Can Supply-Side Economics Co-exist With Fiscal Conservatism? (student loan, free market, real estate)
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I understand the value of supply-side economics. Allowing people more freedom and less restraint to go out and create businesses to supply services to the public is the impetus for economic growth. The idea is that this will allow more money to flow through the economy, in turn, allowing the economy to grow. However, many people who propose this idea of supply-side economics are fiscal conservatives by nature. I, myself, am a fiscal conservative. Fiscal conservatives often make the case that the financial mess we are in was caused by people spending more money than they make. I'm not here to argue the validity of that. I believe in a lot of cases that is true. What I am interested in is understanding the relationship between supply-side economics and fiscal conservatism.
I don't spend much money during a given month. I might go out once a week with a friend and spend $40 on food and drinks. But, for the most part, most of my income goes into savings or pays down my student loan debt. If we are all living well below our means, as many fiscal conservatives propose, then how can a supply-side based economy sustain itself? Essentially, it seems that fiscal conservatives advocate a supply-side system, but live by a demand-side philosophy (only buy what you need, not what you want). Is this a case where we say one thing and do another? We argue that by allowing the creation of businesses that provide products and services, that more money will circulate through the economy. But most fiscal conservatives I know don't spend that much money by nature. They drive used cars. They change their own oil. They don't buy all the latest gadgets and gizmos. They don't waste money on fancy vacations. Overall, they don't spend money on what they consider worthless material things. Yet, as a supply-sider, they argue that it is the freedom to spend, spend, spend that drives the economy and allows it to grow.
Is this a case where we say one thing and do another?
Pretty much so. But we've always done that to a varying degree.
The biggest conflict in attempting to apply these old theories (whether they were ever right
or were ever wrong) is that they assume market and social conditions that don't exist anymore.
Everyone who is (or might be) willing to work hard and apply themselves...
is not going to find the meaningful and satisfying work they are trained or educated for.
As for those who might find one of those jobs... it won't pay nearly enough.
Those without training or education? They're completely f***ed.
Which leaves us with a rather large number of people who aren't willing to apply themselves...
but through observation, experience, osmosis or maybe some seminar program have learned that
there really hasn't ever been much incentive for them to "try harder".
I understand the value of supply-side economics. Allowing people more freedom and less restraint to go out and create businesses to supply services to the public is the impetus for economic growth. The idea is that this will allow more money to flow through the economy, in turn, allowing the economy to grow. However, many people who propose this idea of supply-side economics are fiscal conservatives by nature. I, myself, am a fiscal conservative. Fiscal conservatives often make the case that the financial mess we are in was caused by people spending more money than they make. I'm not here to argue the validity of that. I believe in a lot of cases that is true. What I am interested in is understanding the relationship between supply-side economics and fiscal conservatism.
I believe that supply side economics and fiscal conservatism are two completely different things Here's why:
Supply side (aka Laffer curve) says that there are points along the tax rate vs tax revenue charts where tax revenue will rise although tax rates have been lowered. There is not a one to one relationship. Tax rates fall below a certain point and tax revenue will fall precipitously. Tax rates rise above a certain point and tax revenues will fall precipitously. The supply side argument is that tax rates need to remain in that range where tax revenues are maximized.
Fiscal conservatism, on the other hand is all about balanced budgets. Nothing more, nothing less. High tax rate or low tax rate, government budgets should be balanced.
I disagree with your statement that "fiscal conservatives often make the case that the financial mess we are in was caused by people spending more money than they make" The ideologue right, who still believe that the Community Reinvestment Act and Barney Frank forced mortgage lenders to make bad loans, may say that, and right wing ideologues are for the most part fiscal conservatives, but again, that is more coincidence than anything else.
Its worst of everything. It leaves money creation in monopolies for Wall Street and it supplies real estate bubbles. That is what is supplied. Spending conservatism is another matter entirely where it is certainly quite compatible with progressive era Republicans like me.
You would have to be a complete idiot by now to think supplying an increased cost of living is good for anything but a special interest and I don't mean run of the mill idiot, I mean real drooling brain stems here.
Its worst of everything. It leaves money creation in monopolies for Wall Street and it supplies real estate bubbles. That is what is supplied. Spending conservatism is another matter entirely where it is certainly quite compatible with progressive era Republicans like me.
You would have to be a complete idiot by now to think supplying an increased cost of living is good for anything but a special interest and I don't mean run of the mill idiot, I mean real drooling brain stems here.
Sincerely, I'd like you to expand more on this because my peanut brain does not quite understand your point.
BTW I looked at the numbers, and that Big Hedge Fund you mention might be purchasing maybe 5-10 foreclosures per week, nothing to be concerned about IMHO. The "1.5 billion" number might translate to 7500-15,000 actual properties. A drop in the bucket of that 2-3 million foreclosures pool.
I AM concerned, VERY concerned that The Big Banks are hanging onto 2-3 million foreclosures, holding them off the market, waiting for real estate to recover to the point where they can release them slowly in the hope of recouping their costs. The way the tax laws seem to work is that they can continue to write off the losses and carrying costs and so on and then make pure profit X number of years down the road. Talk about distorting the free market!
Sincerely, I'd like you to expand more on this because my peanut brain does not quite understand your point.
BTW I looked at the numbers, and that Big Hedge Fund you mention might be purchasing maybe 5-10 foreclosures per week, nothing to be concerned about IMHO. The "1.5 billion" number might translate to 7500-15,000 actual properties. A drop in the bucket of that 2-3 million foreclosures pool.
