how supply siders view education

[sweetwater]

Arthur Laffer is an American 'supply-side economist' who was a member of Ronald Reagan's Economic Advisory Board during the 1980's. He is known best for the Laffer curve, an illustration of tax decreases which allegedly results in an increase in tax revenues. He is also an absurdist!

It operates on the premise that if government sets a tax rate of zero, it will receive no revenue. And if the government sets a tax rate of 100 percent, the government will also receive zero tax revenue, since nobody will have any reason to earn an income.

He proposed that a tax decrease could, in certain situations, result in an increase in tax revenues. This premise is the highlight and fallacy of supply side economics. What it proposes is that if corporations were taxed less there would be more profit and more money to spend on supply and thereby create greater wealth, and trickle down into more jobs. It proposes an increase in supply.

The logic of supply dates back to Jean Baptiste Say (1767-1832) who stated that 'the total supply of goods and services in a market economy will equal the total demand', that 'supply will create a demand'. It is referred to as Say's Law or the Law of Markets, and is the fundamental proponent of 'supply side economics'.

This pre-depression logic and fiscal policy of tax reduction to increase supply operates on the fallacy that people will spend on the increase of supply. It doesn't account for market gluts or market waste or issues of savings. That with more disposable income people will tend to save rather than spend, just as much as an increase of supply doesn't necessarily equate to an increase of demand, that the demand for goods and services won't equal the increase of supply. There is waste! And there is demand at a decreased value of supply. An increase of supply will create a supply of less value!

Say's Law of 'supply creating demand' is a simplistic economic notion much in the way that Laffer's curve is also a simplistic formula for understanding fiscal policy. Supply side Economists seem more occupied with tax reductions in the short term than they are with a market glut or market waste in the long term. And it also flies in the face of another logic, that it is demand that creates supply.

Demand side economists prevail upon the opposite sentiment of Say's Law and the supply side, operating themselves on the premise that it is demand that creates the supply, and if people aren't demanding a certain and specific good or service then the value of that good or service will diminish or become extinct.

Supply siders tend to think that people don't know what they want, that people will buy what they are told to buy, that there is no caveat emptor, while demand side economists tend to think that the marketplace is informed or that the buyer is obligated to be informed as to what to buy. As it is scripted in our legal code that the buyer should show discretion and awareness for their purchases, thus exposing the fallacy of a supply side logic.

As for Laffer's curve and what kind of argument it represents is really an argument of no government at a zero tax rate and total government at a 100 percent tax rate and what percentages of tax rate best represents the need for public services, such as hospitals, roads, schools, garbage collection, policing, fire prevention, etc.

Supply side economists tend to not factor in the value of infrastructure for the movement of goods and services, where they seem more predisposed to tax reductions to increase supply than for higher levels of education or better roads to increase supply.

It is almost assumed that an uneducated public or an uneducated mind will automatically demand the increase in supply without thought or discretion, almost as if to say without an education. Jean Baptiste Say grew up in an era when there wasn't public education.

An increase in Education levels won't necessarily increase supply but it does stand to say that it will increase a better standard of supply, and increase the supply of some things over others! And infrastructure such as hospitals and bridges certainly have a great impact on supply as healthy populations are active in doing more, but a healthy educated population would only learn to do more with less! So, supply siders don't tend to view education as being a necessity!

As for a decrease in tax revenues, it is only safe to say to that there will be less money for public services such as hospitals, roads, schools, policing, and fire prevention, which is a depressed state of affairs.

[sweetwater]

As for certain circumstances where the supply leads to a market glut or market
waste, the supply siders would have to also include a decrease in jobs where
there is less profit due to a market glut. And that layoffs would incur due to
this decline in profit.

[mnaz]

and . . . perhaps only some of the increased profit, if any, actually "trickles down." the rest pads already large bank accounts. . .

compared to corporate tax rates of the pre-1980s (which perhaps may have been too high), haven't we been through almost 30 years of "trickle-down" tax policy to varying degrees? (with the Dems being "Republican-lite" in this stretch?) especially the last 8-9 years? how has that worked out? wonder why can't we find some sort of middle ground between the fairly high pre-'80s brackets and the ridiculous corporate welfare of the bush admin.? I thought obama was on the right track here (but of course, much of the corporate media paints him as a dirty "socialist" for his trouble).

the other dubious thing in supply-side philosophy is the assumed mass-consumerism engine required to drive the whole thing. What happens when that starts to break down, as we've seen?

[Barry]

Excellent points, sweet, very astute. As to your comments regarding Reagan and supply-side, trickle down economics vis a vi saving versus spending, let's not forget it was during the Reagan administration that personal savings accounts were taxed as income for the first time, taxed once as payroll deductions, then taxed again at the end of the year. A measure to inhibit saving and increase spending rather than simply increase tax revenue?

Peace,
Barry