On Jul 7, 11:40 pm, Hardpan <hardpan_...@[EMAIL PROTECTED]
> wrote:
> The Profitable Dismantling of Civil Society
>
Supply-side Economics Explained
George W. Bush's economic policy is based on trickle-down economics,
also known as supply-side stimulus. Reagan was a big fan of this idea
also. Simply described, supply siders argue that the best way to
stimulate the economy to grow is to cut taxes on the wealthy. When
their tax rates fall, the rich will increase their investments. For
example, a restaurant owner might decide to build a larger kitchen if
she gets a big refund check. Then, she'll have to hire more workers to
staff that kitchen, and so employment goes up, indirectly because of
that original tax cut.
It's a neat theory. Reagan argued that it even makes sense for the
government to cut taxes to below current spending and take on debt
because in the long run, the economy would grow back so that
eventually the tax cut would pay for itself. This approach is called
"supply-side" because the stimulus (the tax cut) are applied to the
suppliers of goods and services (the business sector).
The common objection to supply-side economics is that there's
absolutely no guarantee that if you cut taxes on the wealthy, then
they will use that money to invest in new business. In fact, since
these tax cuts happen in bad economic times, investors might decide
that their money is safer if they save it rather than invest it. Going
back to the restaurant example, if the restaurant owner decides to
just stuff that tax refund into a savings account, or just keep it in
her mattress, then no job growth occurs.
Also, if the government did what Reagan (and George W. Bush)
recommended and went into deficits to finance one of these tax cuts,
and no economic growth occurs, then the government is in a really bad
spot. They have to raise taxes back to sustainable levels, and then
raise taxes again in order to get the money to pay for the debt, and
then raise taxes even higher to pay for the interest on the debt. Or,
they can do what Reagan did, and just roll the debt over by issuing
more debt. This is sort of like paying off the Master Card bill with
the Visa. It works great as long as you can always get another credit
card to lend you more money. When the last credit card company decides
not to give you a card, then you are in trouble.
George Herbert Walker Bush called supply-side economics "voodoo
economics" because all of supply-side theory was based on a hope that
the rich would invest those tax cuts and not just stick them in the
bank. George W. Bush ignores his father's opinions about the wisdom of
his economic policy, however, and is a big sup****ter of supply-side
economics.
Third-world countries do the Visa-Master Card swap trick all the time.
They run up huge debts by spending more than they tax, and keep
borrowing money from private investors in their country and abroad.
When it becomes obvious that the country is so far in debt that they
will never be able to pay it back, investors start selling off their
debt, even if they sell them at steeply-discounted amounts. This is
really, really bad for the country still trying to pay its bills by
borrowing more. When investors start dumping your IOUs on the market,
then your country's currency quickly loses value. This is called hyper-
inflation.
In 1997, investors all around the world had lots of money invested in
east Asia. Then, people lost confidence in certain countries, and so
investors all started selling off like mad. The investors sold debt
denominated in Asian currency to buy dollars. This pushed down the
value of Asian currencies relative to $US. In short, families in these
countries found out that their life savings (which were stored in
their home-country currency, like the Thai baht, or the Indonesian
rupiah, not in $US) lost all of its value because of inflation. It was
as if these people woke up, went to the store, and discovered that all
the prices had doubled, and were probably going to double every day
after that. That's when the riots broke out, which scared away more
investors, and the downward spiral continued.
The same thing happened recently in Argentina. Investors all started
selling off Argentinian debt, so the value of the Argentinian currency
plummeted, and people were wiped out. Also, when you have high, high
inflation, goods im****ted from other countries become much more
expensive.
What happened in the 1980s is like a big Rorschach test. Some
economists see all the signs that supply-side economics worked, and
others see the same period as the beginning of severe fiscal
irresponsibility ("fiscal" means how the government manages spending).
There's no doubt the economy grew after the Reagan tax cuts, but it
never grew enough to pay back the debt Reagan racked up. We're
stilling paying interest today on that debt. We're also now adding to
it because each year that the government spends more than it taxes, it
creates a deficit, so that gets added to the debt, and we've been in a
deficit ever since the George W. Bush tax cuts. Also, in some other
recessions, the government has chosen to just wait it out, and most
recessions end in about 11 months. Based on previous experience, the
recession probably would have taken care of itself eventually, and we
wouldn't have all this debt hanging over us today from twenty years
ago that we still haven't paid off.
In 1991, part of the reason why George H. W. Bush had to break his
"read my lips: no new taxes" pledge was because he was forced with the
choice of either raising taxes, or putting the country further in
debt. He made the politically painful move in order to protect the
long-term interests of the country, even though he knew he was just
about guaranteeing he would lose the 1992 election.
Clinton saw an op****tunity to steal an issue from the Republicans in
1992. Since they were no longer the party of being fiscally
responsible, Clinton made that his mantra. He balanced the budget
early, by cutting spending and raising taxes. Then of course, the
public didn't like that, so in 1994, the Democrats lost control of
Congress. Still, thanks to Clinton, we got out of deficits by the end
of 1990s and in 2000 Gore wanted to start paying down the debt, but
then George W. Bush won the election, and instead of paying down the
$7 trillion that we owe (about $24,000 per US citizen, and growing
every day), he pushed through his tax cuts instead.
The US debt is at an all-time high, and the financial world is
starting to worry about the long-term stability of the US economy. The
International Monetary Fund, in a release a few weeks ago, recently
warned that the US debt was increasing to the size where it could
threaten the world economy. The Bush administration almost entirely
ignored the re****t and the mainstream US media didn't make the re****t
into a big story.
