Economic Populist Commentary

Economic commentary by a pro-capitalist, economic populist. Demand-Side Economic theory. Consists of author's economic views. Questions & comments appreciated. Dissenting views are VERY welcome and encouraged. Main "agenda" is crafting and advocacy of a "populist" economic agenda. A secondary goal is prevention of an economic Armageddon. Encouraging open discussion of US economy.

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Location: Southern California, California, United States

The author is a physician by profession, and a "student economist" by necessity. The current status of our economy necessitates the latter. The intent of this blog is to explain and discuss economics in layman terms. It is designed to promote thought and discussion. It is written by a layman. Comments and critiques of these theories and letters are welcome and ENCOURAGED. Dissenting comments are also WELCOME! They form the basis for discussion.

Wednesday, December 22, 2004

Tax Cuts

Tax cuts for the affluent are more than just ineffective at stimulating the economy. They are detrimental. If these tax cuts are not offset by spending cuts, they worsen inflation. The adage 'too many dollars chasing too few goods' applies here. Inflation reduces consumer buying power. This further decreases demand for goods and services. In other words, there will be less inflation-adjusted consumer income as a result of these high-end tax cuts. This, in turn, further reduces demand for labor. Which further decreases aggregate labor income. Which will result in still further decreases in consumer spending. More high-end tax cuts will further perpetuate this downward spiral of consumer spending. And our economy will follow in the same downward spiral.

Tax cuts for those making over $100,000 per year made up 69% of the total tax cuts for 2004. Those making over $1,000,000/year received 15% of the total tax cut. Nearly all of this 15% will go towards investment. The bulk of the 69% will also go towards investment. Again , the inflationary effect of these unfunded tax cuts will reduce consumer buying power for a majority of consumers. The following site shows a breakdown of Bush's reverse Robin Hood tax policies.
http://www.faireconomy.org/press/2005/ResponsibleTaxPledgepr.htm

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