Republican demands WII NOT HELP THE ECONOMY

Republican demands for the debt extension

WILL NOT HELP THE ECONOMY!
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The mere cutting back of large parts of the federal gov’t will not help the economy. The reason is that the economic problems are not caused by the size of gov’t or by the size of the debt. Dr. John Rutledge adviser to Pres. Ronald Reagan estimates the US total assets over $200 trillion compared to a debt of $14 trillion. There is no indication that gov’t borrowing is crowding out the private sector. Money is plentiful. Interest rates are low.

Low interest rates and large amounts of money in banks and large co’s do not necessarily add up to good economic times as we are finding out. This approach to stimulate the economy is like trying to push a wet noodle. A problem is these remedies are all supply side. The problem in a depression is the DEMAND SIDE. MAKING MONEY AVAILABLE AT LOW INTEREST RATES is helpful but not sufficient. The Republican program does nothing for the demand side. Lower tax rates for business will only have a small marginal effect on the economy. Note in the 1950’s. 60’s and into the 70’s the corporate Federal Income tax rate varied from 90% to 70%. TAX Rates ARE A FACTOR BUT DO NOT DETERMINE INVESTMENT. PROFIT OPPORTUNITIES DETERMINE INVESTMENT. The 40'S, 50'S AND 60'S were some of the best years this country ever had. In fact a case can be made out that high corporate tax rates stimulate investment more than low tax rates. WHAT CAN WE DO TO STIMULATE DEMAND? We must create an environment that encourages innovation and demand. Then the public can have confidence in the economy.

To understand the Republican position we have to go back to the basic Republican position. The foundation of Republican economic policy is that RICH PEOPLE SHOULD NOT PAY TAXES. This dressed and camouflaged many different ways, But this is the basis of Republican thinking.

This Republican position is not really an economic policy. It is not based on economics. THE REPUBLICAN POSITION IS REALLY A POLITICAL STATEMENT MASQUERADING AS AN ECONOMIC POLICY.

This is not surprising as it is being presented by politicians who appear to have political knowledge but very little knowledge of economics.

However there is a problem. Politics and economics while effecting each other are two different spheres of activity. The Republican position maybe very good politics but it very poor economics. More later.