Taxes and the Economy

The argument for cutting taxes and increasing the debt is that the economy will grow so much that in the end the taxes collected from everybody working will reduce outflows and increase inflows, actually reducing the debt.

Take a simple example.  If someone is getting unemployment insurance and not paying taxes but because the economy grows so much he gets off unemployment and starts paying taxes, he offsets some of the reductions.

Two things are required for this to happen though, there have to be people who are getting benefits who will go back to work when jobs are available.

There is no real evidence to support this considering the unemployment rate is so low and companies are complaining about the lack of skilled workers.

The other thing that has to happen is that the tax breaks result in more jobs.

This is pretty clearly not the case for large well established businesses which have excess capital already and are not increasing production, at least no in any great degree.

There could be a certain number of jobs that get created here if the math makes it more profitable to build here because of the cuts.

The question isn't about a few jobs here and there but about a number of jobs to reduce our unemployment rate.

That is a problem since we are already at full employment.

Small businesses on the other hand might expand but the problem is still that the excess workers aren't there.

We are seeing the baby boomers reach retirement age and beginning to draw social security and Medicare.  Tax cuts aren't going to make them younger and once they can actually afford to retire unlikely to send them back into the workforce.

So unless we allow substantial immigration, there aren't enough workers, and I don't need to discuss the immigration thing here.

So tax cuts will help some people buy groceries or pay for health care but most of it will benefit people who already have savings and investments.

They can donate some to their favorite monkey..