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.

Sunday, October 30, 2005



REPUBLICAN TAX CUTS

Many have asked the question: "Why do Republicans cut taxes without cutting expenses?" This is ab excellent question. Republicans claim it will stimulate economic growth. In fact, it's doing the opposite. Cutting taxes on the top 2% is supposed to increase investment. But there's a catch to this "theory." There needs to be something to invest in. It's only benefit is to increase the SIZE of our industrial capacity. But current industrial capacity is under-utilized. Investment to increase the size of an already underutilized industrial capacity makes no sense. There's simply no current benefit to increasing its size. As such, there is no current benefit to increasing investment.

We need to increase the % UTILIZATION. Investment supposedly increases production. When it does, it does so by increasing industrial capacity size. It has no effect on percent utilization. No amount of investment will increase industrial capacity utilization rates. Only consumer DEMAND increases utilization.

In order for production to increase, there must be an increase in production DEMAND. No amount of investment will increase demand for production. As a result, much of this potential investment capital sits idle. It goes into overvaluation of the stock market, overvaluation of real estate, increased business "cash-on-hand" accounts, foreign bank accounts, CEO bonuses & salaries, stockholder dividends, and last, but not least, Republican campaign contributions.

Meanwhile, the inflationary effect of these tax cuts reduces spendable consumer income, reducing consumer spending. This REDUCES the very "production-demand" necessary to stimulate production, and reduces job growth for workers to provide that production. Thus, the top 2% tax cuts are not only unhelpful, they are detrimental. They slow economic growth. Their inflationary effect reduces inflation-adjusted consumer spending, which reduces the demand for production. Financial analysts have stated on many occaisions that investment capital is plentiful at present. Consumer income is not. Consumer income limits consumer spending, and the production demand it creates. High-end tax cuts are not helpful at present, because increasing potential investment capital is of no benefit. It is NOT growing our economy. It's shrinking it, due to the inflationary reduction of "real" wages caused by these cuts.

It's worth mentioning here that CONSUMER SPENDING is 2/3 of economic activity. It's the largest component of the GDP equation, where GDP=ConsSpen+Invstmt+GovSpen+TradeBal. It makes a lot more sense to try to increase consumer spending at present. It is a larger component than "Investment" capital, and it is in far shorter supply. We need to "change-the-course" back to fact-based economic reality, instead of "faith-based" economic mythology. Investment does NOT create jobs. But demand for production DOES create jobs.

EconomicPatriotForum

8 Comments:

Anonymous Anonymous said...

Here's a comment.

You are a complete idiot and nothing anyone says will change your tactic of pulling numbers out of thin air in a vain attempt to make someone think you are halfway intelligent.

To be honest, your comments are opinion only and my St. Bernard has more sense than you.

7:48 AM  
Blogger unlawflcombatnt said...

Anonymous,

Talk about a completely empty, cowardly response. You've stated no specific episode where I'm "pulling numbers out of thin air." Every number I've posted is documented and most have links that you could verify them from.

Your response is cowardly and spineless. It's typical of a dim-witted Right-Wing blowhard. You've left no email address or link to where someone can respond to you.

Trust me, comments like yours don't bother me any. Feel free to further demonstrate your stupidity and cowardice by posting further comments without identifying yourself.

1:53 AM  
Blogger Tahoma Activist said...

Dude, I love your response. Anonymous can go blow his hole. What a tool.

Anyway, I love your commentary. Very well put together. It made perfect sense to me. And where is anonymous anyway? You'd think he'd come back and set the record straight.

It's all about taking money away from the rich and putting it in the pockets of the working class. It doesn't matter how you get it to us, just make sure it gets into our damn wallets. Then we can buy a new refrigerator, and get some fancy new siding for our house, and maybe get a new car, like a hybrid diesel pickup truck, and maybe we can have another child, even though we were about to stick with just two, and now that we've all got health insurance paid for we don't need to rob the Walgreen's to get our kids' asthma medication, or whatever other sorry story people have been living regarding health care in this country today. The whole system needs to be flipped, with the least gaining the greatest ground in terms of income.

Could you imagine what would happen if rural people of color were the fastest growing economic sector in the country? What a boon that would be for our economy and our reputation throughout the world. It could even spark a (gasp) Bolivarian revolution the world wide. I for one would live through almost anything to see that dream come true.

10:39 PM  
Blogger unlawflcombatnt said...

tahoma activist,

Thanks for your compliments. Clearly someone needs to purchase the goods produced by American industry. If we continue to choke off American labor income, no one will be able to buy our production. And there will be no demand for American workers to provide that production.

The required "demand" cannot be supplied by foreign markets. At present exports account for approximately 11% of our industrial output sales. Most countries are too poor to buy much American production. The countries that are affluent enough severely restrict American imports. The American consumer will always be the main source of demand for American production. Corporate America had better take heed of this reality before it's too late. If they don't, they'll have killed the goose that laid the golden egg--the American consumer.

3:06 PM  
Anonymous Louis Horvath said...

Isn't it amusing that not content with waging war on terrorism, the current US government wages economic war on its poorest constituents?
The biggest irony is that, as with the case with the war on terrorism, most countries around the world have picked up on this type of economic warfare; there seems to be no end to accusations that ordinary people and public services are the major source of wasted resources (while all along money invested in large corporations or the very wealthy – through grants or tax cuts - is supposedly always beneficial).

Anyways what really blows my mind is hearing from economists that we are finally on the right track – yeah, we were so irresponsible in the 60’s and the 70’s, we actually INVESTED in people! Wow. Now we’ve got it all good, and all this rioting and terrorism are not caused by this new economy but by people who refuse to see the light...

9:28 PM  
Blogger unlawflcombatnt said...

Louis,

It certainly is amazing the lack of consideration shown by this administration for the poor.

All of our money is being "wasted" on Corporate handouts, tax cuts for the rich, and the war in Iraq.

Though some economists may be claiming that all is well, many are saying the opposite. A 4th quarter GDP growth of 1.7%, or only $46 billion in chained 2000 dollars, is not a good sign. Especially when only $17.5 billion of it is accounted for by consumer spending, and $51 billion is accounted for by inventory (unsold production) increase.

Worse still, the 4th quarter includes the Christmas shopping season. How much would consumer spending have been if it hadn't been Christmas season?

4:56 PM  
Anonymous Anonymous said...

federal housing administration

9:19 PM  
Anonymous Anonymous said...

http://www.adquity.com

Classifieds for our community. Buy, sell, trade, date, events... post anything. Adquity Classifieds.

http://www.adquity.com

10:27 PM  

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