How can tax cuts make the pie bigger when it does not matter whether the spending comes from?

Wow, seriously? It does matter where the spending comes from. The government doesn't produce anything. It only has two sources of money: taxes, and the printing press (which is also a tax). Taxing takes money out of the private sector and puts it in the hands of government who spends money on it's own interest (rarely that of the private sector interest). The only time the government spends good money, is when it buys goods that outlast its expenditures; i.e. roads, bridges, schools, etc.

Also, there is no "zero sum". The private sector creates wealth such as homes, cars, goods, and services. Money in the hands of the private sector gives the people freedom to determine what their own wants and needs should be. The free market determines not only what goods it wants, but it also gets to demand the prices that it wants those goods for. When government spends money, it doesn't have to shop for price. It can spend whatever it deems necessary. And, if it overspends, it just prints more money, or raises taxes, to compensate, or both.

I'm not writing this for you, because you've already made up your mind that you are right. I'm writing this for anyone else with an open mind who wants to see a basic blueprint of how an economy works.

There are two problems with that notion:

1. It DOES matter where the spending comes from. The government takes wealth away from the private sector, which knows what to do with it to produce growth, and spends it on programs designed only to increase its power and fatten its employees. Put simply, the government spends money far less efficiently than the private sector does.

2. The government takes so much from the private sector that businesses are often unable to afford to expand, further compounding the problem I stated above. The government does not create wealth. Only the private sector does. So the more the government drains from it, the harder it is to create wealth.

Tax cuts by themselves don't "make the pie bigger". They let working people keep more of their own money so that it can be invested or spent locally in businesses that have a chance to expand.

I consider the polls. the only problem is while the few do no longer in basic terms like the electorate judgements they stumble on a super liberal choose and record a journey in hopes of having the electorate overturned. the clarification this does not artwork on a countrywide foundation is the only way for replace at that time is a Constitutional modification. administration of the money potential a great number of potential in Congress. in basic terms some could vote to shrink their potential. additionally, the guy States are used to getting great sums of money from the Feds and can decide for to no longer bypass a Constitutional modification which will mean the money will now no longer come from the Feds. Getting 38 States to approve the modification would be very difficult. The above motives does not recommend we the persons shouldn't do each and everything we are able to to rigidity Congress to try this.

Tax cuts, in an environment where taxes are high, have worked EVERY TIME to revive the economy. Here's a history. Warren Harding and Calvin Coolidge cut the highest income tax rate from 70% to 29% and cut government spending 50%. The result: the Roaring 20's and unemployment of less than 2%. JFK's posthumously passed income tax cuts (90% to 50%) also had a good effect on the economy, creating the revenues for LBJ's Great Society spending.

Reagan cut the highest income tax rate from 70% (again) to 28%, plus 15% across-the-board tax cuts. He also had the courage to tough out reigning in the money supply that was causing the crippling stagflation. Both of these policies created a new, a solid foundation for the country that supported a 17 year booming economy. Revenues during this time also doubled from $500 billion to $1 trillion. Unemployment dropped from 10.4% to 5%. Inflation dropped from double digits to about 2%.

Clinton cut the Capital Gains Tax. The already good economy went into overdrive. After implementation of the Tax Relief and Reconciliation Act of 2003 (part 2 of the Bush Tax cuts), unemployment dropped from 6.3% and kept on dropping into the 1st quarter of 2007 to a low of 4.4%. The increase of revenue this generated made each of his 2nd term yearly deficits step down significantly to a low of less than $200 billion in that same year, on track with the projection of a balanced budget in 2010. This, when Bush spending did not decrease. The economy grew at a rate of 3%. All of Bush's gains were blown out of the water by the mortgage meltdown, unrelated to the tax cuts.

Internationally, Margaret Thatcher lowered the highest tax rate from a stifling 95% to mid-thirties, creating an economic boom similar to Reagan’s economy. Post Soviet Russia’s economy was a shambles for years until Putin lowered the corporate tax to 13%. That is when it started to grow into a powerhouse. China flat out eliminated its capital gains tax to spur investment. Now, everyone wants to invest there and there is capital for all sorts of business. The economy is growing at 7.6% (it’s been as high as 13%).

When implemented correctly on a business environment that is fundamentally sound, tax cuts work well. It's like shot adrenalin the company needs to expand. This expansion creates real, sustainable jobs not paid for by taxpayers. This increases revenues to the government. These tax cuts makes it easier for start-ups to flourish, adding additional revenue.

GDP is NOT a "pie". Wealth is grown, not redistributed.

All government spending always shrinks the pie. NO exception is possible.

Witness: the "most perfect" program of spending possible:

> Resources are REMOVED from the economy.

> A relatively small segment of the population (in government) perforce having LESS knowledge of the aggregate wants and needs of "everyone" than "everyone" has, nonetheless by pure happenstance chooses to allocate those resources (putting them back in) EXACTLY as the economy was going to in the first place (in all other cases, resources are put to "less valued" use thus SHRINKING THE PIE.)

> The inherent overhead of passing those resources through the bureaucracy HAS nonetheless "shrunk the pie."

A dollar of spending is NOT equally valued regardless of how that dollar is spent. The OBVIOUS proof of this that literally 100% of your faction is clearly unable to grasp:

Do you REALLY BELIEVE that if government simply converted tax-revenue to cash and burned it (SPENDING trillions on a bonfire) this would be JUST AS GOOD for the economy as if that money had remained IN the economy or are you certain your theory is FLAWED AT ITS CORE?

EFFICIENCY of spending is key and since we all have different wants and needs, that efficiency MUST be defined by the aggregation of all of our DIFFERING wants and needs and the ONLY CONCEIVABLE method to approximate this as closely as can be is for us each to make OUR OWN decisions about our resource allocation.

I realize this next bit will shock you - or that you will be unable to believe it: Government is made-of PEOPLE and they are not supernaturally wise. Your supposition that having government spend your tax money is good for the economy is EXACTLY as sensible as the supposition that if I run-up bills on YOUR credit card, that YOU will be JUST AS WELL OFF as if I had not - because "spending = spending" regardless of whether YOU spent your money or I did.

Your equation assumes that $100 going into the pocket of G is the same amount as $100 going into the pocket of C or I. For every $100 going into C or I, G spends $140 to achieve that same result. It's called bureaucracy and corruption. It also assumes that G knows where to put that $100 as well as C and I do. G spends money furthering agendas that don't pay off. C and I spend money to make money. This is why Keynesian economics doesn't work.

This is one of the discredited principles of Keynesianism. Government spending frequently thwarts business enterprise, productivity, and innovation. A government bureaucrat can kill thousands of jobs while simply taking a short break from watching porn all day. The economic expansions that followed the tax cuts during the presidencies of JFK, Reagan, and Bush did not happen because the government hired a lot of bureaucrats or threw money at bogus enterprises like Solyndra.

To explain this, you have to realize all wealth comes from sales. All jobs come from profits from sales. The government sells nothing so it produces no wealth. Money taken by the government in the form of taxation generates no profit. Therefore, leaving it in the hands of people to buy things and services they need increases the size of the pie.

This phenomenon was first explained in 1850 by Frederic Bastiat, in his essay "The broken window fallacy"and expanded by Henry Hazlitt.

http://www.youtube.com/watch?v=QG4jhlPLVVs&feature...

This theory discredits all of Keynesian economic theory, before Keynes was even born.

Lower taxes mean more money on main street rather than sucked into the black hole of Pennsylvania ave.

The theory, of course, is that a dollar spent on G is not as good of an investment as a dollar spent on C or I. That's true in some cases; not in others.