Supply-Side Economics Fails Every Objective Test! Part Two

by Merl Moore (MerlMoore@mail.com)

 So, the Republicans passed their long anticipated Tax-Cut plan, “The Tax Cuts and Jobs Act,” with less than a third of the American people's support (https://www.huffingtonpost.com/entry/america-couldnt-be-much-less-excited-about-the-gops-tax-plan_us_5a2308a5e4b03c44072df0ad) making it perhaps the single most unpopular piece of legislation in history ever to pass Congress and be signed into law by the POTUS. That's really saying something! Furthermore, according to FiveThirtyEight.com, “The Tax Cuts and Jobs Act” is even more unpopular than some past TAX-HIKES (https://fivethirtyeight.com/features/the-gop-tax-cuts-are-even-more-unpopular-than-past-tax-hikes/)! Now that is really, really, really saying something (and is actually pretty funny)!   
 
 
 But I don't want to argue against “The Tax Cuts and Jobs Act” or Supply-Side Economic-philosophy. I don't want to address anything as ethereal as economic philosophy and theories. Let's just talk about facts, irrefutable facts, shall we?
 
 It's a fact that “The Tax Cuts and Jobs Act” is at it's base Supply-Side/Trickle-Down Economic-philosophy on steroids. And, you will hear from FOX Business News and other right-wing media, that many of the corporate winners under the new tax laws are already trickling those dollars down upon their long suffering underpaid employees to the tune of 0.001% for every dollar in revenue (https://youtu.be/xcnbTs2myvw). In other words, these corporations are giving back one one-tenth of a penny – i.e.: if you times this amount (0.001) by 10 you get a single penny, times it by 1,000, you get a whole dollar – WOO! HOO!


Well, that's Supply-Side/Trickle Down Economic-Theory for you. And while Supply-Side Economics in one form or another actually goes back to before the 1920s – the rich, powerful and corporations always LOVED the Supply-Side theory (go figure) – there was a time when a decidedly more Demand-Side/Trickle-Up Economic-philosophy held sway, and it was the crash of 1929 which ultimately resulted in The Great Depression that brought it about.


But let's pause for a moment and look at an example of Supply-Side Economics in the real world first. According to Supply-Side Theory: “The taxes paid by the rich and corporations if high lead to less tax revenue and economic stagnation.” Is that true? Well, let's look at some history, shall we: Every once in a while you hear someone say that there was a time in the 1950s when millionaires were taxed at 90% and this is a bit deceptive to say the least.   


In the 50s a person making millions might pay 35%, maybe 39%, maybe even 50% (which would then be greatly reduced by deductions – i.e.: because of various deductions General Electric, one of the most profitable corporations on earth, currently pays 0% in federal taxes) ON THE FIRST SEVERAL MILLION DOLLARS! Only after eclipsing a certain amount – again, SEVERAL MILLION DOLLARS – would those dollars over that amount, and ONLY THOSE DOLLARS OVER THAT AMOUNT, be taxed at 90%. In other words, NEVER have Millionaires in the U.S. paid 90% in taxes on all their earnings. NEVER.


So why that 90% tax-bracket in the first place: Just how many millions of dollars does a person need to live an exceptionally comfortable life? Not that many was the answer for most Americans; certainly not 10s or 100s of millions of dollars, let alone a billion or billions. And anyway, as JFK, a millionaire many times over, pointed out when he lowered that 90% tax-rate (to about 78%, by the way), nobody, regardless of how wealthy they were, was actually paying that rate regardless of how many millions they were paid (i.e.: deductions again)!   


So, in the 1950s, well, actually just after WWII up through the 1950s and 60s, when taxes, while never effectively 90%, were relatively high on the rich and corporations, was some of the most productive years in the entire history of the U.S. It was a time, thanks to those higher tax-brackets for the rich and corporations when income-inequality was at it's lowest, which, not so incidentally, was great for the overall economy. This is a fact. Not an opinion. Not a theory. Not “Confirmation bias” (http://progressive-liberal.com/trump%2Frepublican-tax-plan – I know, I'm referencing myself but not as source material, evidence, or proof, simply an article that addresses “Confirmation Bias,” enjoy!). This is a fact.


