approximately 15% of the US fed budget. and that is jus the interest. They need to get rid of that tax cut, bring the UN in Iraq to lower the costs of that mess, push the Chinese to float their currency (big holder of US bonds), and push the Euros to lower their interest rates to increase consumption and growth.

Or else "life is going to be one big shit sandwich and we all have to take a bite." - From Full Metal Jacket

[Maple]

32. And how likely

is any of that to happen?

Even ONE of those things?

[MrPrax]

33. Current Economies have nothing to do with economy

The rationale of the various regimes is thus:
Promote debt/wealth/power and stick it to the middle income earners (Tax) to pay the load, then appeal to them as a 'voter' on the promise that you will 'solve' the problem...
Increase more debt, more burden on middle income earners...while the whole time alleviating 'responsibilities' to corps, tariffs and keep suggesting their problems would be solved by MORE tax cuts...Keep scaring the middle income earners (tax, schools, medical, roads, income loss through restricted trade)

Essentially you create a middle class that votes and an underclass that can't bother--it feeds it own logic.

The system creates a steady stream of rightwing supporters (san-coulottes, petit-bourgois, treadding de eau,)...

The measure of a good democracy is how many people who vote and how many have TV...

The rest get pepper sprayed...

This program has been going on for awhile...

Forget about the 50s and 60s...everyone WILL have 6 careers in the new economy (if their lucky)

[gdwill]

37. Higher corporate taxes work for whom and for what?

For whom: Those who don't work as hard or as smart, or don't work at all.

For what: The victory of a system based on need, and funded by theft.