Failed experiment: Misplaced faith in tax cuts and other economic myths are destroying the country

[Newsjock]

Source: San Francisco Bay Guardian

For three decades we have conducted a massive economic experiment, testing a theory known as supply-side economics. The theory goes like this: Lower tax rates will encourage more investment, which in turn will mean more jobs and greater prosperity — so much so that tax revenues will go up, despite lower rates.

... For the past decade, we have doubled down on this theory of supply-side economics with the tax cuts sponsored by President George W. Bush in 2001 and 2003, which President Barack Obama has agreed to continue for two years.

You would think that whether this grand experiment worked would be settled after three decades. You would think the practitioners of the dismal science of economics would look at their demand curves and the data on incomes and taxes and pronounce a verdict, the way Galileo and Copernicus did when they showed that geocentrism was a fantasy because the Earth revolves around the sun (known as heliocentrism). But economics is not like that. It is not like physics with its laws and arithmetic with its absolute values.

... How long does it take to conclude that a policy has failed to fulfill its promises? And as you think of that, keep in mind George Washington. When he fell ill his doctors followed the common wisdom of the era. They cut him and bled him to remove bad blood. As Washington's condition grew worse, they bled him more. And like the mantra of tax cuts for the rich, they kept applying the same treatment until they killed him.

Read more: http://www.sfbg.com/2011/04/12/failed-experiment

[applegrove]

1. Supply side economics in my economics class was about moving the aggregate

supply curve down because it had suffered a supply shock in the 1970s due to Oil. It was about hyperinflation not about jobs.

[Confusious]

3. clarification please.

increasing demand to lower supply or lower demand to increase supply? I'm not much into economics.

Or was it some other thing? supply side is ass backwards to me. if I have a supply of shit sandwiches, people will buy them because I have a supply!

I suppose with a little marketing....

[applegrove]

4. The Supply curve in the model is bend like an elbow. It is the aggregate supply.

To tell you the truth I can barely remember this. An oil shock bumped the whole aggregate supply curve up. So you cannot find the same equilibrium as you had before. Moving the demand curve (say by government spending) will not result in the same old equilibrium. You have to let supply costs fall on their own and have that lead the recovery. I just don't know how the GOP apply tax cuts to this. I'm sorry I'm not much help. And anyway, I don't think we are in a supply shock situation what with lower costs for stuff and low inflation. If you can figure out what I am talking about let me know okay?

The hyperinflation that resulted from the oil shocks we don't get anymore because economists figured out in the 1980s that if you just slow down an overheated economy with higher interest rates you have no stagflation or hyperinflation. Think the 1991 recession. So we have solved the inflation thing...except now it seem the rich have found a way to have the little people fighting inflation on their own (like right now) while the rich get richer. That is a question for today. I wonder how that would look on a graph?

[mindwalker_i]

2. Do you honestly think that Republicans actually believe

what they're saying? They want to cut taxes for the wealthy because they get a return on it in the form of campaign contributions. Whether it helps the country isn't part of the equation.

[retread]

7. We Have a Winner!! However, the return is not just in campaign contributions.

[upi402]

5. Reaganomics FAILED but he's being deified by the media

Blame the media, all else follows from their propaganda.

[JCMach1]

6. Capitalism will never solve the healthcare crisis in America

A good percentage of the rest of the world knows this.

[goodnews]

8. Economics is a bullshit subject as it is taught in the US.

It is a faith based quasi-religion designed to make the rich richer.