Republicans Still Suck, page 2

Originally posted by TheWalkingFox

What's got me curious is how you figure that stock market ups and town are incidental with their timing, but economic ups and downs have a real impct from tax cuts. Do tax cuts stimulate the economy? "Eventually", you say - Where is the proof that this is from the tax cuts, rather than an incident of timing, like the aforementioned stock market?

There's no conflict there-- you've simply misrepresented my statements.

The TIMING of the rise and fall of the stock market was coincidental, but the CAUSE of its rise and fall was a specific set of circumstances-- primarily the relatively sudden popularity of the internet. This created not only a whole new class of businesses and stocks for those businesses, but also provided average people with an opportunity to trade stocks. This led to a rush to buy tech stocks, which stocks were often ultimately worthless, since they represented companies that didn't even turn profits, but which stocks were purchased anyway by people who simply didn't know any better. In the short-term, those stocks responded to supply and demand-- the demand for them was high, so the price rose. But soon enough it became apparent that the demand had driven the price up to a level beyond the actual value of the stock, or of the companies those stocks represented. At that point, the prices collapsed.

It wasn't just an "incident of timing." It was a specific series of events, the timing of which was merely coincidental.

Tax cuts stimulate the economy because they leave more disposable income in the hands of people. Those people either spend the additional money, increasing business income, or they invest the money, which gives the banks more money to loan out, which generally serves to lower interest rates as competition for loans increases, which benefits both businesses with ongoing credit lines and new start-ups.

Quite simply, tax cuts put more money in the hands of individuals, and those individuals put it back into the economy, and the economy axiomatically grows when more people put more money into it.

Now-- before anyone leaps in, wailing and gnashing their teeth-- this is not meant as a defense of Bush's tax cuts, which ARE directed almost exclusively to the richest of Americans. Trickle down actually does work to some tiny degree, but mostly what tax cuts to the wealthiest do is to give them more money to squirrel away. They are less likely to redistribute their money than anyone else is, so tax cuts for the rich really do little good. They DO do more for the economy than most leftists are willing to admit, but they still do far less than tax cuts for the middle class would do. But of course, the middle class doesn't own any politicians, so they don't get tax cuts.