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Question here please, on the subject of "Tax cuts creating jobs"...

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Lost-in-FL Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 07:13 PM
Original message
Question here please, on the subject of "Tax cuts creating jobs"...
I know it is not true but... anyone knows any study that "proves" that this is possible? I need it for a class!
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gateley Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 07:16 PM
Response to Original message
1. I don't have the proof - but I've heard references to, for example, the tax cuts
during the Bush admin which instead of creating jobs, resulted in a huge job loss over his term.

Others here will be along with help, I'm sure, but there's proof in the numbers.
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Lost-in-FL Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 07:27 PM
Response to Reply #1
3. There are tons of examples stating that it isn't truth...
Edited on Wed Apr-06-11 07:29 PM by Lost-in-FL
but where this idea came from? Milton Friedman?


BTW... thanks for ur response!!
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pinto Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 07:27 PM
Response to Original message
2. I think a good conceptual argument can be made on job creation.
If tax cuts to the top tier (1 - 2%) are expected to create jobs, why do those who support them also say that middle class businesses create the most jobs in our economy. Both *can't* be true.

I think the latter is accurate. The former is a tax cut to people who invest funds, move money around for a return, but don't "create" jobs on any large scale.

Good luck on your class. :hi:
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Lost-in-FL Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 07:31 PM
Response to Reply #2
4. Good point! Thanks for the response.
I promise if I find it, I will post. I think we should know the myth in order to destroy it.
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Motown_Johnny Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 07:38 PM
Response to Reply #4
5. the fatal flaw in that concept is that capital creates jobs, it doesn't

Demand creates jobs.

Companies hire employees because the workload is such that they must either hire more employees or lose revenue.

Hiring more employees simply because they have the money to do so works directly against the fiduciary responsibility of the company's managers. They are obligated to create as large a profit as possible (within the law) and not to expand the payroll unnecessarily.

This is why supply side doesn't work. It completely ignores half of the equation, demand.

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Lost-in-FL Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 08:25 PM
Response to Reply #5
10. Thank you! Great info... I just found exactly what you just said from this article...
http://pages.stern.nyu.edu/~nroubini/SUPPLY.HTM

On Supply side economics. I am not an economic major but liberal studies so I need to get familiarized with this subject.

I always wondered where this "dogma" came from, I have been wanting to see the numbers. There is no empirical evidence for this or at least I have not being able to find. So far this seems to be an argument.
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Curmudgeoness Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 07:41 PM
Response to Original message
6. Sorry I can't help you. I tried. Google search produced
no "study" or "proof" that I could find. I never thought of it this way, but it seems to be apparent that this was just dreamed up by some quasi-economist/government hating economist. I hope you can find something that provides some reason behind this thinking, but it seems to be a theory with no evidence to back it up.

We are living in a test tube on this one.
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Lost-in-FL Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 08:33 PM
Response to Reply #6
13. That is exactly what I have seen so far. nt
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SheilaT Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 07:44 PM
Response to Original message
7. If it were true,
then job growth during the Bush era would have been massive.

Instead, there was actually negative job growth those 8 years.

Under Clinton, taxes were higher, and job growth was some of the best this country has ever seen.

In addition, the stock market goes up in Democratic administrations, and down during Republican ones.
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quaker bill Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 07:59 PM
Response to Original message
8. It can be true, but the antecedent conditions matter
In an economy that is inflationary, specifically because demand for goods exceeds supply and supplies are restricted due to a lack of investment capital to build productive capacity, then a tax cut pointed at increasing the supply of investment capital and increasing the return on investment, could in fact stimulate job creation.

The only time recently that we have come close to this sort of situation economically was the "stagflation" period in the late 1970's. There were some parallels in the economy at the time, but the situation was overdiagnosed and the cure applied by Reagan was excessive. Significant portions of that inflation were due to the oil price shock, and recovery of Nixon's artificial wage and price freezes applied to overcome excess stimulation of the economy from massive deficit spending to fund the war in Vietnam and the cold war arms race.

The reason it no longer works is that we have been pushing this pedal to the floor for 30 years. Trillions in investment capital is currently available in the market and no one is using it. Further the existing manufacturing capacity is underutilized, so there is no need to borrow to build more of it. What is lacking now is demand, so tax cuts pointed at investment are completely pointless and simply shift the little bit of remaining wealth away from those who would actually use it.
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Lost-in-FL Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 08:51 PM
Response to Reply #8
16. My head hurts... lol!
I just have to absorb the theory a bit at the time. Economic theory seems complicated to me and must take it by sips at a time. This republican meme sounds wrong to me even when repubes seem to speak like tax experts perhaps due to their arrogant nature that goes well with Wall Street. Even Bachmann would sound smart talking about Supply side economics in front of a crowd of teabaggers.
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quaker bill Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 10:07 PM
Response to Reply #16
24. The bottom line
Edited on Wed Apr-06-11 10:08 PM by quaker bill
is any adjustment to the economy can work, but each will only work under certain conditions. Some of the conditions are quite rare and so some fixes would be very rarely used. In short, if something is broke, fixing it will help. If on the other hand, something is not broke, then fixing it will make no difference and the effort is at best a waste of time and money, on occasion, "fixing" the wrong thing can actually make things far worse. We are in one of those times.

Republican theory is not "wrong" in essence, it is just the really wrong time to use it. "Supply side" stimulus works when supply is the problem. This condition has been quite rare since the industrial revolution. "Demand side" stimulus works when low demand is the problem. This has been frequent since the industrial revolution.

