The Fruits of Apostasy: Politcal Correctness

[_Kevin Graham]

It is worth noting that my thorough page 2 refutation of Loran's ridiculous claim that Reagan only spent as much as he did, because of a "Democrat Congress," was completely ignored. In fact, Loran seems to have been very careful to skip around those points when "responding" to my posts, while veering onto other tangents. This was the one point I was hoping he'd respond to.

[_Droopy]

In other words, tax cuts alone do not stimulate the economy. I knew that. And, I would add, that the benefit of cutting taxes does not mean that every tax cut always stimulates the economy. The myth that tax cuts will always result in increased revenues is, simply put, stupid.

Try thinking before posting, Kish, and perhaps, even reading the prior post such that you understand to what you are referring when launching your semi-educated diatribes, from which vantage point it might be possible to avoid misrepresenting the arguments of others as you've done with here with Friedman.

Friedman did not say that tax cuts alone do not stimulate the economy. What he said was that tax cuts alone did not increase revenue to the government in the 1980s (he did not make an across the board general statement that they could not under other conditions).

Milton Friedman: Well, economic growth will inevitably increase the amount of revenue coming into the government. But so far as the Reagan years were concerned, we have to be careful there. There were initial cuts in 1981-1982 and then there was a very good income tax law in 1986. But in between that, there were increases in taxes as well. So it's not an entirely clear picture that you can attribute the growth in revenue entirely to the tax reductions. But it's a hard thing to disentangle the effects of several things happening at the same time. In particular, there's no doubt that growth is very favorable to government revenue.

In other words, tax cuts create economic growth which expand the tax base and eventually increase government revenue. Friedman is saying that the tax increase that occurred during the 80s were a factor in the increase as well, but notice that "growth is very favorable to government revenue" as a general principle. There is also no doubt that, over time, as higher and higher tax rates decrease economic activity, government revenue must shrink, unless the state resorts to fiat money creation to fund its activities.

Simply, elementary logical thought applied to an understanding of the basic attributes of a free market economic environment implies that economic growth must occur as a direct effect of tax cuts (and this means substantial and permanent cuts in marginal rates, as well as those taxes that directly disincentivize productive economic activity, such as dividend taxes, capital gains taxes (the appropriate rate of which is zero) and the death tax). Cutting taxes increases economic activity, and increased economic activity, by definition, means economic growth.

In a free market environment, cutting taxes incentivizes and encourages forms of behavior discouraged by higher taxes, including savings (amassing of capital resources) investment, assumption of entrepreneurial risk, and, on the demand side, spending instead of excess hoarding.

It also encourages increased entrance into productive economic activity by ever more entrepreneurs, spurring, not only economic growth, but the competitive pressures that provoke innovation, creativity, and greater diversity and variety of products, not to mention deflationary pressures on prices over time.

Its high time that you and Ronald McGraham hit the books and get yourselves a decent edjumacation.