(11-10-2011 03:30 AM)rice09 Wrote: (11-09-2011 07:57 PM)Owl 69/70/75 Wrote: I'm glad you noted partisan sources and acknowledged that the claim is up for debate.
What is clear is that there have been no tax RATE cuts. If you are aware of any of those, please advise. None of your links would indicate tax rate cuts, and I'm pretty sure there have been none.
Does cutting the employee contribution to social security from 6.2% to 4.2% count? If you look at total federal taxes paid, I would think that such a cut is effectively about the same thing as cutting the income tax rate by 2% on all pay below $106,800. In fact, for the average person, it ought to be a tad better, since income tax is net of deductions, whereas SS is paid on all pay.
OK, I suppose technically it is, but it does not have the effects you are typically trying to achieve tax cuts, which generally foster long-term change rather than short-term change.
Would you expect to see many people changing behaviour because of it?
Would you expect to see people investing more because of it?
Is it permanent?
I think it's more a gimmick than anything else. I think it's a mistake. And from what I can tell, both parties pushed it, so it's a bipartisan mistake.
It's mainly an attempt to spur consumption at lower income levels, which is a different impact from what is normally expected from tax cuts. It also hastens the day wen social security will become insolvent. It's far more an attempt to spur consumption than investment.
I see a very different problem from what most Keynesians see. Keynes himself saw the problem, but most of his followers don't seem to. We try to deal with every problem by stimulating consumption. Keynes said you run government deficits and stimulate consumption when times are bad, but you then run government surpluses and stimulate investment when times are good in order to put the economy back into balance. You smooth out the economy by filling in the valleys and leveling the peaks. Unfortunately elected politicians love to try to raise the valleys, but they don't like taking the tops off the peaks. Eventually you reach a point where demand stimulus no longer works. Keynes recognized it but didn't really want to deal with it, saying his famous line, "In the long run we're all dead."
I think we've reached the long run, still alive. Krugman and the neo-Keynesians running the country would argue that we're not, but they're more politicians than economists. We've had the highest rate of consumption and lowest rate of savings and investment in the developed world for 50 years. We've seen a steady stream of jobs overseas. We are the largest importer in the world, so much so that our trade deficit is larger than the combined trade deficit of the 100 or so net importers COMBINED. We are the largest debtor nation in the world, with huge private debt on top of a federal debt that approximates our annual GDP. We've tried several attempts to "stimulate" demand, and all have been pretty feckless.
I realize that mine is very much the minority opinion at this point. But the opinion that Joe Paterno was running anything but a squeaky clean football program would have been very much the minority opinion a week ago.