Since republicans like to think they hinge intellectually off of Adam Smith (if one can call any of this intellectual) their approach makes sense, but in that Smith did his thinking and writing before the industrial revolution, their theory would work better in a pre-industrial society. Unfortunately, we don't live in one of those, but the Republicans are working on it. Perhaps when we are nearly all serfs it will work a bit better, I doubt it, but we may yet see.
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FormerDittoHead Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 08:03 PM
Response to Original message
9. What is the context of this? Is this some "debate" where you were given the position to take?
Is this an economics class or a philosophy / logic class.

What is the professor's intent?

1) see / show how when you look for actual facts, there isn't really any (relevant) evidence to support it

or

2) to prove that cutting taxes is a good way to manage an economy and that otherwise everything that is taught in economics is bullshit and you should just watch Foxnews.
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Lost-in-FL Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 08:31 PM
Response to Reply #9
11. Liberal arts
It is complicated... let's say I have an essay to write and one of my arguments is related with this idea of tax increase equating more jobs. I just need to find out if there is actual empirical evidence... which I cannot find. It seems like empty words cause economists just find that it is the contrary.
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Exilednight Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 08:32 PM
Response to Original message
12. You're going to have to do original research, but as a starting point I would
advise at looking at the time when Bush enacted his tax cuts and follow that with researching unemployment numbers, profits by corporations and median income over the past ten years or so.

To balance your research, I would look at when Clinton raised taxes on the rich and then research the decline in unemployment once those increases were enacted.

The idea was built upon supply side economics as outlined by Milton Friedman.
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Lost-in-FL Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 08:34 PM
Response to Reply #12
14. Yup! Thanks a lot for the guidance! nt
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madinmaryland Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 09:11 PM
Response to Reply #12
20. Yes. The point is that they say if you cut taxes, people will use the money to invest in more
in more businesses and thus hiring more people, which results in more people being hired. In theory, it sounds plausible. In reality, the people getting their taxes cut invest their money offshore or their heirs, thus not contributing to the economy.

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Lost-in-FL Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 09:19 PM
Response to Reply #20
21. Also, the lower the taxes the less government incentives for people...
for education, infrastructure, a better labor force, etc. And if people can't get an education or join the work force, people would not consume thus lowering demand for goods and less demand would mean more layoffs. It only takes a little bit of thinking to see how terribly this assertion is. I cannot believe how repubes take junk economics as a dogma.
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gateley Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 08:41 PM
Response to Original message
15. Rachel just showed this graph on her show --
it's from Paul Krugman's blog in the NYT today. Scroll down and see the unemployment rates since the 1940's and see how "well" we did when tax cuts were implemented. (The red line is what Paul Ryan is predicting his new budget will achieve- essentially zero unemployment). The source for the "un-Ryan" graph is given.

http://krugman.blogs.nytimes.com /

And Krugman would be a great source to get info, too.
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Lost-in-FL Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 08:53 PM
Response to Reply #15
17. That't it!!! Exactly what I needed. Thanks a Super-bunch!!!!! nt
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Brigid Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 08:56 PM
Response to Original message
18. I don't have any references, but . . .
As many have pointed out before, if this is true then where are the jobs? We've been trying this method for 30 years.
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Lost-in-FL Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 09:20 PM
Response to Reply #18
22. Yup! nt
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W_HAMILTON Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 09:07 PM
Response to Original message
19. I compared the state unemployment rates with state corporate income taxes a month or so ago.
There was actually a slight negative correlation, meaning that HIGHER taxes correlated with LOWER unemployment.

At the time, Nevada had a 0% corporate income tax rate, but had the highest employment in the nation.

You can maybe do a search of my posts and pull up the information and for the links to where I got my information from.
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Lost-in-FL Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 09:22 PM
Response to Reply #19
23. Awesome! Thanks! nt
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taught_me_patience Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 10:29 PM
Response to Original message
25. Tax cuts absolutely do create jobs
There are two methods of fiscal stimulus that the government can employ to help the economy... tax cuts and increased spending. Tax cuts are not as efficient because some of that money is put into savings and passed through our consumer oriented economy. It still does create jobs and is very popular because everybody gets to benefit. Direct increased spending is not as popular because the effects are felt indirectly by those not directly receiving the benefit.

Either is only a TEMPORARY stimulus effect to the economy... akin to a defibrilator shock to someone in cardiac arrest. The Bush tax cuts created jobs in 2001 (one of the shallowest recessions ever), but the effect has long worn off.
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Exilednight Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Apr-06-11 10:57 PM
Response to Reply #25
26. Many economists have come to the conclusion that no jobs have been created due to
tax cuts.

Not a single scholarly study has proven that tax cuts create jobs. You'll find some right-wing hacks at policy think tanks who cherry pick information and come to the conclusion that you suggest, but they're the only ones.
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taught_me_patience Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Apr-07-11 12:21 AM
Response to Reply #26
28. Tax cuts spur consumption
which raises demand and therefore jobs. This is proven and taught in economics. You might be referring to supply-side tax cuts which have minimal to no impact on job creation.

Almost all economists will agree that tax cuts for the consumer is good for the economy and will create jobs (in the short run).
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applegrove Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Apr-07-11 12:00 AM
Response to Original message
27. Here is a story today from Canada:
Edited on Thu Apr-07-11 12:02 AM by applegrove
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