From: garrett@Ingres.COM (QUOTE OF THE YEAR)
Subject: Re: Boom Boom Boom Boom :)
Summary: "cycles"
News-Software: VAX/VMS VNEWS 1.4-b1  
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Organization: ASK Computer Systems, Ingres Product Division
Distribution: usa
Date: 27 Aug 92 23:00:57 GMT

In article <1992Aug27.112525.3777@desire.wright.edu>, demon@desire.wright.edu (Stupend writes...
>In article <1992Aug27.043330.11723@pony.Ingres.COM>, garrett@Ingres.COM (QUOTE OF THE YEAR) writes:
>> In article <183238@pyramid.pyramid.com>, pcollac@pyrnova.mis.pyramid.com  writes...

>> 	All these theories, and yet not a single person saw a 
>> correlation between the tax cuts and the following recessions. Amazing.
> 
>	The former did not cause the latter.
>
A blanket statement of that size must be explained in more detail.

>> Well, I'm going to advance a theory that I am sure everyone will 
>> disagree with, on both sides. Here goes...
>> 
>> 	The government cuts taxes, therefore allowing more money
>> to circulate in the economy. Hence, economic growth.
>> 	The problem: The government expects the growth to bring
>> in more revenue and doesn't cut its spending enough to compensate
>> for the revenue, that in reality, doesn't come in. 
> 
>	But the revenue DOES come in.  Government continues to spend actual
>income PLUS another 50%.
> 
I'm not saying that revenue doesn't come in. I am saying that revenue
never comes in at nearly the quantity that is estimated. In other words,
"wishful thinking."

>> 	The bigger problem: The deficit increases while the 
>> entrepreneurs build and profit.
> 
>	Actually the government soaks up capital (the debt) preventing the
>economy from continuing to grow.
> 
You must also take into account that the entrepreneurs and companies
are taking on debt as well. They are soaking up capital too. Also,
when the economy grows, consumers are more likely to take on debt.

>> 	The crises: The deficit increases to the point that the 
>> banks get stretched and some start to fail as capital dwindles. The
>> economic growth starts to slow slightly.
>> 	The "solution": The government realizes that it must cut
>> the deficit somehow. It already made some cuts in social spending
>> early on to partially compensate for the tax cuts. They can't cut
>> more without the poor suffering, 
> 
>	The poor suffer more from recessions than they do buy budget cuts. 
>Growth in the economy provides more economic opportunity for (you guessed it)
>the poor to exploit.
> 
I don't have numbers, but I have read that the poor didn't significantly
benifit from the growth of the 20's or the 80's. The growth of the 60's
is different because of the war on poverty.
> 
>> and besides the economy is still
>> growing. So it decides to raise revenue. (High tariffs in 29', user
>> taxes in 90')
>> 	The conclusion: The tax increases just increases the credit
>> crunch. More banks fail, the economy stalls, and the government can't
>> put money into the economy because it is heavily in debt. Hence, 
>> recession city.
> 
>	Ok, but the real linchpin is unrestrained government spending, and not
>the tax cuts.

It's rather dangerous to seperate revenue and spending into unrelated 
catagories. I know that I can't do that with MY budget.
> 
>> 	That's right, someone with no economic schooling has just
>> put an inflamitory post that will be sure to anger every red-blooded
>> American. So start flaming.
> 
>	Pretty close, actually.

Uh, oh. A registered socialist just had a conservative agree with him
about the economy. What does this mean? 

>Brett                                                      

-Garrett

Disclaimer: My opinions are not reflective of my companies.
Newsgroups: misc.headlines,rec.autos,rec.railroad,sci.physics