You know the answer to that. Tax cuts for the rich don't really trickle down...the money is not spent but rather largely invested in "whatever"...demand leakage. Tax cuts for the poor are largely spent. Tax cuts for the middle class are partially spent and partially tacked away in an IRA, 401K or other savings accounts -- also a form of demand leakage.
"Cutting taxes" is a term that has a wide swath, but seems to have populist appeal. People need to understand just what "tax cuts" mean, and how it affects them rather than just hopping on the populist bandwagon.
wwjd -- You are right on again. The only point I will add is that all of Trump's deficiencies that you outlined were know before he ever ran for president. He was an especially bad businessman and all the traits that made him a bad businessman have also made him the worst president ever.
His one outstanding trait, however, is that he is the world's best con artist...perhaps the best that ever lived. Marco Rubio and others pointed that out quite truthfully in the Republican nomination process. Economists and business people wrote about his shitty business practices and how he stiffed his workers. He was just plain awful at everything. Yet he conned the media, Republicans, some Bernie Democrats, and some 63 million Americans. He deserves a gold medal in con artistry for that.
Carlitos -- We've had this discussion before with respect to demand leakages. I generally subscribe to your (Warren Mosler view) on demand leakages. However, I might want to push back a bit on Mosler's statement:
"So why the ‘demand leakages’? The lion’s share is due to tax advantages for not spending your income, including pension contributions, IRA’s, and all kinds of corporate reserves. Then there’s foreign hoards accumulated to support foreign exporters. And it all should be a very good thing- net unspent income like that means that for a given size govt our taxes can be that much lower. Personally, I’d rather have a tax cut than a policy to get other people to spend their unspent income. But that’s just me…"
Mosler's last part on rather having a "tax cut" should really have a qualifier on it. It depends on how the tax cut is distributed. The reality is the vast majority of taxes in this country are not demand leakages because the vast majority of taxed money is immediately spent on goods and services for the public welfare. State and local sales and property taxes, for example, are essentially PAYGO (pay as you go) to fund all the services that communities need. And now even the Social Security and Medicare programs are essentially PAYGO with the trust funds being drawn down, these also would no longer be called demand leakages (except for the past money that remains drawing interest).
The high federal taxes of the 1950s and 60s that went to building our interstate highway system and other public projects like putting a man on the moon added to our prosperity at that time and kept unemployment low.
I cannot help but observe that the "political winner" of always cutting taxes over the past several decades has resulted in our current dilemma of not having enough revenue to fund infrastructure or other goods and services for the public good. The MMT view would be that deficit spending should be encouraged to make up the shortfall, but can such large deficits really be maintained indefinitely just so the private sector can enjoy low taxes? And if those tax cuts accrue more to the rich and corporations (e.g. Bush tax cuts and Trump tax cuts) don't they result in more demand leakages as the money does not trickle down into the economy? Some is parked in overseas accounts or go to personal savings of the rich. Bruce Bartlett wrote an article in 2013, The Bush Tax Cut Failure. In a few years, he and others will be writing a similar article about the Trump Tax Cut Failure.
Throw in the fact that the deficits and debt have become a political football, and we seem destined to have shoddy infrastructure forever because "we cannot afford" to spend otherwise. I for one have no problem paying higher taxes as long as I can see it being spent for the public good.
The point that I am making and asking: In the MMT view, is there a bottom floor on taxes such that lowering them further is no longer beneficial to the economy? It would seem to me we passed that point already because we cannot extract ourselves mentally from thinking of federal budgets as household budgets. That's the reality no matter what Mosler says about "rather having a tax cut". It perhaps made sense when we had the high tax levels of the 1950s and 60s, but does it make sense now when we are already in a perpetual deficit spending mode and not having the political will to spend on projects for the common good because "we cannot afford it".
Carlitos -- Glad to see Stephanie getting broader exposure. Now she can butt heads with Paul Krugman at the NYT. I read her article and she highlights the pending problems for the next recession. As we've discussed, if Democrats are in power, the Republicans (and some Democrats) will be screaming bloody murder about the debt. But on the other hand as she and others have noted, monetary policy (more exotic forms of QE) have limitations. So fiscal policy may be it...more deficit spending than the Great Recession. That will provide more opportunistic politicizing for many politicians and the public needing to assign blame.
TJ -- Great response.
Chet Ruminski Wrote:
President Ronald Reagan may have cut the top tax rate from 70 percent to 30 percent, starting the wealth accumulation at the top, but it was President Bill Clinton who deregulated the banks with the Gramm-Leach-Bliley Act (GLBA) and the Commodity Futures Modernization Act (CFMA) that forced the middle class deeper and deeper into debt and eventually created the great recession.
Your link didn't provide me with Phil Uhrich's article of interest so I dug it out and noticed that he linked to two articles to make his case, one in the Huffington Post, How Congress Rushed a Bill that Helped Bring the Economy to Its Knees, and the other in the Washington Post, Washington’s Invisible Hand. So for the sake of completeness, I have shown the links in Ulrich's article that he cited, and extracted a few paragraphs (Chet style cherry picking).
