Bush Tax Cuts on the Wealthy

Bush cannot justify extending the tax cuts on the top 2% based on job creation. His record has been the worst since Hoover. Under Bush there have been a total of 900,000 new jobs created over 5 years. This information can be found at the U.S. Bureau of Labor Statistics at:

BLS: Private Jobs

Have the tax cuts really helped? Very little, if any.

The rationale for the Neocon-Artist tax cuts has always been dubious. Though there's some theoretical basis for the tax cuts, the reality does NOT support their tax cuts.

Tax cuts put more money back into the private sector of the economy. Part of the money goes back into the economy as either consumer spending or capital investment. (This is if imports and exports are excluded.) The part that goes into savings does not go back into the economy. Savings do NOT cause economic growth. In fact, increased savings shrinks the economy (unless 100% of that savings is invested.)

Whether the tax-cut money goes into consumer spending, capital investment, or savings depends on what tax bracket receives the tax cuts. The more the tax cuts are slanted toward the affluent, the more that goes into capital investment and savings. The more the tax cuts go to the less affluent, the more that goes into consumer spending.

Cutting taxes exclusively on the non-affluent would stimulate consumer spending mostly. Cutting taxes exclusively on the affluent would mostly increase capital investment or savings.

If tax cuts were overly slanted toward the affluent, and consumer spending did not increase any, the tax cut money would go disproportionately more into savings than to capital investment. This is because consumer spending is necessary to create demand for capital investment. Consumer spending is necessary to create demand for the production that capital investment would facilitate.

If high-income tax cuts cannot be productively invested, they "leak" out of the economy as savings. Thus, the degree of economic stimulation from tax cuts is determined by how much of it is recycled into the economy. The benefits of the tax cuts are greater if given to those who will SPEND it, rather than save it. (Again, this explanation excludes money "leaking" in or out of the economy through foreign trade.)

The benefits of tax cuts on the wealthy is to create more capital to increase investment. The benefits are limited by investment opportunities. These investment opportunities are limited by anticipated returns on that investment. Anticipated returns are determined by anticipated demand for the production the investment facilitates. Demand for production is created by consumer spending, and to a lesser extent by demand for capital equipment. (However, demand for capital equipment is also limited by consumer demand for the production of that capital equipment.)

The markets are currently "glutted with capital" according to the Wall Street Journal. Other sources maintain that the markets are "awash with cash." Earlier this year Warren Buffet stated there was a lack of investment "opportunities." All current indications are that there is abundant investment capital at present, but a lack of places to invest it. This argues against any further benefits to our economy by further tax reductions on the "investor" class. There is simply more than enough investment capital. In contrast, reducing the tax burden on consumers would help utilize the already over-abundant amount of investment capital.

unlawflcombatnt
EconomicPopulistCommentary
_________________
The economy needs balance between the "means of production" & "means of consumption."

rich hoarding their dough and looking for 25% returns on their investment.

Investment does no good whatsoever unless someone can buy the products the investment facilitates.

unlawflcombatnt
EconomicPopulistCommentary
___________
The economy needs balance between the "means of production" & "means of consumption."

Of course Bush isn't smart enough to figure that out on his own....

Income for the top earners has also increased significantly, providing even less justification for extending tax cuts on the top 2 %. Below is a chart from the Congressional Budget Office showing the change in take-home income through 2002.



unlawflcombatnt
EconomicPopulistCommentary
___________
The economy needs balance between the "means of production" & "means of consumption."

That's the smart way for an employer to stay in business long term. This anti-worker shit is short-sighted and selfish on the part of craporations.
They'll end up shooting themselves in the foot, but only after they've stabbed everyone else in the back.

If all corporations cut costs by reducing wages they are reducing the dollar value of the market they're selling their goods to. This seems almost too obvious to mention, yet Right-Wingers try to deny this reality.

If an individual business reduces its costs through wage reductions it will increase its own profits. However, on a larger (Macroeconomic) scale this is NOT true. If aggregate labor income decreases, there's less money to purchase production. The savings in labor cost are never passed on to consumers 100%. Thus the loss in labor (and consumer) income is always greater than the price reductions. As wages decline, profits will increase only until wage decline is great enough to reduce business revenue. Then profits will decline with wage declines.

At present the astronomical increase in consumer borrowing has allowed business revenues to increase despite declining labor-consumer income. Thus, the effect of wage reductions has been obscured by the increased amount of borrowed money that is supplementing wage-financed consumer spending. This is definitely not a sustainable path, as consumers will hit a limit on how much they can increase their spending through borrowed money. It appears we are approaching that limit at present. When that limit is reached, our economy will sink.

unlawflcombatnt
EconomicPopulistCommentary
___________
The economy needs balance between the "means of production" & "means of consumption."

I'm just thinking of the kind of industry I see coming from Germany, Sweden, etc - for example: those giant earth boaring machines they use to make tunnels with. Or the giant ships made in Korea I see on the Discovery channel used to transport oil rigs.

I believe they're referred to as "capital goods" - the things used by industry to make the final products for consumption.

Trouble is that we no longer make THOSE either.

My child was quite young and my ex was using the courts to harass me...hence, I could not work a "normal" 9-5 job.

There were older apartments closeby, with working class people. They tipped well, and were very courteous.
Then there was an older area of single family homes on wooded lots, with people who had plenty of money. Those people would turn off their porch lights and claim I was late so they received a discount. They tipped quite poorly, if at all.
In particular, I remember a Christmas Eve when the Superbowl or some such huge game and I delivered 3 large pizzas to a home in the torrential rain. I was totally stiffed.

The entire day was horrendous, and I went home to get ready for Christmas Day only to find my basement flooded from the torrential rains. I quit that job the next day. I had only made $2.00 in tips for working 5 hours. The IRS assessed me more than what I made!

The gist of what I am saying is the rich do not spend their money.
Money trickles up, NOT down.

..I guess we all have stories of a nightmare job we've tried..

But wow.. to come home to a flooded basement on top of it all!

I'm sure glad those days are behind you now! :hug:

The good news is that I am officially divorced from that idiot.

The bad news is like many others under this administration is that I am unemployed.
Sorry, I know your intentions were good and maybe I should have mentioned that aspect, but I did not want to be totally depressing.

Unemployment told me I should be able to get benefits again starting in mid February. It will only be for probably two months, but that is at least something.

I have not been able to get even an interview for 6 months. I can't do many jobs since I have a bad knee needing a knee replacement. No insurance, of course.

Ah well, there are many others in worse shape than I am. Something is bound to turn up eventually.

You'd put some real spending money in MILLIONS of hands,not just 1/2 of 1 percent that really PROFIT from Bush tax cuts. Tax cuts for the wealthy do NOTHING for the economy,there's not a large enough percent for it to ever work.

I completely agree. Money needs to be put in the hands of those who will spend it, not those who will "invest it" in foreign countries to create jobs in foreign countries.

unlawflcombatnt
EconomicPopulistCommentary
___________
The economy needs balance between the "means of production" & "means of consumption."

kick, kick...