The Paul Ryan budget has more than a sprinkle of Supply Side magic to it. Huge tax benefits to the wealthy are intended to be good for the economy. At its core is freedom. Society will be freed from the inordinate burden of government. The poor and middle class will be liberated from a culture of dependency.
Supply side economics has, since Professor Arthur Laffer took it over, had a certain contrarian appeal. It was just counter-intuitive enough to be interesting. It was simple enough to be nearly elegant. It offered what seemed like a free lunch. Tax cuts that produced revenue.
Ronald Reagan took the concept and ran with it in 1980. George H. W. Bush called it voodoo-economics. He didn't stand a chance.
It was such a wonderful idea that if it didn't reflect reality, something had to be wrong with reality. It was a little like Economics 101, with a supply and demand graph. But instead of intersecting lines, it was a bell curve.
At the low end, where the tax on everything was zero, you could reasonably expect income to government to be zero. Basic math. Zero times anything is ... anyone have the answer?
At the high end, where the tax on anything was 100%, you could expect income to government to be ... think about it ... zero. That's because people don't usually work for nothing, and that's what they would have left if government took everything.
Somewhere in between was where Baby Bear meets Goldilocks. At some point, government can tax at just the right rate to produce the maximum amount of tax revenue. Any more and people wouldn't work as much and revenue would go down. Any lower and simple mathematics would produce less.
Laffer suggested that tax rates had moved so far toward the high end of the curve that any tax cut would produce more income. It went from its origins with such economists as John Maynard Keynes to becoming a conservative idea, then the conservative theology. In fact, the reigning orthodoxy has become that reducing taxes always increases income.
Actual evidence was sparse at the beginning. It didn't get any better with experience. Tax cuts have produced drops in tax revenue. Tax increases have produced revenue increases. When President Reagan reduced taxes on high income groups, revenue from those groups dropped. When he raised taxes on working people, he produced revenue gains. Conservatives later pointed to those income gains as proof that lowering taxes produces revenues.
Although John Maynard Keynes was a supply-sider in theory long before Arthur Laffer was a little Laffer lad in the Laffer family, Keynes didn't hold to it as a religious icon. Instead he introduced what has been accepted by economists as Keynesianism. And a considerable body of evidence has grown in the decades since to support the approach.
What has seemed to work in boosting the economy is pushing government money into the economy through temporary deficit spending. The idea is that the economy tends to grow after a great enough jump start. The money then has to be put back at some point, lest we lose our shirts. After economic recovery, when the economy is thriving, surpluses should be sought by reducing spending or increasing taxes, or both.
The approach of liberals and conservatives can sometimes overlap for brief periods, but the contrasts are more often stark. Before 1980, there was relative stability in the mathematical relationship between the extremely wealthy and everyone else. The wealthy got a lot more and the rest got a lot less. It seemed like a law of nature. But the trend since 1980, as conservative tax policies took hold, produced a widening of the gap. The rich, who had a lot more, started getting a lot, lot more. Then lot, and lots, and lots more. And everyone else went from a lot less to lots and lots and lots less.
In the case of the Ryan budget, tax cuts for the extremely wealthy vastly outweigh modest tax cuts for the middle class and future hefty cuts in social benefits like Medicare. The poor are to be hit hardest as educational opportunities like college Pell Grants are eliminated, and medical necessities like Medicaid are slashed. This is a good thing, because it divorces the poor and middle class from a culture of dependency.
It is here that the philosophical fissures appear. More money for the wealthy produces incentives. Those with money work harder if they get more. Less benefit for the middle class and for the working poor produce incentives. A billionaire who pays a lower tax than his secretary will be more motivated if his tax rate goes down still more. A patient on Medicaid will be given the hope of freedom from a culture of dependency if he is denied treatment for a heart attack. Kids divorced from breakfast programs may be hungry, but they will be less dependent. So will young men and women who can't afford a college education.
Such is the theology of contemporary conservative thought. The rich will work harder if tax benefits make life easier for them. The poor will work harder if slashes in food, education, and medical care make life harder for them. The middle class will work harder if Social Security is considered a Ponzi scheme and Medicare is privatized. Everyone will work harder, just for contradictory reasons.
The wealthy will get real cash-on-the-barrel-head Supply Side benefits. Everyone else will get Supply Side pixie dust.
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The only thing harder than trying to teach someone who knows, is to teach someone who knows, and learned through the application of faith.
I think I am preaching to choir, though, because you know that as well as anyone.
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