Lets make fun of Obama while he is still relevant.

[Bob Butler 54]

(12-04-2016, 10:27 AM)Mikebert Wrote: Warren, I do not understand why you seem to want a much bigger federal debt/GDP ratio.  It appears you think if top tax rates are cut there will be an investment boom and strong economic growth--what I call the "Field of Dreams" school of economics (if you build it (invest) they (jobs) will come).  Why do you think cutting taxes will incent people to put their cash at risk.  Do you think I am sitting in cash because I don't want to have to pay taxes on the potential profits I could reap if this finally comes true?  Or is it because of the scary high market, with a much greater probability of much lower prices before Dow 36,000 becomes reality?

Do you think businesses need to be incented in order to invest in profitable opportunities?  Think about it, a 10% ROI from a good investment taxed at 50% still gives 2.5 times the gain from a 2% Treasury return taxes at 0%.  If tax cuts only incent investment when the supply of investable funds is limiting.  If funds were limited companies would not have the large amounts of cash they have on hand, nor would they doing this.

No tax rate will incent companies to take money safely stashed in Treasuries to put them into bad investment (i.e. those that will likely lose money).

I also see the risk of blowing bubbles.  If one moves money from Main Street to Easy Street, if Easy Street runs out of good investments, they typically decide that something like dot com stocks or housing debt is a neat investment.  You've got to put the money somewhere, and Treasuries just don't give sufficient return these days to seem sexy.  Thus, various pieces of paper are given high value due to the laws of supply and demand, not due to the value of what they represent.  Eventually common sense hits the markets and the bottom falls out.

To me, supply side can be helpful if there is a lack of money available for investment.  Currently, interest rates are low, the division of wealth is large, and it isn't particularly difficult to float a new stock.  It isn't a question of whether supply side is better than demand side, it is a question if the economy is in a place where either type of stimulus would be helpful.  At the moment, there is no lack of funds available for investment.  With unemployment as low as it currently is, I'm not pushing for demand side either.

Economic policy ought not to be ideological, where one sort of policy is considered standard by a given party regardless of the state of the economy.  Folk ought to respond to reality rather than double down on ideology.