"Democrat Barack Obama says he would delay rescinding President Bush's tax cuts on wealthy Americans if he becomes the next president and the economy is in a recession, suggesting such an increase would further hurt the economy." ... source
If you're admitting that taxing the rich hurts the Economy,you're actually admitting that the money the rich save on taxes, must TRICKLE DOWN into the Economy.
Yet in Obama's acceptance speech he made fun of trickle down saying: "For over two decades, he's [McCain] subscribed to that old, discredited Republican philosophy -- give more and more to those with the most and hope that prosperity trickles down to everyone else."
FYI - Supply side doesn't actually work on 'hand-outs' as Obama says above ... unless you consider letting someone keep more of what they make a handout. The philosophy posits that if you let people keep more of their income, that money will trick down into the Economy and grow the Economy.
I guess Obama is now a convert do that 'discredited Republican philosophy'.
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4 comments:
I agree with your objection to letting people keep their money as being a handout. It always annoys me when I hear the term "Upward Redistribution of Income". The term is false as it presumes that income was distributed in the first place.
However, I disagree with your coy take on Obama's recent supply side conversion. Just as when the Bush tax cuts were ushered into law, part of the rationale was to throw as much money as possible at the economy to get it jumpstarted. This is essentially a keynsian or a demand-driven insight. What is different with Obama is that as a Democrat, typically the preferred recipe for a demand side stimulus is federal spending.
Claiming that Obama is a supply-side convert was a bit tongue-in-cheek. On a serious note, I think some Bush's tax cuts aimed at dividends and capital gains are much closer to supply-side than the income tax cuts he passed. Assuming Obama was only talking about keeping those income tax cuts in place until they expire in 2011 (which seems to be that case, since the others end in 2009); then Obama is just looking for a more basic demand driven bump. As you point out, it is interesting (and in my opinion, re-assuring) that Obama recognizes the impact of tax increases (and decreases) on overall demand.
I do agree that the Capital Gains and Dividend tax cuts were tax cuts that were supply side driven. I think Greg Mankiw had a important if discomfiting observation that it is more likely that they will be more or less maintained under Obama than McCain.
I do think it bears mentioning when Democrats talk about discredited Republican supply side rhetoric, I think they are correct. This is not to say that all supply side claims are invalid, far from it. But the claim most Republicans make about supply side economics is the old canard about tax cuts paying for themselves, which is patently false.
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