New Study Finds High-Income Tax Cuts Don't Stimulate Economic Growth | ThinkProgress

Owen M. Zidar published a recent study on the effectiveness of tax cuts:

Almost all of the stimulative effect of tax cuts results from tax cuts for the bottom 90%. A one percent of GDP tax cut for the bottom 90% results in 2.7 percentage points of GDP growth over a two-year period. The corresponding estimate for the top 10% is 0.13 percentage points and is insignificant statistically.

These results of this study are consistent with another study by Mark Zandi.

Mark Zandi, economist for Moody's Analytics, indicated similar results. Programs like unemployment compensation and for stamps (SNAP) had a multiplier effect, a term used in Keynesian economics, that most tax cuts lack.

Some conservatives were quick to dismiss the Zidar and Zandi's studies, but Zandi worked as economist for John McCain in the 2008 campaign.

New Study Finds High-Income Tax Cuts Don't Stimulate Economic Growth | ThinkProgress:

'via Blog this' Subscribe to the Rightardia feed: http://feeds.feedburner.com/blogspot/UFPYA Rightardia by Rightard Whitey of Rightardia is licensed under a Creative Commons Attribution 3.0 Unported License. Permissions beyond the scope of this license may be available at rightardia@gmail.com.

A simple explanation of Democratic and GOP tax concepts

As you can tell from the graph, the rise of he 1 per cent started with Ronald Reagan who slashed taxes below 30 per cent for top earning Americans. This trend continued when George HW bush was president.

When George W. Bush was president, he not only gave the one per cent a $64,000 a year tax cut. He also cut the short term capital gains tax to 15 per cent and suspended the estate tax.


The estate tax is an old tax established by Theodore. Roosevelt, a Republican president.


So three Republican presidents undid the tax reforms of FDR that weakened the middle calls. Many middle class teachers, firemen and police have lost heir jobs because the tax base was reduced.

In addition, the economy has suffered because the middle calls is the consumer class and when the middle class is weakened, businesses lose customers. 

Supply side economic might be a workable economic if it was oriented toward the middle calls. Giving the most affluent Americans huge tax breaks is counter-intuitive and simply doesn't work.

This is because the wealthy person may bank rather than spend the tax rebate or purchase gold and put it in a safe deposit box. The affluent could purchase stocks and bonds but this is an indirect way of stimulating the economy.

A direct grant or payment like food stamps or unemployment compensation gets more bang for the Federal tax buck and has a multiplier effect of the federal dollars because the recipient spends the money and rolls it back into the economy.

The following paragraph is verbatim form Wikipedia:

In congressional testimony given in July 2008, Mark Zandi, chief economist for Moody's Economy.com, provided estimates of the one-year multiplier effect for several fiscal policy options. 


The multipliers showed that any form of increased government spending would have more of a multiplier effect than any form of tax cuts. 


The most effective policy, a temporary increase in food stamps, had an estimated multiplier of 1.73. 


The lowest multiplier for a spending increase was general aid to state  governments, 1.36. 


Among tax cuts, multipliers ranged from 1.29 for a payroll tax holiday down to 0.27 for accelerated depreciation. 


Making the Bush tax cuts permanent had the second-lowest multiplier, 0.29. Refundable lump-sum tax rebates, the policy used in the Economic Stimulus Act of 2008, had the second-largest multiplier for a tax cut, 1.26.


Obama's tax policies are based upon Keynesian economics and Mark Zandi's testimony. 

Republican tax policies are based on GOP ideology and unproven economic assumptions. 

source: http://en.wikipedia.org/wiki/Fiscal_multiplier

graphic: http://gulzar05.blogspot.com/2010/09/fiscal-multipliers-for-tax-cuts-and.html

Subscribe to the Rightardia feed: http://feeds.feedburner.com/blogspot/UFPYA




Rightardia by Rightard Whitey of Rightardia is licensed under a Creative Commons Attribution 3.0 Unported License.

Permissions beyond the scope of this license may be available at rightardia@gmail.com.

Both Fox News and Limbaugh push misinformation on unemployment compensation

According to Rush Limbaugh:

There Is No Stimulative Effect Of Unemployment Benefits -- None Whatsoever.
From the August 30 edition of Premiere Radio Networks' The Rush Limbaugh Show


Limbaugh added:
[T]his regime, from Pelosi to any number of people, try to make the claim that unemployment benefits stimulate the economy. Jay Carney even said, "Oh yeah, I mean, it really works out there, you putting money in people's pockets that they're gonna go spend, they're not ganna save it. And so, yeah, it'll stimulate the economy."