With regards to the HP article, Paul Blumenthal heaps the blame on Congress. "In the end, the country would have been better served had Congress not taken the 262-page Commodity Futures Modernization Act, which had trouble passing Congress on its own accord, and inserted it into a bloated 11,000 page conference report when no one was looking. If ever there was a case where Congress should have given more time and listened closer, this was it. Now, we’re all paying for it."
From the Washington Post article, "in 1999 Bill Clinton signed the Gramm-Leach-Bliley Act, a bank deregulation bill that swept away a Depression-era law known as Glass-Steagall. The new law had such a chorus of bipartisan support that it passed the Senate 90-8".
"The current financial crisis is frequently called the worst since the Great Depression. And Gramm-Leach-Bliley is often cited as a cause, even by some of its onetime supporters. Yet the criticism is often vague, which means that anyone trying to understand the causal chain — how the end of Glass-Steagall led to the end of Lehman Brothers — will have a hard time doing so. To many banking experts, the reason is simple enough: namely, that the law didn’t really do much to create the current crisis. It is a handy scapegoat, since it’s easily the biggest piece of financial deregulation in recent decades. But one act of deregulation, even a big one, and the absence of other, good regulations aren’t the same thing. The nursemaid of the current crisis isn’t so much what Washington did, in other words, as what it didn’t do."
"...But surely the bulk of the blame lies with the policy makers and regulators who were on duty while the housing bubble inflated and Wall Street went wild — the Bush administration and Alan Greenspan’s Federal Reserve. Their near-religious belief in the powers of the market led them to conclude that the mere fact that a company was willing to make an investment made that investment O.K."
Just adding a little context to Chet's pervasive "Bill Clinton blame game".
I've written about this before, but as George Lakoff says, Trump knows exactly what he is doing to control our brains. From Lakoff's interview in AlterNet:
"Tump is very, very smart. Trump for 50 years has learned how to use people’s brains against them. That’s what master salesmen do. There’s a certain set of things they do. The first is repeat. Advertisers know this. You turn on your TV, and the same ad comes on over and over and over. The effect on the brain of repetition is that when you hear something it’s understood through the neural circuitry in your brain; it has to become activated. The more it’s repeated, the more that circuitry is activated, and every time it’s activated the synaptic connections become stronger. What that means when they become stronger is two things happen. One, they’re more likely to fire — it’s easier to get those ideas out there if they’re firing — and two, if you hear them often enough they become part of what’s fixed in your brain. They become part of what you naturally understand, and you can only understand what your brain allows you to understand.
"Repetition is a way of changing people’s brains. What Trump was doing all through the nomination campaign was that every day he managed to get on TV, and he would repeat different things that activated the same moral framework, and it really worked. In addition you have particular frames that were repeated: “Crooked Hillary,” “crooked Hillary,” “crooked Hillary,” over and over. There wasn’t anything Hillary did that was crooked. But he kept saying it until people believed it. And they believed it because it was heard enough times to strengthen the neural circuitry in their brains. It wasn’t just stupidity. It’s simply the way brains work."
Trump is a master con artist and what he doing now with the Mueller investigation is raising doubts about the objectiveness of the FBI. And he's saying it again and again until the media and the masses of people start accepting it. Once you "change people's brains" about the truthfulness and integrity of the FBI, then you are on course to clean house and shutdown the investigation or raise doubts about any findings.
The Watergate break-in occurred on June 17, 1972. It wasn't until August 8, 1974 that Richard Nixon finally resigned. That took over two years to investigate just a simple break-in.
On July 25, 2016 the FBI opened an investigation into Russian interference in our presidential election. That proceeded under the supervision of FBI Director James Comey until Trump fired him on May 9, 2017.
Rod Rosenstien appointed Robert Mueller as Special Counsel on May 17, 2017 to continue the Russian interference election but also to explore any links or coordination between the Trump campaign and the Russian government "and any matters that arose or may arise directly from the investigation."
The Russian investigation is considerably more complicated involving multiple parties and countries spanning decades. It is also expanding into "matters that arose or may arise directly from the investigation". This is not some kind "show and tell" investigation in which the Special Counsel is expected to reveal his hand periodically to the media as a report card to justify continuing. It is a multifaceted complicated investigation into several aspects of Trump's involvement.
If Trump is innocent, he sure as hell isn't acting like it by trying to undermine or stop the investigation almost daily. Trump certainly appears to be compromised in some fashion, and I don't care if it takes four years for the truth to come out and justice to be served -- but it will be served. And his report will be absolutely complete with no loose ends...not some shoddy Nunes type of unprofessional partisan report that was debunked before the ink is dry.
Ray Pooch -- Look, the Special Counsel's job is not to lay out his case on a daily, weekly, monthly or even yearly basis to the general public. No one really knows what case Robert Mueller has in the works. He might have enough to convict Trump on a whole bunch of charges right now or maybe none. We don't know. His strategy is to complete a comprehensive investigation of all the facts rather than laying them out piece meal for media consumption.
The exception is that for some of the lower minions plus a bunch of Russians he has brought charges to send a message to all the doubters out there that this is not a witch hunt.
Don't fall for the Trump rhetoric. He is the only one who should worry and for good reason.