Tuesday, January 15, 2013

The Republicon Mythology Continued

The Republicon Mythology Continued:

A fundamental tenet of Republicon ideology is the supply-side theory that if you just cut the marginal tax rates for the wealthy, they will be incentivized to consume more, to increase their business investments, and to provide major boosts to domestic economic growth. This has been the hidebound Republican assertion ever since Herbert Walker Bush blasphemed his party by raising marginal tax rates in November of 1990.  This “trickle down” economic theory has a long history and was better known as “Horse and Sparrow” theory in the late 1800s – since the basic notion here was that if you just fed the horse more oats (i.e. beneficial tax policies for the rich) those horses would “pass through” some undigested oats for the sparrows (i.e.. the 47 percenters).  Indeed, it’s really all B.S. isn’t it???

One of the important tests of this particular philosophy was portrayed in a recent CBO analysis of the effects of changes in the marginal tax rates upon a variety of economic outcomes. That report was presented on September 14, 2012, and then pulled at the request of Republican Senate leader Mitch McConnell.(http://www.nytimes.com/2012/11/02/business/questions-raised-on-withdrawal-of-congressional-research-services-report-on-tax-rates.html?_r=0)

There were two principal findings: a) analysis strongly suggested that reduction in top tax rates had virtually no association with saving, investment, or productivity growth; and b) reductions in top tax rates were however strongly associated with increases in the “shares” of the income pie held by the wealthiest (Apparently the horse “held on” to a lot of those oats).

Still, all of those findings occur in an economic maze, completely disconnected from a more serious examination of underlying Republican and Democratic policies that have contributed to these outcomes. A non-voting Reagan Republican and political scientist at Princeton, Larry Bartels insists that the political governance of the two parties is critical to the outcomes. He finds (http://www.washingtonpost.com/wp-dyn/content/article/2008/06/12/AR2008061203779.html) in his outstanding analysis of partisan differences in income outcomes, that partisan differences have had major effects upon income inequality. Specifically, he concludes that the income gap increased under presidents Eisenhower, Nixon, Ford, Reagan, and the Bushes, while it declined under 4 of 5 Democratic presidents. Republicans worry about inflation (which has negligible effects on income growth at the bottom of the income distribution, but substantial effects at the top).

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