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October 20, 2004


Stephen Downes

Cute theory. Tax cuts to the rich show up in long term trends ('signal') while tax cuts to the poor show up only short term trends ('noise').

Thus allowing you to claim that it was Reagan's policiies that account for the prosperity in the Clinton years (and, presumably, not the recession in the Reagan years or the Bush years).

It's also, of course, a load of hooey. Yes, it is true that benefits (in the form of tax cuts, grants and payments, subsidies, etc) to the poor show up immediately, because the poor have a much lower propensity to save - they spend the money immediately and thus generate economic activity in the short term.

The mystical part is the long term trend, the idea that tax breaks for the rich will create longer term (and presumably more sustainable) prosperity. If this were true, it would be a matter of forgoing short term pain in order to realize long term gain. But there's no real evidence that it is so.

I guess being a 'commonsense' economist means citing absolutely no evidence for your position.

To credit tax breaks for the rich with job creation, short term or long term, you have to draw a causal link between the two. This is hard to do when the wealth simply accumulates - the supposed redistribution is observably not taking place.


Adrian Spidle said:
Modern Republican political speaking always has a much higher Signal to Noise Ratio than modern Democrat Political Speaking.

That assertion is unfounded and unsupported. In other words, you're speaking noise.

(This statement should not be read as a support of Democrats. They're noisy too.)

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