Meanwhile, the US dollar has lost about 30% of its value versus the EU
Euro in the last 12 months. A weak currency in the short run may help
our ex****ts, but in the long run, it pushes up interest rates and
frightens foreign investors. Since most of our debt is held by non-US
investors, the US government's ability to borrow depends on
maintaining confidence that our currency will maintain value in the
long-term.
One economist described debt as more like termites in the walls,
rather than a tornado outside. Both will eventually destroy the house,
but it is a lot easier to pretend that the termite problem isn't so
bad.
The Brookings Institute, a think tank in Wa****ngton, DC, just finished
a paper that describes some long-term consequences of ignoring the
budget deficits. Alice Rivlin, former vice-Chair of the Federal
Reserve Board of Governors co-authored the paper.It is written for the
interested outsider, rather than the professional economist. In short,
allowing the government to run deficits indefinitely raise interest
rates for all of us, risks inflation of US currency, and limits long-
term economic growth. Here's that paper.
Total employment (the number of people with jobs) has fallen by about
3 million jobs since the economy peaked in March of 2001. George W.
Bush promoted the tax cut as a tool to create jobs, and by that
standard, it hasn't worked at all.
http://www.kuro5hin.org/story/2004/1/22/164856/449
> Posted by Howie Klein
>
> Down With Tyranny!
>
> May 13, 2008.
>
> Public infrastructure is deteriorating and Wall St. stands to profit
> from it.
>
> Yesterday Scholars & Rogues featured a pretty ominous look at the
> serious deterioration of basic American infrastructure. The author,
> Dr. Denny, points out that our otherwise preoccupied government is
> normally only moved to action by catastrophes-- like the deadly bridge
> collapse in Minneapolis last year. So that bridge is nearly fixed.
> They're waiting for a spate of disasters before they do anything
> preventive. They may not have to wait long and we have far more than
> "failing bridges to find, fund and fix." Dr. Denny is left cold by the
> leader****p abilities of the current presidential candidates to lead us
> successfully through a real crisis. Just to keep up, the U.S. would
> need to spend $225 billion per year for 50 years-- $11 trillion.
> McCain definitely has a couple wars he'd rather wage. But the
> country's infrastructure-- not just roads and bridges but also dams,
> sewage systems, drinking water systems, air traffic control, nuclear
> plants, electricity transmission lines, levees...-- gets a grade of D.
> Unfortunately, national politicians don't usually find infrastructure
> ***y.
>
> Wall Street does, I found out on the radio yesterday. Tens of billions
> of dollars are coming out of the firms that brought us the real estate
> and mortgage collapse and going into buying up infrastructure. Alarm
> bells went off when I heard that the sleazy GOP vulture capital firm
> Carlisle Group-- whose real estate arm went belly up recently-- is
> buying up sewer systems and roadways. And they're only one of many.
>
> Republicans want to reduce taxes and let the infrastructure go to hell
> so that the public sup****ts selling it all off to for-profit
> companies. Democrats are too cowed to stand up for government
> functions that have been delegitimized by greed obsessed Republicans
> (and Blue Dogs and DLC Democrats). So... on to the predators. Today
> Morgan Stanley-- and I assure you a more unscrupulous and cut throat
> firm you will never find-- announced that it has raised $4 billion to
> target investments "that provide public goods or essential services in
> sectors such as trans****tation, energy and utilities, social
> infrastructure and communications." Global Infrastructure Partners
> (General Electric and Credit Suisse) have capped their infrastructure
> fund yesterday at $6.5 billion. A new Carlyle subsidiary, Carlyle
> Infrastructure Partners, formed specifically-- and under heavy
> political protection-- to rip off American taxpayers and ratepayers is
> investing $1.5 billion in trans****tation and water and wastewater
> facilities, including roads, bridges, tunnels, air****t facilities,
> maritime ****ts, transit projects and other public benefit
> infrastructure in the US and Canada. Henderson Investors, CVC Capital
> Partners, Macquarie (Australia), Rreef, Citigroup, Ferrovial (Spain),
> Goldman Sachs, J.P. Morgan and Alinda are all up to the same thing.
>
> Infrastructure assets such as utilities, toll roads and air****ts are
> attractive to financial bidders like banks and pension funds because
> of their stable cash flow despite having lower growth rates than other
> private equity op****tunities. GE had disappointing first-quarter
> earnings, but its infrastructure segment performed better than
> expected.
>
> The money being ante-ed up for infrastructure projects by private
> capital is at historically high levels.
>
> New roads, railways, oil pipelines, hospitals and schools: the world
> is an infrastructure financier's oyster. In Mumbai, for instance,
> there are plans to build an extension of the city to house 15 million
> people - nearly double the size of London's population. One UK banker
> who returned from there last week said: 'I left London depressed at
> the state of the markets. Going there, you see that there are people
> making huge sums of money.'
>
> Even in the developed world, there are signs that we do not have the
> infrastructure to cope with continued economic and population growth.
> Blackouts, road congestion and capacity problems in air****ts and on
> railways are commonplace in both the US and Europe. In addition, an
> ageing population means different kinds of healthcare facilities are
> needed.
>
> The question is: how are these essential building blocks going to be
> financed? There has been a decline in governments' willingness or
> ability to pay for new facilities in the past 15 years. Among the
> developed countries, government outlays on capital projects fell from
> 9.5 per cent of overall spending in 1990 to 7 per cent in 2005,
> according to the OECD.
>
> Increasingly, it is the private sector that world leaders now rely on
> to fill the funding gap.
>
> http://www.alternet.org/blogs/peek/85271
|
