McCain's Supply Side Tripe

[Zynx]

In his recent economic proposals, John McCain has proposed the same tired old supply-side B.S. that the Republicans have been spewing for years. This is the idea that tax cuts create such rapid economic growth that they more than make up for their revenue loss.

*Snip*
McCain is in favor of extending the Bush tax cuts, which are set to expire in 2010.

The Center on Budget and Policy Priorities has projected that by extending the cuts, which McCain originally opposed, and including the additional cuts McCain has proposed, the deficit for 2013 would be somewhere around $439 billion to $445 billion.

McCain disputes those figures because "they're static numbers -- not saying that revenues will increase with a strong economy and with low taxes. That's the difference, and I respectfully disagree."
*/Snip*

http://www.cnn.com/2008/POLITICS/07/08/mccain/index.html

The truth is completely contrary to what he suggests. The following is government receipts, ex-Social Security taxes though the general results hold almost exactly the same with them as well, during the Clinton years, the George W. Bush Years, and the Reagan years.

Clinton Years
Receipts 1993: $842 billion
Receipts 2001: $1.483 trillion
Growth: 76%

Bush Jr. Years
Receipts 2001: $1.483 trillion
Expected 2009: $ 2.086 trillion
Growth: 40.6%

Reagan Years
Receipts 1981: $469 billion
Receipts 1989: $727 billion
Growth: 55%

Source: Congressional Budget Office

As you can see, Clinton had much faster growth in general government revenues following a tax increase than Bush and Reagan did following tax cuts. This is also even though Bush and Reagan had higher rates of inflation than did Clinton which has the effect of boosting government revenues artificially. None of these results should surprise people, but we need to make the point again and again that supply-side economics is a bunch of B.S. and it has empirically been proven to be as much. This is an ideological debate that we need to have in order to beat McCain in this election, and Republicans in general in future elections. They keep repeating the same tripe McCain said that I pointed out earlier and if it is not refuted, people will begin to believe it.

[AdHocSolver]

1. Tax cuts do NOT guarantee increased economic activity. Government spending does, by definition.

Those who receive tax cuts could merely stuff their mattresses with the extra money which would do nothing to boost economic activity. Many of the wealthy use their windfalls to speculate on the stock market, which artificially bloats stock prices and further boosts their wealth.

When the government spends money, that boosts the economy automatically, as this creates jobs, and the workers pay taxes. Since income taxes return more revenue to the government than capital gains taxes, the government comes out ahead as well.

The trick is for the government to spend the money in such a manner as to promote a multiplier effect for economic activity. Spending on education, technological research, and rebuilding infrastructure will promote further economic activity. Spending on warfare and weapons systems will not.

During the Great Depression of the 1930's, it was President Franklin Roosevelt's New Deal of corporate regulations and job creation to build the country's infrastructure that prevented a total collapse of the U.S.

We need to end the Iraq occupation and implement a New Deal type program to save the U.S. economy.

[stevebreeze]

2. actually Reagan increased taxes far more then he cut

by the time he was out of office something like 80% of the population had higher taxes. The ones with lower taxes surprise surprise were those on the top of the income ladder.
Much of this due to the huge SS tax increase, but also other changes like removing deductions for credit card interest expenses and taxing unemployment insurance.

[Zynx]

3. His policies were supply-side nonetheless.

Also, as a percent of GDP he did cut taxes, though you are correct that most people faced higher taxes.

[Jim__]

4. It's difficult to refute republican talking points ...

... mostly because they're repeated by the media over and over and over. The internet is a powerful and useful tool; but it still can't compete with the broadcast media in getting across a point of view.