Presidential election, 2016

[Bob Butler 54]

(01-11-2017, 08:04 AM)Odin Wrote:

(01-10-2017, 09:22 PM)Warren Dew Wrote:

(01-10-2017, 05:53 PM)Odin Wrote: Wait "supply-side theory" is a credit theory? I thought it was a claim that supply was more important than demand as a limit to economic growth, which is why it is considered BS on the left since the demand side has been dominant since the Industrial Revolution? I always hear it claimed to be a mere justification for cutting taxes on the rich.

Sorry, "credit" is being used as a verb in that sentence.  To put it another way, I dismissed supply side policies until I was 24 and had seen them work.

But no, it's not a claim that supply is more important than demand, and it's definitely not a justification only for cutting taxes on the rich; that's propaganda from the left.

Here's a simple introduction.  There are several ways for the government to stimulate the economy.  One is monetarist stimulus, where the central bank prints money.  The other is Keynesian fiscal stimulus, where the government runs a deficit (and it's assumed that the central bank covers the deficit).

We'll ignore pure monetary stimulation for now, and just look at fiscal stimulus.  It involves running a deficit.  Keynesian theory says it doesn't matter how the government runs the deficit.  From a practical standpoint, the government can run a deficit in two ways:  it can increase spending, or it can decrease taxes.

If the government runs the deficit by increasing spending, it is stimulating demand - the spending is demand for goods and services - and so that's demand side fiscal stimulus.  If the government runs the deficit by decreasing taxes, it is stimulating supply - the decreased taxes decrease the cost of supplying goods and services - so that's supply side fiscal stimulus.

Supply side economics is about what the consequences of supply side stimulus are, and how they differ from demand side stimulus.  For example, demand side stimulus is inflationary and supply side stimulus is deflationary, which has implications for when they are most appropriately used and how they are most appropriately coordinated with monetary policy.

The purest forms of supply side tax cuts are for everyone who pays taxes:  examples are the Bush tax rebates of 2001 and the bipartisan temporary Social Security tax cut from 2011-2012 inclusive.

The whole "for the rich" thing is a red herring that is pushed by various factions for political reasons unrelated to economic theory.  The left pushes it to try to prevent the use of supply side stimulus since they'd rather have demand side stimulus to increase the size of government.  And certain segments of "the rich", specifically investors, push the myth that it's about capital gains tax cuts because they want the right to focus the tax cuts on their taxes rather than on taxes on the general population.

Thanks!

I'm happy to see Warren put up a clean summary of his views.  I just wouldn't confuse Warren's viewpoint, however much or little merit it might have, with what you read in the main stream press or hear from politicians.  While the above is a respectable position, it is not a good match for how others talk to everyman about economics.  Few have put as much effort into economics and politics as Warren, so most reporters and politicians don't try to express the above.  Judging from the comments of some real economics guys, an awful lot of politicians and press aren't just talking down, they really believe in the everyman version of things.  In short, they haven't a clue.

There are a couple of questionable motives involved in the above.  One suggests that the left wants to increase the size of government rather than provide effective services that will please and attract voters.  I'd consider this motivation to be propaganda from the right.  This isn't to say there aren't empire builders in the federal bureaucracy.  There are.  This isn't to say that the empire building got way out of hand towards the end of the Great Society era.  Leave any party and philosophy in charge for too long and it becomes corrupt.  However, the typical blue guy has no great interest in bloating this or that bureaucracy.  They just want results.  If I were starting some sort of mythical common sense party, I'd make trimming any bloat a non-partisan goal that ought to be welcomed from both left and right.

There is also a view that the nature of the deficit doesn't matter.  Some propose that the blue dislike of tax breaks for the rich is just propaganda, with no economic truth.  While this might be true in Warren's understanding of things, I disagree.  If the corporates can already get enough investment money to keep their companies afloat, if the investment class has enough money to make good investments, and extensive supply side stimulus keeps being poured into the top of the economy, the investment class ends up making bad investments, dot com stocks, housing debt, because you have to put the money somewhere.  The result is often a bubble and a bust.  Supply side stimulus can be over done, should be a part of a balanced policy.  It should not be pushed for the sake of pushing it any more than you grow a bureaucracy for the sake of bigger bureaucracies.  There come times to stop stimulating and buy down the deficit.

On an entirely different front, I posted recently about my prior exchanges with a Christian Fundamentalist.  As with many world views, his way of looking at things involved basic truths which were unquestionable.  In this case, the literal truth of the bible is a good example.  He also had blind spots which had to be maintained as otherwise his basic truths would fall.  A good example for fundamentalists is the rejection of evolution.  You just have to reject it, or one's world view collapses like a house of cards.  The amount of doublethink involved in denying evolution seems quite absurd to those with different values systems.

More recently I had an exchange with a modern Communist.  Again, there were basic unquestionable principles, that revolution was the way to change cultures, that said revolutions come in a given order.  Again, we got involved in a blind spot.  To cling to classic Marx, he seemed to think he had to deny the famines that occurred under Stalin and Mao.  Again, the amount of double think and twisted logic involved was quite clear to most everyone not a Communist.  It is fairly easy to see the other guy's blind spots, sometimes impossible to perceive one's own.

After watching Mikebert's posts for many years, I have him pegged as having a scientific world view.  He is very much into data points and math.  I was pleased and amused watching his recent economic exchanges with Warren.  I haven't got the economic background to match Warren in the details of an mathematical economic exchange, any more than I could out Bible quote the Fundamentalist.  The core of my worldview and my areas of study center elsewhere.  However, what I saw was someone hitting one of the other guy's blind spots.  Even with two people whose view of truth was deeply involved in numbers and data, there was an inability to communicate.

Given my evaluation of the two, that one has scientific values, the other political, I can come to my own conclusion about whose blind spots were the source of the problem.

Eric?  He's centered on spiritualism.  Different things are important to him.  He's not going to be able to out Bible quote a fundamentalist either, or out number crunch a scientist.  We all have strengths and weaknesses.  It's much easier to see the other guy's weaknesses than one's own.