Grasping Reality
And now it is official: the official non-Trumpist Republican line is now that all of that stuff about the tax "reform" bill delivering materially faster economic growth in exchange for widening inequality was just boob bait for the bubbas.
Brad DeLong | Professor of Economics, UCAL Berkeley
5 comments:
So Delong is saying economic growth will not increase?
So Rubio says this: "Some of them will be forced, because they’re sitting on historic levels of cash, to pay out dividends to shareholders. "
Then Delong agrees with him...
So Delong thinks that dis-saving doesnt result in higher economic activity?
Like the underfunded state/municipal pension funds who own these equities will receive these dividends will not then spend that income $4$ as they will not have to divert those $ from current tax revenues to make up pension shortfalls $4$?
So Delong thinks that dis-saving doesnt result in higher economic activity?
Like the underfunded state/municipal pension funds who own these equities will receive these dividends will not then spend that income $4$ as they will not have to divert those $ from current tax revenues to make up pension shortfalls $4$?
This is the thinking behind supply-side Laffer economics. Tax relief is assumed to go entirely to spending — consumer purchases and firm investment.
However, most of the people receiving the relief are in the top tiers and their saving desire tends to greatly outweigh their spending desire, so most of the windfall would be invested financially, which is another form of saving.
If so the tax relief would drive asset prices and not the real economy.
The question is the ratio of saving to spending and historically, the well-to do are savers in one form or another.
So we'll have to wait and see.
"This is the thinking behind supply-side Laffer economics. Tax relief is assumed to go entirely to spending "
Not endorsing Laffer but I dont think they think NONE of it gets saved ...
A good portion gets spent ... I have a friend who doesnt save and he was getting the tax on ACA which is now cancelled... its like $800 he is going to spend on something ..
The big get in this thing is that it eliminates the incentive for the multinationals to save offshore to avoid taxes...
Like Warren says "if somebody saves then we cant buy all of our output".... so you want policy to reduce the propensity to save...
Delong just looking like a pure politician here...
That's true, Matt, but the supply-sides assume it all goes to spending. It doesn't, and there are historical trends regarding spending and saving that show that different cohorts on the income and wealth scales act differently.
Transfers to the lower levels go to consumer spending and paying down debt, while at the higher, they go in greater proportion into portfolios.
Supply-siders assume that since S = I, increased saving causes firm investment. That is a mistake. And a lot of the projection of growth is based on it.
It's virtually guaranteed that any tax windfall to government will be allocated to increased military and related spending. That would be stimulative but hardly in a constructive way.
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