hi therealsourpatchninja just thought i’d try to clarify a couple of the areas you were having difficulty with
Now, I’ve never understood tax cuts. They’re meant to be an economic stimulus of sorts based on the idea that if people can keep more of their own money, they will have more of that money to spend on goods/services, thus boosting the economy. This idea makes sense to me, but they haven’t seemed to be working. I believe the problem is in the structure of the tax cuts, that is to say that they’re too heavily focused on the rich, so much so that it’s actually hurting us. Yay trickle down economics!
tempting to believe your analysis but look at it from a couple of different points of view.
some economists (called Keynesian after the first proponent) believe a dollar spent by one economic actor can be spent by another economic actor and have the same effect. that might be why tax cuts might not be working.
other economists try to calculate how effectively different economic actors spend their money and show that a tax cut gives money to people so they can purchase the goods and services they actually need rather than the ones the government guesses they need and thus this extra efficiency should boost the economy as you describe. however, if other economic actors are also reducing their spending then the effect of the boost might be completely, partially or overwhelmingly counteracted. and that might be whhat happened with the bush tax cuts
in any case making a statements like ‘it focuses on the rich’ and ‘yay etc etc’ only serves to alienate the rich who read your blog and those who look for serious analysis by people who pose questions of themselves
Anyway… the argument behind this “tax cuts for the wealthy” strategy is that jobs are made in the private sector. If a business owner wants to expand their business, they have to do it with their own money. More money for business owners = more jobs available. The main problem with this is that it just doesn’t work; that’s not how businesses hire. They create jobs based on the market that they’re involved in. Companies hire when they need new employees, not because they want to create a job for someone. They expand when the market shows them that people like their products and that there’s a niche for them. If a business owner is getting tax cuts but sees that their business isn’t getting new customers, they will just hold on to the extra money for themselves.
jobs exist in the piblic sector too and so are in fact made there
businesses can expand with borrowed money as well
you’re right: more money in a business’ bank account will only translate into new jobs if the business sees a need for it. but you’re not totally right when you go on to say: ‘when the market shows them etc’. the businesses which create the jobs will look to innovate, will look to use the extra $6k they might have as a result of that tax cut to hire someone for two weeks to redesign an element of the product or service
the problem is however - the year after the tax cut, the business may no longer see the $6k as needing to go to the business. it might take the tax cut as given for eternity (as a decade it seems to be) and it no longer boosts the economy. so ten years ago it boosted the economy. now, if they are taken away and the spending given back to the ‘ineffective’ public sector there will be a negative impact to the size of the economy.
the bigger problem is that we measure our virility as a nation by the size of our gdp. we don’t look at whether it’s only that big because we pump it up every day. we manipulate it. we count things which harm us as adding to its size.
Tax cuts should aim for a bottom up approach, rather than a trickle down one. Want businesses to hire more people? Well those businesses need people to buy their products. Who are the majority of consumers out there? The poor and the middle class. More money in their pockets means more money going into businesses when they buy their products. This would allow companies to hire more people and expand to handle the new business they’re getting.
you sound fired up on this. good. tell it to your representative. oh wait, the house already passed what you think is the top down approach again (is that the 11th year now?)
okay - stillgo see your representative. still make your impassioned plea if this time around they voted for the extension. congratulate them if they did not. and in either case repeat the above paragraph. but only it. and after your 30 seconds are up either continue with more impassioned - but informed this time please - words or turn and leave. your choice.
Tl;dr: Trickle down economics don’t work. Bottom up economics are a better idea. A pyramid is most stable when placed on its base, not when trying to balance on its point.
unless it is spinning very quickly. while most live in ignorance it looks like the top spins very quickly. but as we educate ourselves and others and dig down and analyse we actually seem to see it slowing down. is it really slowing down? or is it just how closely we are observing that makes it seem so? and if it does slow down does it become more unstable? or do we have time to make it spin in a special groove? do we know how to give it a nudge so the spin has the minimum required pace for stability.
the pace i’m talking about: the pace of growth in a world obsessed by it
the groove i’m talking about: a place large and deep enough that a stationary upside down pyramid would not topple
the stability i’m talking about: the unrest and violence as the spinning slows wihtout a groove and the top begins to wobble before falling
think about what you want and plan for it
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