Back to the Seventies and Eighties. Roberts, a former assistant secretary of the Treasury, reports on the history and politics of supply side economics. Many Tidbits you probably weren't aware of, or had forgotten about.
Counterpunch
What is Supply-Side Economics?
Paul Craig Roberts | former assistant secretary of the Treasury
4 comments:
How does his claims jive with the claim that deregulation of natural gas is primarily what cured the 70s stagflation?
JK they dont...
Here are some beauties from this guy here:
"High tax rates mean that leisure is cheap in terms of forgone current earnings–thus there is less labor supply–and current consumption is cheap in terms of foregone future income streams–thus less savings for investments."
S=I so of course just increase S and you get more I ! Brilliant!
"Simultaneous inflation and unemployment meant that the federal budget would soon be out of control. In those days Congress actually worried about such an outcome. "
Yes "we're out of money!"... LOL!
"The solution, I said, was to reduce the marginal income tax rates across the board."
Never mind that the additional net income to the high income cohort has to be put in Treasury securities accounts or the govt cannot spend in the first place!
etc..
Supply side math doesnt work... govt has to maintain a positive balance in the TGA to be able to spend... if they cut the top marginal rates and expect to maintain previous govt spending flows, then an amount of previous savings that equals the difference between the previous spending flow and the now reduced receipts flow has to be put into Treasury securities (ie "from the checking account to the savings account") and the marginal tax cut is saved in the Treasury securities accounts and is a leakage that exactly equals the additional net income created by the tax cut.... ie "rich get richer" and NO effect on consumption spending...
Nowhere here is this guy mentioning what happened to top-line govt spending during this era.... I guarantee you it went WAY up and created the increase in economic activity during this time of so-called "supply side" or whatever...
rsp,
During Reagan years, US GDP roughly doubled from $3 trillion to $6 trillion. Interest rates fell, inflation fell, gasoline lines vanished and 18 million jobs were created as the economy boomed. Probably no causality though with regard to tax policy in the 1980s. Best part was that the Soviet Union raised the white flag without the US firing a shot.
MMT argues that the power of the state to tax and thus reduce the supply of currency is what gives the currency it's value.
Supply Side argues that cutting taxes can create demand for currency because it raises the after tax return on capital. I think this is what happened during the 1980s and the very strong US dollar despite large budget deficits lends support to this view.
I think that depending on the circumstances, both of these arguments can apply although probably not at the same time without canceling each other out.
How does his claims jive with the claim that deregulation of natural gas is primarily what cured the 70s stagflation?
If you notice, his solution was based on Uncle Miltie's QTM, were increasing saving supposedly causes greater investment based on the wrong assumption that banks lend savings.
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