Where does the money come from? You have to take it away from somebody before you give it to somebody else. It's a wash. There is no stimulative effect of unemployment benefits -- none whatsoever. Whether you borrow the money, or print it, or get it via taxes, you still have to take it from some place in the private sector to give it to somebody else in the private sector. It zeros out. And probably is a net negative because it also has the added benefit of promoting laziness, slothfulness. The longer you pay people not to do anything, the longer they'll not do anything. 
Premiere Radio Networks, The Rush Limbaugh Show, 8/30/11

First of fall, the Federal government doesn't not rob Peter to pay Paul. The federal government collects taxes and is obligated to spend these revenues before the fiscal year ends. What is the most effective way to spend the tax dollars:  that is the real question?

Mark Zandi of Moody's economics answered this question with a study. the results of which are shown in the following chart. His study identifies which tax programs have what some call a  "multiplexer effect."

People who have lost their jobs will spend most of the unemployment compensation  to pay bills and buy groceries. This money is quickly churned back into the economy. 

Tax cuts that benefit the affluent may be banked. Some wealthy Americans may purchase precious metals such as gold and place it in a safe deposit box or under their bed. The money is not rolled back into the economy.

Some tax cuts like the FICA payroll tax holiday are stimulative because these cuts benefit a broad segment of the population: middle class/working Americans,

Cuts that benefits small segments of the population such as the corporate tax cuts for C-corporations, the Bush tax cuts and accelerated deprecation have far less " bang for the federal buck."

Are you surprised that Fox News and Rush Limbaugh aren't enamored with the Zandi study? its basically debunks many of the foundations for supply side economics.

source: http://mediamatters.org/research/201108310027
Subscribe to the Rightardia feed: http://feeds.feedburner.com/blogspot/UFPYA
Rightardia by Rightard Whitey of Rightardia is licensed under a Creative Commons Attribution 3.0 Unported License.
Permissions beyond the scope of this license may be available at rightardia@gmail.com.

DCCC: Paul Ryan falsely claims payroll tax cut doesn't work

On NBC’s Meet the Press today, Republican Budget Chairman Paul Ryan falsely claimed that the payroll tax cut doesn’t work. Ryan said:

I don’t think this works to grow our economy” and compared the payroll tax cut to “sugar-high economics.

In reality, independent economists like former John McCain economic advisor Mark Zandi said blocking the payroll tax cut for 160 million middle income Americans would trigger an economic recession and could cost nearly 1 million American jobs. The non-partisan Congressional Budget Office found that extending the payroll tax cut is more cost effective to promote economic growth and employment than the tax breaks for the ultra wealthy that Ryan and House Republicans support.

Mark Zandi's chart: note the payroll tax holiday returns $1.29

FACT CHECK

Mark Zandi: Payroll Tax Cut Needed to Avoid Recession. “Failure to extend a payroll tax holiday into 2012 could trigger another recession, noted U.S. economist Mark Zandi said on Thursday, as Democrats called the extension a top priority needing quick action.” [Reuters, 10/6/11]

Reducing Payroll Taxes on Firms Creates More Jobs Than Tax Cuts for the Wealthy. In January 2010, the non-partisan Congressional Budget Office wrote that reducing payroll taxes for firms was among the policies “that would have the largest effect on output and employment per dollar on budgetary cost in 2010 and 2011. By contrast, policies that would temporarily increase the after-tax income of people with relatively high income, such as an across-the-board reduction in income taxes […] would have a smaller effects because such tax cuts would probably not affect the recipients’ spending significantly.” [Congressional Budget Office, 1/10]
T
Congressional Budget Office: Reducing Employers’ Payroll Taxes, Increasing Unemployment Aid Will Have Bigger Impact on Employment Than Other Proposals. “Policies that would have the largest effects on output and employment per dollar of budgetary cost in 2012 and 2013 are ones that would reduce the marginal cost to businesses of adding employees or that would be targeted toward people who would be most likely to spend the additional income. Such policies include reducing employers’ payroll taxes (especially if limited to firms that increase their payroll), increasing aid to the unemployed, and providing additional refundable tax credits in 2012 for lower- and middle-income households.” [Congressional Budget Office, 11/15/11]

National Federation of Independent Business: Payroll Tax Holiday Can Create Jobs. The National Federation of Independent Business has said that a payroll tax holiday for small businesses would help “struggling businesses reduce costs” and “can reduce unemployment and keep people working during a period of slowed economic growth.” [NFIB, accessed 9/16/11]

Republican Budget Chairman Paul Ryan Called Extending the Payroll Tax Cut “Sugar-High” Economics.House Budget Committee Chairman Ryan “rejected the idea of making further short-term changes to the payroll tax” and called payroll tax cuts “sugar-high economics.” [The Hill, 6/16/11]

Rightardia considers Paul Ryan a clueless frat boy who will say what the Establishment Republicans tell him to say. Curiously, his name is being as one of the "stand in nominees" if Mittens doesn't make the cut by convention time in Tampa. 


Jeb Bush and Chris Christie's names are also on that list. 

