"It's the tax system, stupid"

If you wish to blog on economic issues, you might consider actually learning some economics. So called “supply side” economics is NOT based on a fixed amount of money (albeit if money is limited it has no value at all). Government spending does not create money; it must be either printed, borrowed or taxed BEFORE it is spent – and for this reason taxation does NOT take money out of the economy unless it is then destroyed. The statement that taxation gives value to money – even fiat money – is absurd on its face.

Moreover, the faulty description of Glass-Steagall (which was a disaster needing repeal) and the methodology of money creation (which is the result of the acts of central banking – the Fed – not mortgage and security people) not to mention bubble fairy tales further undermine your case.

Of course the completely nonsensical argument that progressive tax rates in the 1990s created a healthy economy is laughably contrary to reality. In fact, the economy was growing strong two YEARS before taxes were raised at which time the economy slowed to its slowest post recession pace in history and then caused tax rates to exceed 20% of GDP before the end of the decade – one of the chief causes of a recession that was inevitable long before it actually occurred.

The demand-driven economy that you seem to believe in has been demonstrated to be a fable unconnected to reality. This is not “conservatism” but real economics … something about which you apparently have no knowledge.

I wonder if it has ever occurred to you that in order for the Treasury to sell T-Bills or collect taxes that there must _FIRST_ be money in the private sector. You obviously believe that Santa deliverd the money and then the government borrowed it or got it via taxation. Your position is based on illogic and ignorance and your response is mostly false arrogance.

Perhaps you should run along and look up the meaning of the word "signorage" and after that you may have some clue as to how monetary economics actually works. The _fact_ that the Fed "prints?" money (actually just creates it) in the TTL accounts of the Fed when needed seems to be lost on you. As I said: Government spending is the _CAUSE_ of the money creation. The nit that the money magically appears in the TTL accounts so that it can be disbursed is irrelevant.

Average increase in GDP 1981 - 1993 = 2.85%
Average increase in GDP 1993 - 2000 = 3.85%

GDP increases in 90 - 93 were 1.8, -.5, 3.0. 2.7

You seem to be just lying, Fletch.

And BTW: Glass-Steagall was the separation of banking from "investment banking" wherein Banks could not operate as houses of speculation.

Your stupid remark about taxes is redundant and really a laugh. My point was that the tax increase on higher incomes did not harm the economy in any way. The GDP numbers seem to bear that out.

But thanx for playing.

Average increase in GDP 1981 - 1993 = 2.85%
Average increase in GDP 1993 - 2000 = 3.85%

GDP increases in 90 - 93 were 1.8, -.5, 3.0. 2.7

You seem to be just lying, Fletch.

And BTW: Glass-Steagall was the separation of banking from "investment banking" wherein Banks could not operate as houses of speculation.

Your stupid remark about taxes is redundant and really a laugh. My point was that the tax increase on higher incomes did not harm the economy in any way. The GDP numbers seem to bear that out.

But thanx for playing.

You claimed that “supply side” economics requires some limited amount of money. This is true. As I pointed out, unlimited money is, by definition, worthless. The implication, however, that supply side economics is different in this regard than any other economics is entirely false. The claim that any other possibility exists is not merely faulty, but asinine.

You claimed that “supply side” economics requires that “rich people” will continually “invest” money so as to make more money. This is also true, but it is by no means whatsoever limited merely to “rich” people. It is the investment of capital and resources (including labor) in order to better one’s condition that drives the economy. The claim that any other possibility exists is not merely faulty, but asinine.

It is clear that you do not comprehend where money comes from. Money as a means of exchange and a store of value has existed long before the intervention of governments and the development of fiat money. It makes absolutely no difference that money has to pre-exist in order for the government to issue debt instruments (T-Bills), the fact remains that it is NOT taxation that creates money value (that is, by definition, the willingness of actors in the marketplace to accept it as a means of exchange) or that brings it into existence. Nor does taxation remove money (as opposed to wealth) from the economy as long as it is kept in circulation. The devaluation of the currency – the expansion of the money supply – does not (CAN NOT) occur at the point of public spending. It occurs when the means to enable that spending (obviously before it happens) is undertaken in a way that DOES increase the money supply: either governmental borrowing or direct debasement of the currency.

Seigniorage is merely an example of that debasement of the currency. It in absolutely no way supports your (inaccurate) assertions about how the money supply is expanded or the (absurd) notion that taxation sets the value of money. If you want to understand the mechanics of credit expansion (and the consequences) you might want to read Mises’ “The Theory of Money and Credit” or “Human Action”. As I said, you should STUDY economics.

You are only partially correct about oil prices for that matter. Even if you accept the argument that oil prices are “so high” – which I do not given that they are lower in real terms than a quarter century ago – it must be noted that prices have risen substantially on the WORLD market in all the major currencies. Such a market phenomenon is entirely normal as the interplay of supply and demand changes. The differential between the change in prices in other currencies and the US dollar is arguably the impact of inflation but it is difficult to gauge given that all the other major currencies are fiat money as well.

The chief impact of Glass-Steagal was to impose artificial barriers between certain traditional financial institution activities. It did not address the matter of fractional reserve banking and Fed intervention into the money supply which is what, in reality results in long-term credit expansion – not any speculative activities of private banks. The current mortgage difficulties were the direct result of the Fed’s too-free money policy between 2003 and 2005 that pumped liquidity into the market and induced those mislead by the resultant faulty market signals to invest (lend) in areas not supported by unaltered market conditions.