Also a fact: again, at no time in all of history has Supply-Side Economic-Theory actually, demonstrably worked. Talk about the “Laffer Curve” and the “Magic Hand” all you like (https://youtu.be/l62EHsI_sqs), until you can point to a specific time and place where it's worked, you're just blowing smoke.   


(NOTE: The closest Supply-Side has ever come to actually working was just after Reagan's initial tax-cut in 1981 when the economy did “boom.” However, despite the economic growth, tax-revenues did not appreciatively increase – so much for the Laffer Curve – and the deficit sky-rocketed, thus blowing a hole in the debt and forcing Reagan to subsequently increase taxes several times. In fact, it could very easily be argued that the “boom” had nothing to do with the tax-cuts at all and was more a result of the economy “correcting” after the dismal late 1970s. In any event, demonstratively, Supply-Side didn't work even in this case either.)


Of course, there is a reasonable, that is demonstrative and provable argument that can be made for the other side: Trickle-Up/Demand-Side Economics. In case you've never heard of it, Trickle-Up/Demand-Side Economic-Philosophy (AKA: Keynesian Economic Theory or Keynesian Economics)  is the simple, straight-forward idea that if you give people money (i.e.: cut their taxes) who don't have a lot of money they will spend all that money and put all that money back into the economy which will then grow the economy, whereas rich people do not spend all their money as they do not have to spend all their money, thus very little economic stimulus results from cutting their taxes. Like I said; simple and straight-forward.   


And here's perhaps the most compelling evidence: it was during the years just after WWII up through the 1950s and 60s that the Middle-Class in America was created and thrived. In fact, the Middle-Class was the direct result of the G.I. Bill (i.e.: FREE Education) and Trickle-Up/Demand-Side Economic-Philosophy (https://en.wikipedia.org/wiki/Demand-side_economics) – in other words: the EXACT OPPOSITE of Supply-Side Economic-Theory, the theory the Republicans are pushing right now (again), the theory “The Tax Cuts and Jobs Act” is based upon.


I don't want to get too deep into the numbers (if you're interested in the numbers, specifically how tax rates on the rich affect GDP (or doesn't), I suggest you read this: https://www.politico.com/interactives/2017/gop-tax-rate-cut-wealthy/) but the simple fact of the matter is that, except for making the rich even richer, Supply-Side/Trickle-Down Economics just doesn't work, at least not as a boost to the economy because tax-rates on the rich have almost nothing to do with overall economic growth (again, see the above politico.com piece).   


Put another way: Tax-cuts for the wealthy and corporations in the 1920s led to The Great Depression. Tax-cuts by Reagan in the 1980s led to huge increases in the National Debt. Tax-cuts by George Jr. on the wealthy and corporations 2001 and 2003 resulted in The Great Recession. Whereas, conversely, tax-hikes on the rich and corporations during the Clinton and Obama administrations have resulted in incredible, sustained economic growth. If Supply-Side Economics was anything other than a “con” so rich people can keep more of their money (i.e.: become richer) the facts would be the opposite.


These are the facts.


 I'd like to point out that “The Tax Cuts and Jobs Act” could have quite easily kept all the small tax-cuts for the poor, working and middle-classes and not have ballooned the national debt by 1.5 trillion dollars and still given the economy a major boost. All they had to do was make all the tax-breaks effective for the first $200,000.00 for everybody, rich and poor alike. Anything over $200,000.00 would be taxed at the same, current rate. Then you'd have both an across the board tax-cut as well as a tax-cut focused predominently on the poor, working, and middle classes. 


 But the “The Tax Cuts and Jobs Act” was never about the poor, the working or the middle-class. This was about paying back wealthy Republican donors. That's why 80% of this tax-cut benefits corporations and the rich. 

   
  The point being, Trump told you he was going to give the middle-class a big tax-break, and he could have done that without giving the rich and corporations a huge tax-break. Isn't that what he promised you? He didn't do that because this tax-cut was never about the middle-class.