Subscribe to the Rightardia feed: http://feeds.feedburner.com/blogspot/UFPYA
Rightardia by Rightard Whitey of Rightardia is licensed under a Creative Commons Attribution 3.0 Unported License.
Permissions beyond the scope of this license may be available at rightardia@gmail.com.

Democratic Think Tanks need hard factual studies on tax cuts

The Democrats need to conduct some objective studies on tax cuts. Some of the questions that need to be asked:

1. Are tax cuts for the top tax brackets stimulative?  How does this stimulation mechanism work?
2. Are tax incentives to businesses to hire workers more stimulative than tax cuts? 
3. Which government programs that use tax stims work and which don't work?
4. Advantages and disadvantages of a progressive tax system. 

The Democrats could build on the work of Mark Zandi form Moodys Analytics. We have published this table many times:

Permanent tax cuts do not appear to be stimulative at all. The Obama administration has used the payroll tax holidays for FICA payroll tax and provided refundable lump sum tax rebates.

However, the GOP approach with the Bush tax cuts and cutting corporate taxes is not effective according to Moodys. . 

The Democrats should use empirical data to attack the bad tax ideas of the GOP. Taxes are a numbers game.

Some of the work could be done by both the office of Management and Budget (OMB) and the General Accounting Office (GAO).  A Joint Report on tax effectiveness from the GAO and OMB would be interesting and tough for either political party to refute.

The GOP uses a lot of fuzzy math when they talk about taxes.

Show America the numbers!

graphic courtesy of: http://www.newsrealblog.com/

Subscribe to the Rightardia feed: http://feeds.feedburner.com/blogspot/UFPYA  

 


Rightardia by Rightard Whitey of Rightardia is licensed under a Creative Commons Attribution 3.0 Unported License.

Permissions beyond the scope of this license may be available at rightardia@gmail.com.

Fox News doesn't get Food Stamp effectiveness

Fox News doesn't understand the effectiveness of Food Stamps. Rightardia has published the table that Mark Zandi of Moody's Analytics produced that made it clear that food stamps were far more stimulative and had more bang for the buck than tax cuts.

Eric Bolling's view is common for conservatives who just "can't be fooled by the facts." Bolling is wrong about Food stamps and Vilsack is right on.

Recently the mayor of Las Vegas went on the Food Stamp or Supplemental Nutrition Assistance Program (SNAP) diet. You can lose a lot of weight if you only eat $4.06 worth of food every day.

Subscribe to the Rightardia feed: http://feeds.feedburner.com/blogspot/UFPYA  




Rightardia by Rightard Whitey of Rightardia is licensed under a Creative Commons Attribution 3.0 Unported License.

Permissions beyond the scope of this license may be available at rightardia@gmail.com.

GOP: Don't confuse me with the facts on the economy

The Washington Post
By Lori Montgomery, Monday, February 28, 9:45 AM

A Republican plan to cut the federal budget  this would destroy 700,000 jobs through 2012, according to an independent economic analysis  that will be  released Monday.


The report, by Moody’s Analytics chief economist Mark Zandi, offers fresh ammunition to Democrats seeking block the Republican plan. The GOP plan would terminate dozens of programs and slash federal appropriations by $61 billion over the next seven months.

Zandi, an architect of the 2009 stimulus package and has advised both political parties. Zandai was an economic advisor to John McCain during the 2008presidnetial elections.

Zandi predicts that the GOP package would reduce economic growth by 0.5 percentage points this year, and by 0.2 percentage points in 2012, resulting in 700,000 fewer jobs by the end of next year.

His report is similar to an analysis last week by the investment bank Goldman Sachs.  It predicted that the Republican spending cuts would cause even greater damage to the economy, slowing growth by as much as 2 percentage points in the second and third quarters of this year.

Republicans have dismissed both reports, calling them the product of the same flawed economic thinking that produced President Obama’s $814 billion stimulus package . . .


Rightardia is not aware of any macroeconomic theory that suggests governments should cut spending during an economic crises. 

That is what a business would do, not what a government does according to Keynesian economics, which is a widely embraced macroeconomic theory.


Are the Republican trying to stall the recovery for political gain in 2012? Or are thy just too pigheaded to see the "forest thorough the tress?"


Be aware that the two studies are from private enterprise, not the Government Accounting Office or the Congressional Budget office.

source: http://www.washingtonpost.com/business/economy/gop-spending-plan-would-cost-700000-jobs-new-report-says/2011/02/28/ABBK9oJ_story.html


Netcraft rank: 7029 http://toolbar.netcraft.com/site_report?url=http://rightardia.blogspot.com

Rightardia by Rightard Whitey of Rightardia is licensed under a Creative Commons Attribution 3.0 Unported License.

Permissions beyond the scope of this license may be available at rightardia@gmail.com.