Glass –Steagall actually facilitated some of the same conditions that caused the Great Depression in the first place. The Fed infused the economy with boatloads of too-cheap money (creating the roaring 20s) and then drastically curtailed the availability of liquidity just as the market was seeking more of it. This resulted in bank failures (primarily banks that were prohibited from diversification by community banking laws – which Glass-Steagall mirrored) at which time more banks failed and the Great Depression was underway. After that FDR undertook several actions which prolonged the Depression for years, but that’s another topic.

And then you either engage in a bald-faced lie or one of the most incredible examples of monumental stupidity that I have ever come across. I expect that it is the former and you are merely “just lying” as you so gracefully put it.

Only a blithering idiot believes that economic policies magically take place overnight. In fact, competent economists in assessing the economic policies enacted under any given administration typically adjust the time scale two years or more into the future. Dishonest liberals, on the other hand, gleefully pretend that the data corresponding with time in office yields a usable figure.

In grabbing 1981 – 1993, liberals deliberately grab a period including two recessions and overlook the fact that Reagan’s policies could not even go into effect until the 1982 budget cycle (except deregulation of oil prices which began the economic turnaround) and weren’t fully realized until a couple of years later. It also overlooks the continued growth into 1993 and 1994 for which Clinton (or the tax increase) can take no credit whatsoever.

Also convenient in stopping in 2000 is the continued downward spiral in the latter years of the Clinton presidency (forestalled, albeit briefly, by capital gains tax cuts) and the recession that came as a result.

The “point” that “the tax increase on higher incomes did not harm the economy in any way” suffers, again, from the same moronic pretense that economic policies magically occur in the instant that they are passed. As the higher tax rates continued to bear on the economy, economic activity weakened in the latter years of the Clinton presidency and a recession (predicted well over a year in advance by the leading economic indicators) was the result.

Please don’t pretend that your tortured misuse of statistics, your use of economic jargon with which you are unfamiliar and your lack of understanding of economic concepts stands up to actual economic knowledge.

It's been a while since I formally taught this subject but I'd be happy to recommend some basic texts that might help you learn ... asuuming you're actually interested.

Here is s nice little picture for yoou from the Fed that will illustrate the real GDP. Once there you can poke around and look at year over year gain or whatever.

http://research.stlouisfed.org/fred2/series/GDPCA?cid=106

The numbers say exactily what I said in that the "Largest tax increase in history" according to the Republicans of the day had a "good" effect on the economy if you measure performance using GDP. The data are not stuff that I made up. The data comes from the Fed. The same is true for tax proceeds and I admit that the capital gains cuts of 1997 did enhance tax revenue by blowing a gigantic bubble. The problem seems to be that you get your supposed "data" from the Cato Institute and the Heritage people. Try the real stuff for change.

Oh... BTW... The Democratic Congress also forced a tax increase by the "Read My Lips" of Daddy Bush 1n 1990. So your claims about how the Reagan economy blessed Clinton with goodness from the Republicans is also total crapola.

Here's a nice picture of ON BUDGET tax revenue and expenditures for the period in question and remember please that the SS system (off budget) was in surplus all along. There were no Fed actions of note and that a comet didn't hit the earth or anything like that. The economy performed quite well with the tax hikes, thank you.
http://www.greatervoice.org/econ/data/OnBudget.html

You can delude yourself into believing that the data undermines my points all you wish. No one with an actual grasp of economics will ever fall for it. That you continue to cling to the belief that the economy was just peachy because the detrimental impact of higher taxes didn't magically appear instantaneously rather than being realized over a period of years simply highlights your ideological blindness and desperate need to cling to ignorance.

In any event, the last thing I need to do is prove my comprehension of economics to one such as yourself. Rant on here as much as you like.

It may be possible to map Reagan and Bush tax cuts to GDP performance if one assumes that it takes 5 to 8 full years for tax cuts to have an effect and that money creation and borrowing (increasing the interest burden as a share of spending) do not adversely effect the economy. But to claim that the timeliness of the effects of the tax cuts will vary according to one's religious beliefs is not an exercise in economics. It is simply an exercise in denial and lying. I have illustrated the continuous improvement in economic performance three years following the tax hikes of 1990 and then 1993 continuing to 2000 (three years after the Gingrich capital gains cuts). According to your religious beliefs the tax cuts of Reagan took a full 8 years to have any effects at all yet the tax cuts of Gingrich were efficacious almost immediately saving the economy from the evil tax hikes of 1993. For you then, the current "stimulus" package will have no effect until some nebulous point in the future where it is convenient for you to make some other ridiculous claim or denial.

It seems that you just make it up as you go along, Fletch. That's how ideology works. For you, denial is just a river in Africa.

Please note that the 1/28 11:32 post by Fletch was jiggered to appear on top of a reverse chronology list of posts so that it stands right next to my original blog on the subject. The Fletch post and its arrogant position of superior economic credentials was totally refuted by me using the historical facts as illustrated. I do not just attack Fletch lying about the facts and the data. I attack latter day neoclassical economics as a whole in favor of the classical school as extended by Henry George. Mr. Fletch, by wrapping himself in the flag of neoclassical manure, simply extends the utter stupidity and self serving nature of the latter day neoconomists. The data and the history refute the neoclassical and marginalist school because the aggregations necessary to their primary thesis have been proved inappropriate on multiple fronts. The treatment of all income taxes without regard to progression is just another error of aggregation. It matters who and waht are taxed and it matters as to the disposition of the funds.