How will cutting taxes pay off the national debt?

tax cut (for bush and cronies) = good for them, to hell with the debt, well leave it up to the Dem's to deal with as usual.

GOPer pretty much covered the gist of the argument, although it's actually just a little more complicated than that.

Tax rates do have an effect on the economy, but indirectly. You can still kind of look at it the same as if you were selling a product.

If you charge too high of a price for your product, you won't sell enough to cover your rent and cost of the equipment even if you're making a high percentage of profit on each unit sold.

On the other hand, lowering the price will increase the number of units you sell - but only up to a certain point. You can't sell 10,000 units to only a 1,000 customers (unless it's a product that can only be used one or two times). So, eventually lowering the price just cuts your profit margin so low that you still can't cover your rent and cost of equipment.

The right price is whatever price maximizes your profits.

Same thing with taxes. Lowering taxes to 0 obviously won't pay off the national debt. Raising taxes so high that you cut the amount of money flowing in the economy won't cut the national debt because the government needs money to actually move in order to tax it.

Somewhere between there, there should be a balance that maximizes the amount of revenue the government brings in. Agreeing on what that balance is is what causes the tax debate. As long as the rates being debated are all somewhere towards the peak, the debates aren't all that significant - except for the person paying the taxes, in which case I'd probably prefer to miss slightly on the low side than miss slightly on the high side.

Cutting taxes creates investment.

Money that is not spent, either on stuff or taxes, has to be put someplace. Usually that money is put into banks, mutual funds, etc. These are investments.

Corporations work the same way. Cut taxes and create more investment money.

The investment reduces production costs and increases profitability which increases the GDP or Gross Domestic Product.

For example, if things worked the way you seem to think the Clinton deficit of 2003 which was 23% (Clinton wrote the 2003 budget) would not have been paid down to 9% as of 2006.

The reason that the deficit has been paid down so far is because GDP has returned to 6% growth because of the Bush tax cuts.

Under the Clinton budgets (1997 to 2004) the GDP for 2001 and 2002 was 3%. When the Bush tax cuts took real effect at the beginning of 2003 when people pay 2002 taxes the GDP went up to 4% and by 2004 the GDP had returned to 6% even with Clinton's miserable budgets where he refused to buy armor for troops.

The Bush budgets (2005 to 2012) and the Bush Tax Cuts (2002 onward) should enable the nation to be economically stable.

Understanding how something as complex as the economic policies of the United States work is not easy. Most people do not know that Presidents plan budgets 4 years into the future for example or that a Tax cut passed by Congress in 2001 for the 2002 fiscal year will not really be felt until people pay taxes in the first quarter of 2003. Quarterly payments are based on previous years estimates.

If you read Ron Paul's gibberish you know that the United States has a fiat currency based on the stability of the government. What you probably do not know is that political conflict reduces confidence in the US dollar and therefore the international value of the dollar. By electing a Democratic congress in conflict with the President the citizens of the US devalued the dollar.

Sure, politicians should know this and some do. Most know about as much about economics as you do and some feel the way Ron Paul does. Politicians have to appease their voter base and if their voter base wants conflict the politicians have to give it to them or be voted out of office.

The lower dollar will really help reduce the deficit because it forces production away from places like China where the reduced dollar increases the costs of Chinese goods. US manufacturing increases, jobs increase and tax receipts go up even though taxes stay down.

PS: You actually have some very good answers. One of the less educated seems to think that the budget deficit has gone up since the Clinton budget of 2003. You can check out deficits at gpoaccess.gov and GDP at bea.gov.

Ahhhh, a thumbs down from someone who does not want to know how taxes and economics work in the US. You have to love people who hate learning.

Just like JFK stated, If you cut taxes, you stimulate the economy. With the economy stimulated, there is more cash flow. The more the cash flows, the more business expansion, which creates more jobs. The more jobs you have means more people paying taxes. This equals to the same government revenue as if you had increased taxes.

Actually you will have more government revenue. The results of increased taxes are a loss of revenue as jobs are lost, and businesses often fold or do not go through with plans for expansion, so less jobs are created. Along with this there must be a decrease in government spending. Cut the pork!

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Theoretically. Lower taxes mean more money in people's pockets, which means more spending, which means more demand for goods and services--thus more jobs.

In practice, since 1980, the new jobs have been created in other countries, which does us no good in the US. Cutbacks in Federal grants and services have led to higher State and Local Taxes. Wages have stagnated, which means less money available for spending. And predatory marketing practiices have smothered the small businesses that generate the most tax revenue and jobs.