I AM concerned, VERY concerned that The Big Banks are hanging onto 2-3 million foreclosures, holding them off the market, waiting for real estate to recover to the point where they can release them slowly in the hope of recouping their costs. The way the tax laws seem to work is that they can continue to write off the losses and carrying costs and so on and then make pure profit X number of years down the road. Talk about distorting the free market!
The easiest way to explain it is with regard to a physical aspects of the economy, I tend to be influenced by classical economics.
The ordinary progress of a society which increases in wealth, is at all times tending to augment the incomes of landlords; to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer, as it were in their sleep, without working, risking, or economizing. What claim have they, on the general principle of social justice, to this accession of riches? In what would they have been wronged if society had, from the beginning, reserved the right of taxing the spontaneous increase of rent, to the highest amount required by financial exigencies?
JS Mill
This is ruinous to supply side theory just as much as would be a warlord. Warlords can make money without any net supply of anything, just like a landlord with respect to the ground values. Lowering taxes to give more buying power to a class of people who can invest in consolidating cartels and monopolies or real estate to jack up rents is little different than the wealth a warlord brings, and at best nets to zero, typically a net loss in the aggregate. Wealthy people invest in so call toll booth economy based not on material but access charges.
You can further see the rub here between the so called "new classical" and the old.
I understand the value of supply-side economics. Allowing people more freedom and less restraint to go out and create businesses to supply services to the public is the impetus for economic growth. The idea is that this will allow more money to flow through the economy, in turn, allowing the economy to grow. However, many people who propose this idea of supply-side economics are fiscal conservatives by nature. I, myself, am a fiscal conservative. Fiscal conservatives often make the case that the financial mess we are in was caused by people spending more money than they make. I'm not here to argue the validity of that. I believe in a lot of cases that is true. What I am interested in is understanding the relationship between supply-side economics and fiscal conservatism.
I don't spend much money during a given month. I might go out once a week with a friend and spend $40 on food and drinks. But, for the most part, most of my income goes into savings or pays down my student loan debt. If we are all living well below our means, as many fiscal conservatives propose, then how can a supply-side based economy sustain itself? Essentially, it seems that fiscal conservatives advocate a supply-side system, but live by a demand-side philosophy (only buy what you need, not what you want). Is this a case where we say one thing and do another? We argue that by allowing the creation of businesses that provide products and services, that more money will circulate through the economy. But most fiscal conservatives I know don't spend that much money by nature. They drive used cars. They change their own oil. They don't buy all the latest gadgets and gizmos. They don't waste money on fancy vacations. Overall, they don't spend money on what they consider worthless material things. Yet, as a supply-sider, they argue that it is the freedom to spend, spend, spend that drives the economy and allows it to grow.
What are your thoughts on this?
I am a conservative and I buy new cars and what I know I can afford.Afterall thsoe used cars come from somehere you buy. It really depends on income as to what you can afford and still be fiscal sound.
The easiest way to explain it is with regard to a physical aspects of the economy, I tend to be influenced by classical economics.
The ordinary progress of a society which increases in wealth, is at all times tending to augment the incomes of landlords; to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer, as it were in their sleep, without working, risking, or economizing. What claim have they, on the general principle of social justice, to this accession of riches? In what would they have been wronged if society had, from the beginning, reserved the right of taxing the spontaneous increase of rent, to the highest amount required by financial exigencies?
JS Mill
This is ruinous to supply side theory just as much as would be a warlord. Warlords can make money without any net supply of anything, just like a landlord with respect to the ground values. Lowering taxes to give more buying power to a class of people who can invest in consolidating cartels and monopolies or real estate to jack up rents is little different than the wealth a warlord brings, and at best nets to zero, typically a net loss in the aggregate. Wealthy people invest in so call toll booth economy based not on material but access charges.
You can further see the rub here between the so called "new classical" and the old.
I like what you are saying, and how you weave John Stuart Mill into the conversation. I reply that within the past couple three months I have read, re-read, and read again The Worldly Philosophers by Robert Heilbroner and if I have learned anything from this work it is that economic theory has changed many time due to new information. That is, there are no ultimate truths in economics because things change and people change as a result.
I'd hate to see the day come that deficits, no matter how high, dont matter, just as I would hate to see the day come that one size fits all in terms of tax rates. That said, the conversation MUST continue. Too bad our President and our elected so called representatives do not have the integrity to do so.
I like what you are saying, and how you weave John Stuart Mill into the conversation. I reply that within the past couple three months I have read, re-read, and read again The Worldly Philosophers by Robert Heilbroner and if I have learned anything from this work it is that economic theory has changed many time due to new information. That is, there are no ultimate truths in economics because things change and people change as a result.
When the field became economics instead of political economy, it became a field of apologists for special interests.
Just look at value systems. How do "economists" just plug in V for value? It ranges from a more objective value system at the base of Maslow's pyramid to something more whimsical at the top. Malslow was a better economist than many "economists". How is GDP going to come out?
Quote:
I'd hate to see the day come that deficits, no matter how high, dont matter, just as I would hate to see the day come that one size fits all in terms of tax rates. That said, the conversation MUST continue. Too bad our President and our elected so called representatives do not have the integrity to do so.
All deficits mean in a soft money system is money printing. And if we ditched fractional reserve banking , they would need to be high and continuous to sustain moderate inflation since it would be the only source of new money. The government taxes when its spends and in reality deficits really are an entirely different animal. You can have large deficits and small government.
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