This has resulted in a "Booming Economy," where the formerly secure are now poor, bankruptcies and foreclosures have reached record levels and are still climbing and the dollar has lost half it's value thanks to 6 years of Republicans writing bad checks.

The problem is that 90% of Tax "Relief" has gone to the 10% richest Americans, whose tax burden as a percentage of income is now roughly 54 times less than that of the Middle Class and poor, (the other 90%.)

Ever since the minting of the first coins, observers have noted that money moves toward the rich. The mistake the communists made was in thinking that the process could be halted. It can't. It's a force of Nature.

What we call The Economy is really all of the effects, the jobs, the goods, the services, the tax revenues that support maintaining Civilization--that are what money does on its way to the Rich. The more hands that money passes through on its way up, the higher the level of General Prosperity. Thus, sending money directly to the rich through tax cuts is like saying you'll get more electricity by blowing a hole in the bottom of the dam.

Conservatives don't have a plan for paying off the National Debt. They don't care about the National Debt. As long as they get their share of the loot, it's somebody else's problem.

Edit

I've no sympathy for the Commies, Justanot. Unlike Neocons who just LOVE that Chinese slave labor. All communism does is change which fatcats get a bigger slice of what becomes a smaller pie. REALLY Free Markets work, but we don't have one anymore.

Cutting taxes has substantially INCREASED revenue into the government coffers. That IS a fact.

How it works...Lower taxes stimulates the economy...both through spending both at the personal level and in business. When businesses expand, they hire more people which puts them in a higher tax bracket. It also generates more corporate taxation. It also generates optimistic spending. People buy more when they have more. That is how it works...and has worked every time it has been done.

The problem is not that the government doesn't have enough money to bring down the national debt, the problem is that the government just spends whatever it gets. THAT is the problem.

Exactly how do you pay a debt with a debt? You don't. You all are trying to save a system that is destined to fail and take us all into the abyss along with it. The current economic system in this country is designed to only perpetuate technological expansion without offering any real substance back to those whose minds design and implement such growth. Theoretically it is supposed to be what is best for the "common good". however i personally believe that there is indeed a far more sinister initiative at work here. Mad Pol scientist is indeed correct on many of his examples. however i do not agree with his sympathetic views relating to communism.

John_D: Nice to see you ring in. I always thought it was 6 yrs though. There gave you a thumbs up to help "balance" out your well versed and informative answer. Bottom line? An economic overhaul needs to occur. The patching effects of the past are now upon us. you are indeed correct, it is complex.(And yes i do understand how it fully works) but it doesn't have to be. Money is only meant to be a neutral means of exchange. In place of used to be known as bartering. However it has become a manipulation tool used for power and control. Case in point. Read proverbs 22:1. My how interesting how that falls right in line with our system of ......um "CREDIT" isn't it? Of course if you read further into proverbs you'll see that "IT" (I.E. your "GOOD NAME") can be taken away on a whim. That's power and control. I'm just damn glad that "DEMOCRACY" is merely a corporate blanket that cloaks our true "Constitutional Representative Republic". We need to fix the cracks getting bigger in the foundation. Without it, we'll fall.

Ron Paul 2008.

Cons keep saying that but every time we cut taxes the deficit goes up. Forget the theory, live in the real world.

Ask them, if cutting taxes ALWAYS brings more income, why not cut taxes to zero. That should eliminate the debt overnight.

There is obviously an optimum tax rate for generating revenue. a 100% tax rate would stop revenue also. Pragmatically, it seems the optimum is somewhere around the Clinton levels with a maximum rate of 39%

Also since 70% of the economy is driven by consumer spending, cutting taxes on the middle class is the way to stimulate the economy. This is demand side economics. The Cons view of supply side, cutting taxes on the rich and hoping they spread it around, has obviously failed.

The same way having a sale increase revenue for a store. You may get less of each dollar but you get many more dollars taxed because people spend when they see a bargain.

The best way to decrease debt is to cut spending. We all deal with it daily in our lives. We may not be able to increase our income so we cut our spending to raise funds.

'Cuz, like, as soon as the War in Iraq is won, all of the shareholders of our employers who got those massive tax cuts will give us all 300% raises and we'll all pay higher marginal taxes and pay it all off!

Then we'll also all be rich! Dontcha get it???

so how much more taxes do you just pay??

higher taxes = less profits = less employment = less tax revenue = less taxes.

cutting taxes = more profits = more employments = more taxes revenue = less debt.

This should be easy enough even for a liberal like you.